Italian Inheritance Tax: A Guide for UK Expats

This article examines Italian inheritance tax and its interaction with UK IHT, including the applicable rates and allowances, the 2025 administrative reforms, property-related taxes and forced heirship rules. It also explains the key cross-border considerations for UK expats planning to preserve and transfer wealth across both jurisdictions.

Does Italy Have Inheritance Tax?

Italy has levied an inheritance tax (imposta sulle successioni) since 1862, although the regime has undergone substantial changes over time. Its beneficiary-based system generally offers lower rates and more generous allowances for close relatives than the UK’s inheritance tax regime.

Certain assets are entirely exempt from taxation, such as:

• Italian government bonds, including Buoni Ordinari del Tesoro (BOTs) and Certificati di Credito del Tesoro (CCTs)
• Qualifying life insurance distributions
• Trattamento di Fine Rapporto (TFR) and certain pension entitlements

Another exemption applies to a family business. If a qualifying business or company shareholding is passed to a spouse or descendants, it may be inherited tax-free, provided the relevant conditions are met. These can include maintaining control of the company or continuing the business activity for at least five years, depending on the type of interest transferred.

How Does Italian Inheritance Tax Differ From UK Inheritance Tax?

The main distinction between the UK’s and Italy’s inheritance tax systems is their structural approach to taxation:

1. The UK utilises an estate-based system, generally applying tax to the estate before the assets are distributed to beneficiaries.
2. Italy utilises a beneficiary-based system, charging each beneficiary according to the value of the estate they receive and their relationship with the deceased.

This distinction is especially relevant for high-net-worth families transferring assets to multiple beneficiaries, as each qualifying beneficiary may have their own tax-free allowance.

UK vs Italy: Inheritance Tax Rates and Allowances

The UK generally applies a standard rate of 40% above the available nil-rate band, while Italy applies different rates and allowances according to each beneficiary’s relationship to the deceased.

In the UK, the principal tax-free thresholds are:

• Nil-rate band: £325,000
• Residence nil-rate band: Up to £175,000 (generally available where a qualifying residence is passed to direct descendants, subject to conditions and tapering for estates above £2 million)

Transfers to a spouse or civil partner are generally exempt from IHT, although restrictions can apply where the recipient does not have the relevant UK long-term residence status. Unused nil-rate bands can also generally be transferred between spouses or civil partners, potentially increasing the thresholds available on the second death.

Italy, by contrast, applies a separate rate and allowance to each beneficiary:

For example, if two children each inherit €1.5 million from a parent, each would generally receive a €1 million allowance and pay 4% on the remaining €500,000. This would produce an Italian inheritance tax liability of €20,000 per child, before considering any exemptions or other applicable taxes.

The equivalent UK inheritance tax calculation would depend on the deceased’s available allowances, exemptions and residence status. The Italian liability cannot simply be compared with the UK’s 40% headline rate without considering those factors.

For UK expats, the distribution of assets must also account for UK inheritance tax exposure, Italian succession law and the ownership of assets across both jurisdictions.

Italian Inheritance Tax Administration: The 2025 Reforms

Italy overhauled the administration of inheritance and gift tax through Legislative Decree No. 139/2024, with the principal changes applying to successions opened and gifts made from 1 January 2025.

The reforms affect how inheritance tax is assessed, how lifetime gifts interact with inheritance allowances and the taxation of trusts.

How Does Italian Inheritance Tax Self-Assessment Work?

Previously, the Italian Revenue Agency (Agenzia delle Entrate) calculated the inheritance tax due and issued an assessment to heirs. Under the new rules, this responsibility shifts to those required to declare the inheritance.

The heirs must generally:

1. Submit the succession declaration within 12 months of the deceased’s death.
2. Calculate the inheritance tax due under the self-assessment system.
3. Pay the tax within the applicable statutory deadline, generally 90 days after the deadline for submitting the declaration, with instalment arrangements available in qualifying circumstances.

The agency retains the right to review returns, correct errors and challenge incorrect valuations within the relevant statutory assessment periods.

For expats with overseas investments, privately held companies or assets held through complex structures, accurate valuations and supporting documentation are especially important. The self-assessment process also requires establishing which assets fall within the Italian inheritance tax calculation.

