Inheritance Tax in the UK and Italy: A Comparative Overview and the Advantages of the Italian System

As already outlined in our previous article dated 19 May 2025, the UK Finance Bill 2025 has abolished the "non-dom" regime, introducing a taxation system based solely on tax residency.

From 6 April 2025, any individual who has been a UK tax resident for at least 10 out of the past 20 years will be subject to Inheritance Tax at a rate of 40% on his estate wherever his assets are located in the world.

Consequently, foreign assets, including real estate or bank accounts held outside the UK, will also fall within the scope of UK inheritance taxation.

As previously mentioned, Italy remains a highly attractive alternative for succession planning—not only for high-net-worth individuals but also for those with modest estates, including foreign property or other types of assets.

By transferring tax residency to Italy, individuals can benefit from Italian succession rules, which are generally far more favourable than those currently in force in the United Kingdom.

In particular, Italy offers the following key advantages in terms of inheritance taxation:

a) Inheritance tax is levied only on assets located within Italian territory;

b) Foreign assets are entirely excluded from Italian inheritance taxation;

c) For spouses, direct ascendants and descendants (e.g. children and grandchildren), a tax-free allowance of up to €1,000,000 per beneficiary applies. The 4% inheritance tax rate is applied only to the portion exceeding this threshold;

d) If the estate is comprised of foreign property or savings, no inheritance tax is levied in Italy on such assets.

With respect to assets located abroad (outside Italy), only the local inheritance taxes of the countries where those assets are situated may be applicable, if any.

Therefore, contrary to common belief, one does not need to be a millionaire to benefit from Italy’s favourable inheritance tax regime. Even individuals with a moderate income but with savings or real estate held outside the UK can:

• Significantly reduce inheritance tax liabilities simply by changing their tax residence;

• Protect their family wealth;

• Avoid burdensome inheritance taxes for children or spouses.

Today, relocating one’s tax residency to Italy is a rational and strategic choice, especially for those seeking stability, clear tax rules, and assets protection.

Milano 05.06.2025

Avv. Giovanni Babino