Pre Immigration Tax Planning Green Card: The UK HNW Guide

Pre-immigration tax planning before a green card is the single highest-return exercise a wealthy UK family will undertake in a cross-border move. The window closes on the day US residency begins. Before that date, basis step-ups, trust funding, offshore fund disposals and accelerated gains are all available. After it, almost none of them are — and the cost is measured in decades of untaxed UK appreciation.

Why the residency start date is a cliff edge, not a slope

Most tax planning is iterative. You review, adjust, and improve over years. Pre-immigration planning is not. It is governed by a single date — your US residency starting date — and the US tax code draws an unusually hard line across it.

Under the green card test, lawful permanent resident status generally makes you a US tax resident from the first day of physical presence in the United States in that status. If you are already present on a work visa and adjust status, residency may begin earlier still, or may already have begun under the substantial presence test. From that date the United States taxes you on worldwide income and gains, imposes a global information-reporting regime, and treats you as US domiciled for estate and gift tax purposes.

Critically, the US does not care that your Berkshire farmhouse, your founder shares or your family's investment trust appreciated entirely while you lived in Surrey. There is no automatic step-up in basis on becoming a US resident. Whatever your historic cost was in 1998, that is the number the IRS will use in 2030. A UK family with a portfolio carrying £8m of embedded gain can, by taking no action, gift the US Treasury a claim to tax on gain that has nothing to do with America.

Everything below is about closing that gap while you still can. For a broader framework, see our overview of cross-border tax planning.

What can you actually do before the green card is issued?

The pre-arrival toolkit is narrower than most people expect, but each item is powerful. In practice, five workstreams do the heavy lifting.

• Basis step-up on appreciated assets. Sell and repurchase liquid holdings so your US basis resets to market value. The gain is realised while you are outside the US tax net.
• Offshore fund liquidation. Exit non-US collective investments before they become PFICs in your hands.
• Trust funding and restructuring. Establish and fund non-US trusts while you are still a non-resident, non-domiciled settlor.
• Accelerating income and gains. Trigger deferred compensation, dividends, or company distributions in the pre-residency period where the UK rate is lower or relief is available.
• Entity rationalisation. Restructure UK companies, partnerships and holding vehicles before CFC, GILTI and check-the-box consequences attach.

Basis step-up: the mechanics and the discipline

The concept is simple: realise the gain now, when the US has no claim to it, and re-enter the position at a fresh basis. The discipline is in the detail. Wash sale rules do not apply to you pre-residency in the US sense, but UK share matching rules — the same-day rule, the 30-day bed-and-breakfast rule and the section 104 pool — absolutely do if you remain UK resident at the point of sale. A step-up executed carelessly can produce a UK CGT charge that was avoidable through better sequencing or a split-year departure.

The calculation is a straightforward comparison: the UK capital gains tax cost of realising today, against the present value of the US tax on that same gain when the asset is eventually sold as a US resident, at US federal rates plus state tax plus the net investment income tax. For assets with large embedded gains and a long expected holding period, the pre-arrival realisation usually wins decisively. For recently acquired positions with little gain, it is noise.

There is also a second-order benefit that is frequently overlooked: a stepped-up basis reduces the eventual US exit tax if the green card is later surrendered. Entry planning and exit planning are the same conversation held ten years apart.

Why offshore funds are the most urgent item on the list

If you take one action before your green card is issued, make it this one. UK OEICs, unit trusts, investment trusts, offshore bonds and Irish- or Luxembourg-domiciled UCITS are, in almost every case, passive foreign investment companies once held by a US person.

The PFIC regime is not a mild inconvenience. Under the default excess distribution method, gain is allocated across your holding period, taxed at the highest ordinary rate for each prior year, and burdened with a compounding interest charge for the deferral. The mark-to-market and qualified electing fund alternatives require either exchange-traded status or annual information statements that most UK funds simply do not produce. Each holding demands a separate Form 8621. A family with thirty fund lines inherits thirty forms and a compliance cost that recurs forever.

