Quick answer: the instrument that governs your Italian house for UK inheritance tax was signed in 1966, drafted for a tax that no longer exists, and contains the detailed situs rules that modern treaties dropped. It still applies. Separately and more immediately, owning in Italy adds the 5% additional-dwellings surcharge to your next UK residential purchase, because that test counts property anywhere in the world.
British buyers arrive at Italian property with two questions that have nothing to do with Italy: what happens to it when they die, and what it does to their position at home. The answers come from an unusually old treaty and an unusually recent stamp duty change, and neither is what most people expect.
What is the 1966 convention and why is it still running?
The United Kingdom and Italy signed a convention for the avoidance of double taxation on the estates of deceased persons in London on 15 February 1966, brought into effect by the Double Taxation Relief (Estate Duty) (Italy) Order, SI 1968/304.
The tax it was written for, estate duty, was replaced by capital transfer tax in 1975 and by inheritance tax in 1986. The convention survived both changes because it applies not only to the taxes listed at signature but to any identical or substantially similar duties imposed afterwards, and HMRC’s own guidance treats inheritance tax as falling within that scope.
What makes this group of treaties interesting is not their survival but their drafting. Conventions concluded before 1975 usually contain detailed rules on where an asset is situated, because situs did most of the work in the estate duty system. Conventions concluded afterwards usually do not. The UK has only a handful of the older kind, and the agreements with Italy, France, India and Pakistan are the ones specialists name.
They also predate the deemed domicile rules entirely and contain no provision for them, which is why the question of whether such a treaty can displace a domestic deeming rule has been a live technical topic in UK tax practice for decades.
- The convention covers duties on estates, not income or capital gains, which are governed by separate agreements
- Immovable property is situated where the land is, so the Italian house is Italian for these purposes
- Relief operates by credit for tax charged by the other state on assets sited there
- The Italian charge itself is modest for close family, with a franchigia per beneficiary before any rate applies
How does the 2025 UK reform interact with a 1966 treaty?
From April 2025 the United Kingdom replaced domicile with long-term residence as the connecting factor for inheritance tax, which changed who falls inside the charge on worldwide assets.
The treaty did not change. It contains situs rules and no deemed domicile provision, and it continues to apply on its own terms to estates connected with both countries.
Putting a 2025 domestic test alongside a 1966 treaty is precisely the kind of question that produces different answers from different advisers, and the sums involved on a family holiday home are large enough to justify a written opinion rather than a general guide’s summary. This page will not attempt one. What it will say is that anyone whose position depends on the interaction should ask specifically about it rather than accepting a general statement that the Italian house is inside the UK charge.
- Red flag: an adviser who describes the Italian position without mentioning that a treaty exists
- Ask whether the treaty is being relied on, and if so on which article
- The answer can differ for a long-term UK resident, a recent arrival and a British citizen living in Italy
- Our Italian inheritance guide covers the Italian mechanics, including forced heirship and the succession declaration due within 12 months
Why does an Italian house raise the stamp duty on your next UK purchase?
This is the immediate, quantifiable consequence, and it catches people who thought a holiday home abroad was irrelevant at home.
Stamp duty land tax charges higher rates for additional dwellings where the buyer already owns another residential property at the end of the day of the transaction. The test counts residential property owned anywhere in the world. An apartment in Puglia is a residential property, so a British owner who later buys in England or Northern Ireland is buying an additional dwelling.
The surcharge rose to 5% for transactions with an effective date on or after 31 October 2024. On a £600,000 UK purchase that is £30,000 of additional tax attributable to owning a house in Italy.
| Position at the next UK purchase | Surcharge | On a £600,000 purchase |
|---|---|---|
| No other residential property anywhere | None | Standard rates |
| Owns an Italian holiday home | 5% | About £30,000 more |
| Replacing a UK main residence, old one sold | Refundable | Reclaim within the time limits |
The replacement of a main residence relief allows the surcharge to be reclaimed where a new main home is bought before the old one is sold, provided the sale completes within 36 months and the claim is made within 12 months of that sale. That relief addresses the main residence, so it does not remove the Italian house from the count.
- Insider tip: where a UK move and an Italian purchase are both planned, the order matters and the UK purchase should generally come first
- Inherited shares of property have their own rules, with a 50% or greater share counting and inheritances more than 36 months old generally disregarded
- Scotland and Wales operate their own equivalents with their own rates, so the figure differs outside England and Northern Ireland
What did Brexit actually change for British owners?
Less than most people assume about ownership, and a great deal about time.
The right to buy was never affected. The United Kingdom appears on the reciprocity tables as a state where Italians may acquire property, so article 16 is satisfied and a British buyer purchases on the same civil terms as before. The purchase sequence runs identically.
What changed is that a British passport holder became a third-country national for Schengen purposes and is limited to 90 days in any 180-day period across the whole area, not merely in Italy. From 2026 the Entry/Exit System records movements automatically, which removes the informal tolerance that passport stamps sometimes allowed. Our 90/180 guide covers how the rolling window is counted, and it is a rolling window rather than a calendar allowance, which is the detail people get wrong.
For owners who want more than a quarter of the year at the property, the elective residence visa is the usual route for those not working, and it carries its own income requirements and its own tax consequences once residence follows.
Which law governs the will, now that the UK is outside the EU regime?
Tax decides what the estate pays. A separate body of law decides who inherits, and for British owners the two questions have drifted apart since Brexit in a way that Irish or German owners do not experience.
