Inheritance Tax in South Africa: Estate Duty, Rates and Exemptions

For UK expats living in South Africa or planning to relocate, Estate Duty can have significant implications for wealth held across both countries. Depending on your residence status, South African Estate Duty and UK inheritance tax (IHT) may both need to be considered, particularly where your estate includes property, investments, pensions or business interests.

The key considerations are which assets each country can tax, which exemptions apply and whether relief under the UK–South Africa estate tax treaty may be available.

Do You Pay Tax on Inheritance in South Africa?

In most cases, beneficiaries do not pay South African tax simply because they receive an inheritance. Estate Duty is instead calculated against the deceased’s estate, with the liability generally settled before the remaining assets are distributed.

The South African Revenue Service (SARS) treats an inheritance as a capital receipt excluded from the recipient’s gross income. However, capital gains tax (CGT) may arise on the deceased’s assets, and beneficiaries may face tax on subsequent income or gains from inherited property.

This distinction is also relevant in the UK, where the death tax system is formally referred to as Inheritance Tax (IHT). However, the framework also generally taxes the estate rather than the beneficiary, so it operates on a similar principle to South Africa’s Estate Duty despite the different name.

Both systems generally tax the estate, but their rates, allowances and residence rules differ. These differences need to be considered when planning a cross-border wealth transfer.

How Is Estate Duty Calculated in South Africa?

Estate Duty is levied on the dutiable value of your estate after allowable deductions and the applicable abatement. The tax rate depends on the dutiable value:

The primary abatement is R3.5 million per individual, and any unused portion may be transferable between spouses. The surviving spouse may utilise the remaining abatement of the deceased, potentially increasing the available deduction to R7 million, subject to the applicable rules.

The 25% rate applies only to the portion exceeding R30 million, rather than the entire estate.

South African Estate Duty and UK inheritance tax are both generally charged against the deceased’s estate, but their rates and allowances differ. South Africa applies rates of 20% and 25% after the relevant deductions and abatements, compared with the UK’s standard IHT rate of 40%. The amount payable in either country depends on the estate’s value, the available reliefs and the assets within each jurisdiction’s taxing scope.

The UK allows a £325,000 nil-rate band, with an additional residence nil-rate band of up to £175,000 where qualifying residential property passes to direct descendants. The additional allowance is tapered for estates exceeding £2 million, and unused allowances may be transferable between spouses or civil partners.

Lower Estate Duty rates do not necessarily mean a lower overall tax liability. The different thresholds, exemptions and reliefs can produce different outcomes depending on the size, composition and geographical diversification of your estate.

Does South African Estate Duty Apply to Worldwide Assets?

The scope of South Africa’s Estate Duty primarily depends on whether you were ordinarily resident in South Africa at death:

If you have relocated from the UK and become ordinarily resident in South Africa, your worldwide estate may fall within the scope of Estate Duty, including UK assets. If you are not ordinarily resident, the charge generally applies to South African-situated property, which can include immovable property and certain intangible assets.

Ordinary residence for Estate Duty purposes is not necessarily the same as income tax residence established through the physical presence test. The distinction matters for UK expatriates who divide their time between the two countries.

Estate Duty can also extend to deemed property, which includes certain assets or benefits that were not legally owned by the deceased at the time of death but are included under the Estate Duty Act. Depending on the circumstances, these may include:

• Certain domestic life insurance policy proceeds
• Certain benefits arising from matrimonial property arrangements
• Certain death-contingent donations

The deemed-property provisions can bring amounts into an estate even where they pass outside the deceased’s will. Identifying and assessing these assets can be more complex where an estate includes insurance policies, trusts or matrimonial arrangements.

If you want to ensure clarity and understand your Estate Duty liabilities, our financial advisers at Titan Wealth International can help. We can review your estate, outline your obligations, and assist you in managing them through tax-efficient strategies.

Which Assets Are Subject to South African Estate Duty?

The Estate Duty treatment of immovable property, shares and securities, cash holdings and pension interests depends on the nature of the assets, their location and the deceased’s residence status.

Immovable Property

South African-situated immovable property is generally within the Estate Duty scope, regardless of whether the deceased was ordinarily resident in South Africa. It is generally included at its value at the date of death, determined under the applicable valuation rules.

Property may also give rise to capital gains tax (CGT) through a deemed disposal on death. For individuals, the maximum effective CGT rate is 18%, although the actual liability depends on taxable income, available exclusions and applicable rollover provisions.

