Cyprus abolished inheritance tax in 2000. There is no estate duty, no succession tax, no gift tax on assets passing on death or during lifetime in Cyprus. For British expats who have spent years worrying about HMRC’s 40% inheritance tax charge, this is a genuinely welcome part of moving to Cyprus. It is also, for most British nationals, only part of the story, because the UK’s inheritance tax does not observe Cypriot borders, and understanding exactly where it applies requires looking at both jurisdictions together.
Cyprus: What There Is and Is Not
Cyprus levies no inheritance tax, estate duty, or gift tax of any kind. Assets passing on death (whether Cyprus property, bank accounts, listed securities, a business interest, or a life insurance policy) are not subject to any Cypriot succession tax charge, regardless of the size of the estate or the relationship between the deceased and the beneficiary. This position has been unchanged since 2000 and is confirmed by PwC’s Worldwide Tax Summaries (last reviewed 1 July 2025).
Cyprus does levy immovable property transfer fees on the acquisition of Cyprus-sited property, including transfers on death, at rates of 3% to 8% of market value depending on the band, though various reliefs apply for transfers between family members, and transfers from parents to children carry no fee at all. For direct-line family inheriting Cyprus property, the transfer cost on death is therefore minimal. For more distant relatives or unrelated beneficiaries, the transfer fee is a real consideration, but not a succession tax in the traditional sense.
Cyprus is also an EU member state and applies the EU Succession Regulation (Brussels IV). British nationals resident in Cyprus can, unlike British expats in non-EU jurisdictions such as the UAE or Singapore, elect for the law of their nationality (UK law) to govern the succession of their estate. For British expats concerned about forced heirship provisions or the interaction between Cypriot succession law and their existing UK wills, this election can simplify the picture considerably. It requires proper legal advice and a formal declaration, but the option is there.
UK Inheritance Tax Does Not Stop at the Mediterranean
HMRC charges inheritance tax at 40% on the worldwide estate of UK-domiciled individuals above the nil-rate band of £325,000. Domicile is not determined by where you live: it is a deeper legal concept rooted in where you consider your permanent home to be and where you intend to remain indefinitely. Most British nationals, regardless of how long they have lived in Cyprus, retain their UK domicile of origin unless they have taken deliberate steps to acquire a domicile of choice in Cyprus and can demonstrate a genuine, settled intention never to return to the UK.
For the great majority of British expats in Cyprus who retain family, property, pension entitlements, or professional ties to the UK and have not formed an unequivocal intention to remain in Cyprus permanently, HMRC will treat them as UK-domiciled. The consequence is that their worldwide estate: Cyprus property, Cyprus bank accounts, UK assets, portfolio bonds, assets held anywhere in the world, is within the scope of UK inheritance tax at 40% above the nil-rate band. Cyprus having no local IHT does not reduce that charge by a penny.
From April 2025, the UK reformed its IHT rules to introduce a residency-based test for non-UK assets. Once you have been non-UK resident for ten consecutive tax years, your non-UK assets begin to fall outside the UK IHT net under the new framework. For British expats who have been in Cyprus long enough and have consistently passed the HMRC Statutory Residence Test as non-UK resident, this creates a meaningful planning horizon. But for those in the first decade of Cyprus residency (which includes the majority of British expats currently based there), the full UK IHT exposure on worldwide assets remains in force.
The result for a British family in Cyprus is a succession picture that is, on the local side, clean and favourable, but which carries a potentially substantial UK IHT liability on the death of a UK-domiciled family member. An estate of £1.5 million (not unusual for a British expat who has sold a UK property, retained investment assets, and built wealth during their working years) carries a UK IHT charge of approximately £470,000 on death, payable within six months, regardless of whether the assets are in Cyprus or the UK.
The Named Beneficiary Mechanism
A portfolio bond (an international investment-linked insurance policy written out of a jurisdiction such as the Isle of Man or Guernsey) provides a specific and well-established mechanism for addressing both the succession process efficiency and the UK IHT exposure simultaneously.
A portfolio bond is a life assurance contract. On death, the policy proceeds are paid directly by the insurer to the named beneficiaries, outside the estate and outside the probate process. In Cyprus, where there is no succession tax to avoid, the practical benefit is speed and certainty: beneficiaries receive the policy value directly, without waiting for Cyprus probate administration or estate resolution. For an estate with Cyprus property plus a portfolio bond, the liquid financial assets reach beneficiaries promptly whilst the property follows the standard succession process.
For the UK IHT dimension, the mechanism requires appropriate structuring. A portfolio bond held directly by the policyholder forms part of the UK estate for IHT purposes if the policyholder is UK-domiciled. However, where the policy is written in trust (an offshore trust structure that holds the policy outside the policyholder’s estate), the death benefit can in many circumstances fall outside the UK taxable estate and therefore outside the 40% IHT charge. This is long-established planning used by UK IFAs and cross-border advisers. It requires proper legal structuring from the outset: the trust instrument, the interaction with HMRC’s reservation of benefit rules, and the correct relationship between the policyholder, the trust, and the policy all need specialist attention. Putting the structure in place at the point of taking out the policy is far more effective than attempting to restructure retrospectively.
Why Cyprus and a Portfolio Bond Work Well Together
There is a natural alignment between Cyprus’s non-dom regime and the portfolio bond structure. During the 17-year SDC exemption window (when dividends and interest on directly held assets are already effectively zero in Cyprus), the portfolio bond’s primary value is the post-17-year protection it provides and the succession structure it enables from day one. The trust overlay addresses the UK IHT tail on the policy value. The named beneficiary designation bypasses Cyprus probate on the liquid estate. And the policy travels: if you subsequently leave Cyprus (returning to the UK, moving to another EU country, or relocating elsewhere), the structure remains in force, the trust arrangement continues to serve its purpose, and the estate planning work done in Cyprus does not need to be rebuilt.
Friends Provident International (FPI), one of the longest-established providers in the British expatriate market, writes Isle of Man-based portfolio bonds specifically designed for internationally mobile British nationals. Their structures include trust options, open investment architecture, and a compliance framework that is familiar to UK-connected advisers and HMRC alike. RL360, Hansard, and Utmost International offer comparable structures, and the right choice between providers depends on the size of the portfolio, the investment mandate required, and the specific trust arrangement in place.
If you are a British national in Cyprus who has not reviewed your succession position, particularly the UK IHT exposure on your worldwide estate, it is worth doing so now rather than later. The structure that addresses it most cleanly takes time to set up properly, and every year of delay is a year the estate is exposed. Request a free consultation here.