Separate Allowances for Gifts and Inheritances

Before the reform, Italy applied a principle referred to as coacervo, under which certain lifetime gifts were aggregated with inheritances when calculating the available allowance.

The 2025 reform removed this aggregation for inheritance tax purposes, allowing lifetime gifts and inheritances to benefit from separate allowances under the applicable rules.

This can create an estate-planning opportunity for high-net-worth individuals. For instance, a parent may be able to transfer assets to a child during their lifetime and leave a further inheritance that benefits from a separate allowance.

However, the treatment of multiple lifetime gifts must still be considered under the relevant gift tax rules. UK inheritance tax may also apply to lifetime transfers, particularly where the donor remains within the UK’s long-term residence regime.

Clarified Tax Treatment of Trusts

The reform explicitly addressed the treatment of trusts, which were previously governed largely by administrative guidance and case law. The new rules address the following:

• Transfers of assets and rights through trusts can fall within Italian inheritance and gift tax rules.
• Tax generally arises when assets or rights are attributed to beneficiaries, with the treatment of earlier tax elections subject to the applicable rules.

The treatment depends on the trust arrangements, the beneficiaries and the relevant assets. Any tax paid under an earlier election must also be considered when assessing subsequent distributions.

Where a settlor was not resident in Italy when assets were transferred into a trust, the Italian inheritance and gift tax position generally focuses on assets situated in Italy, subject to the relevant statutory conditions.

For UK expatriates, trusts established before relocation may have different tax consequences once the settlor or beneficiaries become resident in Italy, making it important to review existing arrangements.

Italian Inheritance Tax on Property: Which Additional Charges Can Apply?

When inheriting Italian real estate, additional taxes can apply upon registering the change of ownership with the Land Registry and cadastral records:

Both taxes are generally calculated using the property’s applicable cadastral valuation, which is an administratively determined value that is often below the open-market value.

These charges are separate from inheritance tax itself, which is calculated under its own valuation rules and beneficiary allowances.

A relief may be available if the property qualifies for prima casa (first-home) treatment. This can apply where a beneficiary meets the relevant conditions concerning residence, other property ownership and the type of property inherited.

The beneficiary does not necessarily have to occupy the inherited property immediately as their main residence. The statutory conditions can include having or establishing residence in the municipality where the property is situated, subject to the applicable rules and exceptions.

If the criteria are met, both the mortgage and cadastral taxes are replaced by fixed charges of €200 each.

For UK expatriates inheriting Italian property, eligibility for first-home relief should therefore be assessed separately from the inheritance tax liability.

Italian Forced Heirship Rules and UK Expat Estate Planning

UK expats devising a cross-border inheritance tax plan must also consider Italian succession law. In contrast to England and Wales, where individuals generally have greater freedom to distribute their estate, Italy imposes a system of forced heirship, known as legittima.

This regime reserves a guaranteed minimum share of an estate for certain heirs, principally spouses, children and, in some circumstances, parents or other ascendants.

In England and Wales, testamentary freedom is broader, although eligible family members and dependants may still bring claims against an estate under the Inheritance (Provision for Family and Dependants) Act 1975.

If you drafted a will in the UK without accounting for legittima, it could be challenged where Italian succession law applies.

UK nationals who own property or other assets in Italy may be able to avoid the application of Italian forced heirship rules through the EU Succession Regulation (Brussels IV).

Under this regulation, a testator can elect the law of their nationality to govern their succession. For a UK national, the appropriate law within the UK must be identified, and the election must satisfy the Regulation’s requirements.

The election can generally govern succession to the estate as a whole, rather than being limited to Italian property. However, it does not remove every possible legal restriction or determine the inheritance tax treatment.

An election of English law, for example, does not itself prevent Italian inheritance tax from applying to assets within Italy’s taxing jurisdiction.

For expats with assets in both countries, UK and Italian wills should therefore be reviewed together. Particular attention should be paid to whether separate wills are appropriate, how each deals with the relevant assets and whether one could unintentionally revoke the other.

Key Cross-Border Planning Considerations for UK Expats in Italy

For UK expats with assets in both countries, the application of Italian inheritance tax depends primarily on the deceased’s residence at the time of death and the location of the assets.