The year-of-death CGT exclusion and any available primary residence exclusion may reduce the taxable gain. A subsequent sale by the deceased estate can also have separate CGT consequences.

Shares and Securities

The treatment of shares and securities primarily depends on their situs and the deceased’s ordinary residence. South African-situated holdings may fall within Estate Duty even where the deceased was not ordinarily resident, while foreign holdings are generally outside its scope in those circumstances, subject to applicable rules and treaty provisions.

Shares and securities can also trigger a deemed disposal for CGT purposes. Their valuation depends on the nature of the holding:

1. Listed: Valued under the applicable market-based valuation rules
2. Unlisted: Valued using an appropriate method that reflects the underlying business and shareholding, subject to statutory requirements

For UK expatriates, the distinction between shares held directly, through a company or within a trust can also affect the Estate Duty position. The location of the underlying investments does not necessarily determine the legal situs of the shares themselves.

Cash Holdings and Pension Interests

Cash holdings are generally included in the estate at their relevant value, although the location of bank accounts and the nature of the rights held can affect the treatment of non-resident estates.

Pension interests are treated separately, and qualifying South African retirement fund death benefits are generally excluded from Estate Duty.

Depending on the arrangement, this may include benefits from:

• Pension funds
• Provident funds
• Preservation funds
• Retirement annuities

However, this does not mean all pension assets are exempt from taxation. Retirement fund death benefits may have separate income tax consequences, while distributions from qualifying South African funds are subject to the relevant fund rules and, where applicable, section 37C of the Pension Funds Act.

UK pension arrangements require separate consideration, particularly for expatriates who retain substantial pension wealth in the UK.

Under UK legislation taking effect for deaths on or after 6 April 2027, most unused pension funds and certain pension death benefits will be brought within the scope of UK IHT, subject to specified exclusions. The treatment will depend on the arrangement and the deceased’s UK inheritance tax position.

What Estate Duty Exemptions and Reliefs Are Available?

Apart from the transferable spousal abatement, South Africa generally allows a deduction for qualifying property left to a legally recognised surviving spouse under section 4(q) of the Estate Duty Act.

Qualifying spousal transfers can reduce the value subject to Estate Duty when combined with the available abatement. The deduction is subject to statutory conditions, particularly where trusts or more complex succession arrangements are involved.

Lifetime donations between spouses are also generally exempt from donations tax where the recipient is a South African tax resident, subject to the applicable rules. This can be a useful part of a long-term estate planning strategy because qualifying transfers may reduce the value of the donor’s estate.

For the 2026/27 tax year, donations by natural persons to third parties are generally exempt up to the R150,000 annual threshold. Taxable donations are subject to rates of 20% and 25%, with the higher rate applying once cumulative taxable donations exceed R30 million.

Married couples can potentially use their individual annual exemptions to gift a combined R300,000 annually to children, trusts or third parties, provided each spouse makes qualifying donations within their own allowance.

South Africa also provides relief for certain qualifying charitable and public benefit transfers. Separately, smaller deceased estates may qualify for simplified administration procedures, although these should not be confused with the R3.5 million Estate Duty abatement.

How Does South African Estate Duty Interact With UK IHT?

UK expats with South African residency and assets in both jurisdictions may face a risk of double taxation. If you are ordinarily resident in South Africa, your worldwide estate may fall within Estate Duty, while HMRC may also tax UK-situated assets or your worldwide estate, depending on your long-term UK residence history.

The governing instrument for such scenarios is the bilateral Estate Duty Convention between the UK and South Africa. The two countries maintain an estate tax agreement that addresses several matters, including:

• Allocating taxing rights over different categories of property
• Providing mechanisms to mitigate double taxation
• Defining the situs of assets and addressing fiscal domicile

Under the convention, relief may be available where the same property is subject to death taxes in both jurisdictions. However, the availability and amount of relief depend on the treaty provisions, the deceased’s circumstances and the nature and location of the assets.

The treaty does not necessarily eliminate every difference between the two countries’ tax liabilities. The amount of relief must be calculated under the applicable provisions rather than assumed to offset the full tax charged by the other jurisdiction.

Treaty relief may need to be claimed through the relevant estate tax reporting procedures. Executors should ensure that the necessary information and supporting documentation are available to establish entitlement.

