Introduction Estate and succession planning for a US citizen living in the UK involves two inheritance tax systems that apply simultaneously — and that interact in ways most advisers on either side of the Atlantic do not fully understand. The United Kingdom imposes IHT at 40 percent on worldwide assets above the nil-rate band for […]
Estate and succession planning for a US citizen living in the UK involves two inheritance tax systems that apply simultaneously — and that interact in ways most advisers on either side of the Atlantic do not fully understand. The United Kingdom imposes IHT at 40 percent on worldwide assets above the nil-rate band for UK-domiciled individuals. The United States imposes an estate tax of 40 percent on worldwide assets above the federal exemption for US citizens — regardless of where they live.
Specialist US and UK Tax Advisors who understand both systems — and the US-UK estate tax treaty that provides a credit mechanism between them — are the only advisers who can plan an estate correctly for a US citizen in the UK. Without the right planning, both systems can tax the same assets at 40 percent each — a combined exposure that proper structuring can prevent.
This guide covers estate and succession planning for US citizens in the UK in 2026. Visit our advisory service:
https://www.jungletax.co.uk/services/us-uk-tax/
US and UK Tax Advisors for estate and succession planning understand both the UK IHT framework — nil-rate band, residence nil-rate band, spouse exemption, business property relief — and the US federal estate tax framework — the lifetime exemption ($13.99 million for 2026), the annual gift exclusion ($18,000 per donee), the marital deduction, and the generation-skipping transfer tax. They also understand the US-UK estate tax treaty, which allocates taxing rights between the two countries and provides a credit mechanism to prevent full double taxation.
The IRS guidance on estate and gift taxes for US citizens abroad is at:
https://www.irs.gov/businesses/small-businesses-self-employed/estate-and-gift-taxes
A UK estate planning specialist can reduce UK IHT exposure through gifting, BPR, and trust structures. They cannot advise on whether the same planning actions affect the US estate tax position or create unintended US gift tax consequences. A US estate planning attorney can structure the US estate efficiently — but cannot advise on whether UK IHT applies to the same assets. Only US and UK Tax Advisors who understand both systems simultaneously can build a plan that reduces the combined exposure without creating unintended consequences in either jurisdiction.
The current US federal estate tax exemption of $13.99 million per person is scheduled to reduce significantly after 2025 unless Congress acts to extend it. For US citizens with large estates, this creates an urgent planning window — large gifts using the higher exemption must be completed before the exemption is reduced. The US and UK Tax Advisors at Jungle Tax model the impact of the exemption reduction on every HNW client’s estate.
A US citizen who has been a UK resident for 15 of the preceding 20 tax years is deemed UK domiciled for IHT purposes — making their worldwide assets subject to UK IHT at 40 percent above the nil-rate band. Many US citizens in the UK who have retained their US domicile of origin do not realize they have become deemed domiciled there. Specialist US and UK Tax Advisors identify the deemed domicile position and plan around it before death.
Our guide to domicile and residency planning for HNW US citizens is at:
The US-UK estate tax treaty provides a credit mechanism — the country that taxes first receives its full tax, and the other country provides a tax credit for the amount already paid. But the credit is limited. It does not cover every situation in which the exemptions and rates in both countries interact to produce a combined effective rate higher than either country’s alone. The US and UK Tax Advisors model the treaty credit position for every estate and identify residual double taxation that requires additional planning.
40% of the taxable estate over the nil-rate limit (£325,000 in 2025–2026) and the residence nil-rate band (£175,000 when a UK residential property falls to direct descendants) is subject to UK IHT. For a married couple, both nil-rate bands can be transferred on the first death — providing a combined exemption of up to £1 million on the second death. IHT does not apply to gifts given more than seven years before death. Gifts made within seven years are subject to taper relief on a sliding scale.
The US federal estate tax applies at 40 percent on the taxable estate above the lifetime exemption ($13.99 million for 2026). The unlimited marital deduction allows assets to pass to a US-citizen spouse estate-tax-free. Where the surviving spouse is not a US citizen — including a UK-citizen spouse — the unlimited marital deduction does not apply. The US and UK Tax Advisors at Jungle Tax identify every estate where the surviving spouse is not a US citizen and advise on the Qualified Domestic Trust structure that preserves the marital deduction deferral.
The US-UK estate tax treaty allocates taxing rights based on where assets are situated and the deceased’s domicile. For a US citizen deemed domiciled in the UK, both countries tax the worldwide estate. The treaty provides a credit — the country where the asset is situated taxes it first, and the other provides a credit for that tax. The combined tax on any single asset is capped at the higher of the two countries’ effective rates — not the sum of both rates.
Both the UK and the US provide annual gift exemptions. The UK annual gift exemption is £3,000 per year — immediately exempt from IHT regardless of the seven-year survival period. The US annual gift exclusion is $18,000 per donee per year in 2026. A coordinated annual gifting program uses both exemptions simultaneously — reducing the estate in each jurisdiction each year. A couple making maximum annual gifts to three children under both programs transfers approximately £42,000 (UK) and $108,000 (US) per year out of the estate tax-free in each jurisdiction.
Where the spouse is a UK citizen, the unlimited US marital deduction does not apply. Gifts to a non-citizen spouse above $185,000 per year (2026) are subject to the US gift tax. For larger transfers, the Qualified Domestic Trust structure preserves the marital deduction deferral — but requires careful structuring before death. The US and UK Tax Advisors at Jungle Tax advise on the QDOT for every estate where the surviving spouse is not a US citizen.