None of this applies if you do not own the funds when you become a US resident. Liquidate, take the UK tax outcome, and reinvest into US-compliant vehicles — US-domiciled ETFs, mutual funds, individual securities, or separately managed accounts. This is one of the rare situations in tax where a problem can be deleted rather than managed. Our US tax services team runs this exercise routinely alongside UK advisers.

How do UK trusts survive contact with the US system?

Trusts are where UK and US logic diverge most sharply, and where the pre-arrival window matters most.

In the UK, a trust settled by a non-domiciled settlor holding non-UK assets is typically excluded property, sitting outside the inheritance tax net indefinitely — a structure many wealthy families already have in place. In the US, the same trust is analysed through an entirely different lens: is it a grantor or non-grantor trust, is it foreign or domestic, does it make distributions of distributable net income, and does it accumulate income that will later be hit by the throwback rules and the accumulation distribution interest charge?

The problems compound after residency. A trust the settlor funds after becoming a US resident is generally a completed gift for US purposes, potentially taxable, and the anti-abuse rules of the grantor trust regime can pull the trust's income onto the settlor's US return. Beneficiaries who become US residents transform the reporting profile of a trust that was previously entirely outside the US system — Forms 3520 and 3520-A appear, with penalties for late filing that are calculated on trust value rather than tax due.

The drop-off trust

The classic pre-immigration solution is the drop-off trust: an irrevocable non-US trust, funded before residency begins, drafted so that the settlor retains no interest that would trigger US estate inclusion or grantor status. Because the settlor is not yet a US person at funding, the transfer is outside the US gift tax net and outside the excluded property difficulties that arise later. Appreciation accrues outside the settlor's US estate. Structured well, and combined with UK excluded property analysis, the same vehicle can serve both jurisdictions.

The drafting is unforgiving. Retained powers, reserved benefits, a poorly chosen trustee jurisdiction or a beneficiary class that includes the settlor can each collapse the intended treatment. This is not a template exercise; it is bespoke drafting coordinated between US and UK counsel. Our trusts and estate planning practice exists for exactly this coordination problem.

US vs UK: how the two systems treat the same facts

Issue	United States (IRS)	United Kingdom (HMRC)
Basis on becoming resident	No automatic step-up; historic cost carries forward	Historic cost generally applies; rebasing available only in limited statutory circumstances
Scope of taxation	Worldwide income and gains from the residency starting date; citizenship-based thereafter	Residence-based under the Statutory Residence Test, with split-year treatment available
Non-domestic collective funds	PFIC regime: punitive rates, interest charge, Form 8621 per holding	Offshore income gains regime for non-reporting funds; income tax rather than CGT treatment
Trusts	Grantor/non-grantor analysis; throwback tax on accumulations; Forms 3520 and 3520-A	Excluded property regime for non-dom settlors; relevant property charges for others
Estate and gift exposure	Green card holders generally treated as domiciled; worldwide estate in scope at rates up to 40%	Inheritance tax by reference to domicile and long-term residence status
Leaving the system	Exit tax on covered expatriates and long-term residents surrendering a green card	Temporary non-residence rules can reclaim gains realised during a short absence

What about the UK side of your departure?

Pre-immigration planning fails when it is run as a US-only project. Every step-up, disposal and trust funding has a UK consequence at the moment it happens, because you are almost certainly still UK resident when you execute it.

The Statutory Residence Test determines when UK residence ends, and split-year treatment can carve the year of departure into UK-resident and non-resident parts — but only where a specific statutory case applies. Sequencing a large disposal into the non-resident part of a split year can transform its UK cost. Equally, the temporary non-residence rules can reach back and tax gains realised while abroad if you return to the UK within roughly five years, which matters enormously for families who view the US move as a chapter rather than a permanent emigration.