Who Is Affected by Italian Inheritance Tax?

Italian inheritance tax is calculated on each beneficiary’s inherited share of the deceased’s estate. The assets subject to tax generally depend on the deceased’s residence at the time of death.

If a foreign resident (such as a UK resident) inherits the estate, their own residence does not generally determine whether Italian inheritance tax applies to worldwide assets or only Italian-situs assets. The deceased’s residence is the principal consideration.

Italian income-tax residence is assessed using several alternative criteria, including physical presence, residence and domicile under Italian law. Registration on the civil population register (Anagrafe della Popolazione Residente) also creates a rebuttable presumption of residence.

For inheritance tax, the deceased’s residence at death must be considered under the applicable succession tax rules, rather than assuming that the annual income-tax residence test produces the same result.

How the UK’s Long-Term Residence Rules Affect Expats in Italy

While Italy generally defines the geographical scope of inheritance tax based on the deceased’s residence, the UK relies on its long-term residence (LTR) test. Introduced on 6 April 2025, the LTR test generally applies to individuals who have been UK resident for at least ten of the previous 20 tax years.

An individual does not need to remain a UK tax resident to retain LTR status for inheritance tax purposes.

If you are considered an LTR, your worldwide assets are generally subject to UK IHT, while a non-LTR is generally taxed on UK-situs assets, such as UK property, bank accounts and company shares, subject to specific exclusions and rules for indirectly held assets.

Even if your UK residency has ceased, your worldwide estate can remain within UK IHT scope for between three and ten tax years following your departure, depending on your previous UK residence history. Transitional rules can also affect the calculation.

A UK expat considered an LTR for inheritance tax purposes can simultaneously be resident in Italy, creating potential double taxation of the same assets.

UK-Italy Inheritance Tax Treaty

The UK and Italy can each claim taxation rights over inherited assets under their domestic laws. As a result, the same asset can be subject to taxation in both countries.

However, double taxation may be prevented or reduced through the UK-Italy inheritance tax treaty and applicable domestic tax relief provisions.

The UK and Italy have an estate duties convention dating from before 1975. Unlike more recent inheritance tax treaties, it operates under older rules, including provisions concerning common-law domicile and the location of assets. This is distinct from the UK’s long-term residence test for domestic inheritance tax purposes. The convention applies to inheritance taxes arising on death, rather than generally covering lifetime transfers.

Depending on the circumstances, the applicable rules can:

1. Determine which country has taxing rights over particular assets.
2. Provide relief where both countries impose tax on the same assets.

The amount of relief depends on the convention, the taxes charged and the relevant assets. It should not be assumed that all overlapping taxation will automatically be eliminated.

For instance, a UK expatriate who remains within the UK’s LTR regime and dies resident in Italy may leave an estate containing Italian property and UK investments. Italy may assess inheritance tax on worldwide assets, while the UK may also bring overseas assets within its IHT calculation.

The final tax liability will depend on the applicable treaty provisions and domestic relief rules.

Our advisers at Titan Wealth International can review your assets and residency status across both jurisdictions to help identify the reliefs that may be available.

Estate Planning Considerations for UK Expats in Italy

Whether you already live in Italy or are planning to relocate, reviewing your estate arrangements can help identify potential conflicts between UK and Italian tax and succession rules.

In addition to reviewing wills, trusts and asset ownership, UK expats resident in Italy may wish to consider the inheritance tax treatment of qualifying investments held within a Piano Individuale di Risparmio (PIR).

Qualifying financial instruments held within these plans may benefit from an inheritance tax exemption when transferred on death. This is distinct from the five-year holding requirement generally associated with the plan’s income and capital gains tax advantages.

Eligibility, the nature of the investments and the applicable plan conditions should be checked before incorporating a PIR into an estate plan.

Within your wider inheritance tax planning, particular attention should be paid to:

1. Existing trust arrangements, including the treatment of future beneficiary distributions and any tax paid under an earlier election.
2. UK and Italian wills, including whether the documents operate together and whether a choice of succession law is appropriate.
3. Asset ownership structures, particularly where UK property, Italian real estate, company shares or investment portfolios may fall within both countries’ inheritance tax regimes.