UK business property relief provides a 100 percent exemption from UK IHT for qualifying trading business assets — including shares in unquoted trading companies and interests in trading partnerships. The US and UK Tax Advisors at Jungle Tax confirm BPR eligibility for every business asset and ensure the qualifying conditions are maintained throughout the ownership period.
Marcus is a US citizen. He has been a UK resident for nineteen years and is deemed UK domiciled under the 15 of 20 rule. His UK-citizen wife is Sarah. Their combined estate: London home: £2.6 million; UK investment portfolio: £1.4 million; US brokerage account: $980,000; traditional IRA: $420,000. Their combined net worth is approximately £5 million. Marcus has three adult children — one holds dual US-UK citizenship.
Upon Marcus’s death, the combined estate is subject to UK IHT at 40 percent on amounts above the nil-rate bands and US estate tax at 40 percent on amounts above the federal exemption amount. Sarah is not a US citizen, so the unlimited US marital deduction does not apply without QDOT.OT Without planning, the combined IHT and estate tax exposure at Marcus’s death is significant — double taxation on the same US assets, with the treaty credit not applied correctly.
Jungle Tax implemented the following estate plan. First, a QDOT was established to hold the US brokerage account — preserving the marital deduction deferral until Sarah’s death. Second, a coordinated annual gifting program was established — £3,000 per year under the UK exemption and $18,000 per child per year under the US exclusion to all three children. Third, Marcus’s UK investment portfolio was reviewed for BPR eligibility — approximately £380,000 of shares in an unquoted UK trading company qualified for 100 percent BPR, thereby reducing the UK IHT estate by £380,000. Fourth, a life insurance policy held in trust was arranged to provide liquidity for the combined estate tax liability at Marcus’s death — avoiding a forced sale of illiquid assets.
The US-UK estate tax treaty reduces double taxation — it does not eliminate it. Differences in exemptions, reliefs, and asset valuations can result in residual double taxation that the treaty credit does not fully offset. The adviser models the full combined liability — not just the treaty credit position — before advising on the estate plan.
Where the surviving spouse is not a US citizen, the unlimited US marital deduction does not apply without a QDOT. A QDOT must be established before death — it cannot be created retrospectively in the estate administration. A US citizen who leaves their entire estate to a UK-citizen spouse without a QDOT triggers a significant US estate tax on death.
The UK seven-year taper relief requires evidence that gifts were made on specific dates. A gifting program that is not documented — with bank transfer records and gift letters — cannot be relied upon to support the IHT taper relief claim. The adviser maintains gift records for both UK IHT and US gift tax purposes.
Business property relief requires that the property be owned for at least two years before death and continue to qualify as a trading asset. A business that moves from trading to investment — by accumulating significant cash — loses BPR eligibility. The adviser reviews BPR qualifying conditions annually — not only at the time of estate planning.
The IRS guidance on estate tax for US citizens is at:
https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
Jungle Tax is a specialist US-UK cross-border tax advisory firm with US and UK Tax Advisors who include IRS Enrolled Agents and UK-qualified tax practitioners experienced in transatlantic estate and succession planning. We model the combined UK IHT and US estate tax exposure annually — applying the treaty credit and identifying residual double taxation. We confirm the deemed domicile position, implement coordinated annual gifting programs, advise on the QDOT where the surviving spouse is not a US citizen, confirm BPR eligibility for every business asset, and design life insurance trust structures that are efficient under both systems.
Read our guide to HNW families’ estate planning:
https://www.jungletax.co.uk/jungle-tax-news-updates/accountants-for-us-and-uk-hnw-families/
Estate and succession planning for a US citizen in the UK requires specialist US and UK Tax Advisors who understand both the UK IHT framework and the US federal estate tax — and who can model the treaty credit to identify the true combined exposure.
Three points matter most. First, the US lifetime exemption reduction creates an urgent planning window — large gifts using the elevated exemption must be completed before it is reduced. Second, the QDOT must be established before death, where the surviving spouse is not a US citizen — it cannot be created retrospectively. Third, the annual gifting program must be documented for both UK taper relief and US gift tax purposes — undocumented gifts cannot be relied upon at death.
Jungle Tax | mailto:hello@jungletax.co.uk | 0333-8807974 | https://www.jungletax.co.uk
Yes — if deemed UK domiciled. The US-UK estate tax treaty provides a credit to prevent the combined rate from exceeding the higher of the two countries’ effective rates on any single asset.
The exemption is $13.99 million per person in 2026. It is scheduled to be reduced significantly after 2025 unless Congress extends it. Gifts using the elevated exemption must be made before the reduction takes effect.
No. The unlimited US marital deduction applies only to US-citizen spouses. A Qualified Domestic Trust must be established to defer the estate tax where the surviving spouse is a non-citizen.
BPR provides 100% UK IHT relief on qualifying UK trading business assets held for 2+ years. It applies to UK business assets only — not to US business interests, which are assessed separately.
In the UK, £3,000 per year is immediately exempt from IHT. In the US, $18,000 per donee per year is excluded from gift tax. Both exemptions can be used simultaneously in a coordinated program.
Immediately — especially if approaching 15 years of UK residence. Deemed domicile triggers worldwide UK IHT exposure. Planning before the threshold is crossed is always more effective than planning after it is crossed.