UK-situs assets stay within HMRC's reach regardless. UK residential property remains subject to UK CGT and inheritance tax. UK pensions carry their own treaty analysis. Employment income sourced to UK duties may remain UK-taxable even after you leave. The UK tax services workstream and the US workstream must be built as one plan, or the reliefs simply do not line up.

Founders and private company shares

The hardest cases are private company owners. A UK founder with a holding company, EMI options and a possible exit in three years faces a distinctive set of choices before their green card lands.

• Restructuring the holding company before controlled foreign corporation, Subpart F and GILTI rules attach to a US shareholder.
• Deciding whether a check-the-box election improves or worsens the outcome — often it does one for income tax and the other for estate tax.
• Valuing shares for a pre-arrival step-up or trust funding, which requires a defensible valuation, not a management estimate.
• Sequencing option exercises against UK relief availability and the US residency start date.
• Testing whether business asset disposal relief or investors' relief is preserved or lost by the move.

These are not decisions to make in the last month before a flight. See our high-net-worth practice for how we approach founder wealth entering the US system.

The compliance floor: what starts the day residency starts

Planning gets the attention; compliance creates the penalties. From day one of US residency you enter an information-reporting regime that is unusually aggressive by international standards.

• FBAR for foreign financial accounts above the aggregate reporting threshold — bank accounts, brokerage, certain pensions and signature authority over company accounts.
• Form 8938 for specified foreign financial assets, with higher thresholds and a different asset definition.
• Form 8621 for every PFIC holding you did not liquidate.
• Forms 3520 and 3520-A for foreign trusts and certain foreign gifts and inheritances.
• Forms 5471, 8865 and 8858 for foreign corporations, partnerships and disregarded entities.

The right approach is a compliance map drawn before your first US tax year: every account, entity, trust and holding listed against the form it triggers and the person responsible for filing it. Families who arrive without one usually discover the gap two or three years in, at which point remediation — often through IRS streamlined filing — becomes the conversation instead of planning.

A realistic timeline

Twelve to eighteen months before the anticipated residency start date is the working standard for substantial wealth. The sequence typically runs:

• Months 18–12: full asset and structure inventory; UK and US advisers appointed jointly; residency date modelled against SRT and split-year options.
• Months 12–6: trust drafting and jurisdiction selection; company restructuring; valuations commissioned; PFIC inventory built.
• Months 6–3: trust funding executed; offshore fund liquidation; portfolio rebuilt on US-compliant lines; step-up disposals sequenced around the UK tax year.
• Months 3–0: final acceleration of income and gains; documentation packaged and dated; compliance map finalised; residency date confirmed and, where possible, controlled.

Three months is workable for a listed portfolio and no trusts. It is rarely enough where private company shares, existing settlements or real property are in play. The one variable you can often control — and should — is the residency start date itself, which for many families is a scheduling decision rather than a fixed fact.

The five mistakes we see most often

• Assuming a step-up happens automatically. It does not. Nothing resets on arrival.
• Treating the green card as an immigration matter only. It is a tax event with an immigration wrapper.
• Funding trusts after arrival. The same transfer that was free two months earlier becomes a taxable gift with grantor-trust consequences.
• Keeping UK funds "for now". The PFIC clock starts immediately and the holding period taints every future year.
• Running two advisers who never speak. UK relief claimed in isolation frequently destroys the US position, and vice versa.

Speak to us before the date, not after it

The distinguishing feature of pre-immigration planning is that it is genuinely irreversible. There is no amended return, no late election and no reasonable-cause argument that recreates a step-up you did not take or a trust you did not fund. The families who arrive with their structures already settled pay tax on American appreciation only. The families who arrive first and plan later pay tax on a lifetime of British appreciation as well.

Jungle Tax advises UK founders, executives and families moving into the US system, working as a single US–UK team rather than two national practices in parallel. If a green card is on your horizon — even eighteen months out, even if the timing is uncertain — that is precisely the right moment to talk. Arrange a confidential consultation with our US–UK cross-border team and we will map the window you still have, and what it is worth.