The EU Succession Regulation of 2012 determines, in the member states bound by it, which country’s law governs a person’s estate. The United Kingdom never participated in it. Italy did, so an Italian court or notary handling the succession of a property in Italy applies the Regulation’s rules whoever the deceased was.
The consequence is asymmetric rather than hostile. The Regulation’s choice of law provision is universal in effect, so a British national may elect the law of their nationality to govern their succession, and an Italian notary will give effect to that election. What the United Kingdom does not do is apply the Regulation in return, so the two systems are looking at the estate through different instruments even when they reach the same answer.
Practically, that puts weight on the drafting. A British owner who wants English law to govern the devolution of the Italian house should say so expressly in a will, rather than relying on an assumption that their nationality settles it. Without an election, the law of habitual residence applies, which for a British resident is English or Scottish law and for a British citizen living in Italy is Italian law, including its reserved shares for spouse and children.
- Make the choice of law expressly; silence hands the question to habitual residence
- A separate Italian will covering only the Italian asset must be drafted so it does not revoke the English one
- Scottish succession law differs from English law, and the election should name the right one
What does the UK take when you sell?
Italy exempts a private seller’s gain once the property has been held for 5 years. The United Kingdom taxes the worldwide gains of its residents throughout, at the residential property rates of 18% and 24% depending on where the gain falls against the income tax bands, after the annual exempt amount of £3,000.
The pattern will be familiar from the rest of this cluster: where Italy has charged nothing there is no Italian tax to credit, so the UK charge falls unrelieved. The calculation is made in sterling using the exchange rates at acquisition and at disposal, so a property that broke even in euro can still produce a sterling gain.
- Keep evidence of the acquisition cost and of improvement spending, since both reduce the gain decades later
- The sterling computation is separate from the euro reality and both may need explaining
- Report and pay within the UK deadlines for disposals of residential property, which are shorter than the ordinary self-assessment cycle
Which British buyer scenarios does this change?
The retiree buying a permanent base. The stay limit is the binding constraint and a visa is the answer, which converts the question from a property one into a residence one. Tax residence in Italy then brings worldwide Italian taxation and, for a retained UK property, an Italian charge on foreign property, so the modelling has to cover both countries at once.
The family buying a holiday home while keeping the UK house. The most common profile and the one where the SDLT knock-on bites, usually years later when they trade up at home. The decision framework is simply to know the number before buying in Italy rather than discovering it at the next English conveyance.
The owner letting the property. Italian tax first, as our cedolare secca guide explains, then UK tax on the overseas property profit with credit for the Italian tax. Overseas property is pooled separately from UK property for UK purposes, so an Italian loss does not shelter a UK rental profit.
The buyer thinking about eventual succession. The 1966 treaty is the instrument, the 2025 residence test is the domestic overlay, and the combination is worth a written opinion. That is a small cost against a house that will pass to children.
For the annual Italian side of ownership, the prima casa comparison explains why a UK-resident owner pays the second-home rates, the mortgage guide covers what an Italian lender will advance, and the selling guide describes what a disposal requires on the ground.
Frequently Asked Questions
Yes, and it is older than the tax it now governs. The convention on duties on the estates of deceased persons was signed in London on 15 February 1966 and given effect by SI 1968/304. It was drafted for estate duty, which became capital transfer tax in 1975 and inheritance tax in 1986, and it continues to apply because it covers substantially similar duties imposed after signature.
Because of what pre-1975 conventions contain and what they leave out. Treaties from that era set out detailed situs rules deciding which country an asset is located in for the purposes of the charge, where modern ones generally do not. They also predate the deemed domicile concept and contain no provision for it, which is why specialists have long treated this small group of treaties as capable of overriding rules the modern regime applies by default.
In Italy, under the treaty's situs rules, which is the straightforward part. Immovable property sits where the land is. What the treaty then does is allocate the primary right to charge and require the other state to give credit, which HMRC does for tax charged by another country on assets sited in that country. The complexity is not the location but what the allocation means for someone connected to both states.
It changed the domestic test and left the treaty in place. From April 2025 the UK moved from a domicile-based system to one keyed on long-term residence, which alters who is within the worldwide charge. How that interacts with a pre-1975 treaty containing no deemed domicile provision is a specialist question with real money attached, and it is the single item on this page most worth paying for advice on.
It can add 5% to the stamp duty. The higher rates for additional dwellings apply where the buyer already owns another residential property, and the test counts property owned anywhere in the world rather than only in England and Northern Ireland. The surcharge rose to 5% for transactions on or after 31 October 2024, so an Italian holiday home bought today makes a later UK purchase materially more expensive.
The replacement of a main residence rule allows a refund where you buy a new main home before selling the old one, claimed from HMRC within 12 months of the sale and provided the sale happens within 36 months of the purchase. That relief is about your main residence, so it does not help where the additional property is the Italian one. For most buyers the Italian house simply sits in the count.
The post-Brexit position is 90 days within any rolling 180, measured over the whole Schengen zone and not per country, with automated recording from 2026. Property owners have no exemption and no longer allowance than any other visitor. Beyond that, a visa is required, and for retired owners the elective residence route is the usual one.
Italy taxes it first, at 21% on the first short-let unit or 26% beyond it under the flat regime, or under ordinary IRPEF. The UK then taxes the same profit as overseas property income with credit for the Italian tax under the income convention, which is a separate instrument from the 1966 estate duty one. Profits and losses on overseas property are pooled separately from UK property for UK purposes.
Get an Italy property shortlist
Tell us your budget and region (Tuscany, Lake Como, Puglia, Milan, Sardinia). We reply within one business day with options matched to your goals.