Treaty protection must be assessed in the context of asset situs, residence history and fiscal domicile under the convention, which may differ from an individual’s domestic tax residence position.

For HNW families, coordinated planning is particularly important where an estate contains property, investment portfolios, private company interests or trusts in both countries.

Estate Planning Considerations for UK Expats in South Africa

For UK expatriates with assets in both countries, estate planning should address three areas:

1. Tax residency between the UK and South Africa
2. The consequences of repatriating to the UK
3. Administrative succession arrangements

Tax Residency Between the UK and South Africa

Your residence status can affect which assets fall within each country’s death tax rules. The two jurisdictions rely on different residence frameworks.

South Africa uses the ordinarily resident test, under which your personal circumstances, established home and intention to return to the country are relevant. Factors such as family, employment and business interests can help establish where you are ordinarily resident.

For income tax purposes, South Africa also has a physical presence test. If you are not ordinarily resident, you may become tax resident by meeting all three criteria:

1. Presence in South Africa for more than 91 days in the current tax year
2. Presence in South Africa for more than 91 days in each of the preceding five tax years
3. Combined presence of more than 915 days in the preceding five tax years

However, meeting the physical presence test for income tax does not, by itself, mean that you are ordinarily resident for Estate Duty purposes.

The UK uses a separate residency framework known as the statutory residence test (SRT). It involves three sequentially applied tests:

The different residence tests make it important to maintain accurate records of your UK and South African residence history, particularly because UK IHT exposure is no longer determined solely by domicile.

What Happens to Your Estate Planning if You Return to the UK?

If you plan to return to the UK after living in South Africa, you will need to establish when you cease to be ordinarily resident there.

For individuals who are ordinarily resident, cessation depends on their circumstances and whether South Africa remains their usual home. A separate 330-day continuous absence rule applies to individuals whose South African tax residence arose under the physical presence test.

A change in residence should also be appropriately reported to SARS.

Once you are no longer ordinarily resident in South Africa, foreign assets will generally fall outside the scope of Estate Duty, while South African-situated assets may remain within it.

However, abandoning UK residency for IHT purposes can be more complicated under the long-term resident (LTR) regime introduced from 6 April 2025.

Broadly, you are considered a long-term UK resident for IHT purposes if you have been a UK tax resident for at least ten of the preceding 20 tax years, subject to applicable transitional rules.

Once you become an LTR, you cannot necessarily exclude foreign assets from UK IHT merely by relocating abroad. Rather, you may remain subject to a tail period during which HMRC retains the right to levy IHT on your worldwide estate.

The tail period can last between three and ten years, depending on your previous UK residence history. For example, an individual who was a UK resident for 16 of the 20 tax years before departure may remain within the worldwide IHT regime for six tax years after leaving, subject to the relevant conditions.

If you repatriate to the UK and resume tax residency under the SRT, this can affect your long-term residence calculation and interrupt the period of non-residence required to fall outside the worldwide IHT regime.

Returning to the UK can therefore bring overseas assets, including South African investments, within the scope of UK IHT. UK pension arrangements also require review, particularly in light of the changes taking effect from April 2027.

Upon ceasing South African tax residency, you may also be subject to an exit-related CGT charge through a deemed disposal of certain assets. Although this charge is separate from Estate Duty, it can significantly affect long-term wealth planning. Some assets are excluded from the deemed disposal, so the potential liability depends on the holdings involved.

Administrative Succession Arrangements

Both the UK and South Africa allow considerable testamentary freedom, although statutory and family-law claims can affect how estates are distributed.

For individuals holding assets in both countries, it may be appropriate to draft separate, coordinated wills for each jurisdiction.

Although a single will may be recognised in both countries, separate wills can help address issues such as:

• Differences in local legal and administrative requirements
• Administrative delays
• Conflicts with local probate and estate administration procedures

However, separate wills must be carefully coordinated to prevent one from unintentionally revoking the other or creating conflicting instructions.

Ownership structures should also be reviewed. Assets held personally, jointly, through companies or within trusts may receive different treatment for Estate Duty and UK IHT purposes. Transferring assets into a trust or company does not automatically remove them from either tax regime.

Even with separate wills, foreign assets can remain inaccessible during probate or estate administration. Your estate should also have sufficient liquidity to meet any tax liabilities and administration costs without forcing the sale of illiquid assets.