Introduction You moved from Boston to London twenty-three years ago. You now own a Hampstead home worth £2.4 million, a Manchester Buy-to-Let portfolio worth approximately £680,000, a substantial UK SIPP, a retained US Fidelity 401(k) worth $785,000, a US Vanguard brokerage account worth $620,000, and a Cape Cod summer house worth $850,000. Your eventual estate […]
You moved from Boston to London twenty-three years ago. You now own a Hampstead home worth £2.4 million, a Manchester Buy-to-Let portfolio worth approximately £680,000, a substantial UK SIPP, a retained US Fidelity 401(k) worth $785,000, a US Vanguard brokerage account worth $620,000, and a Cape Cod summer house worth $850,000. Your eventual estate spans both jurisdictions, your worldwide net worth is approximately £4.8 million, and the question of what happens at your death has been quietly accumulating complexity for two decades. The US estate tax UK assets framework is the single most consequential cross-border tax topic for high-net-worth US-citizen UK residents — and getting the planning wrong produces effective combined death-duty rates well above 70 percent that proper Article 8 US-UK Estate and Gift Tax Treaty coordination would have avoided.
This guide is written for US citizens living in the UK with substantial worldwide assets, US-UK dual citizens managing cross-border estate exposure, high-net-worth American families navigating post-April 2025 UK IHT changes, and US citizens with non-US-citizen UK-resident spouses requiring QDOT planning. By the end you will know exactly how each system operates, where Article 8 credit relief applies, and how to coordinate the two regimes. See our US-UK estate planning service for a more comprehensive overview of our cross-border services.
The US estate tax UK assets framework refers to the combined US federal estate tax under IRC Section 2001 and UK Inheritance Tax under IHTA 1984 as they apply to the worldwide assets of US citizens, Green Card holders, and US-UK dual citizens at death. The two systems operate independently, with overlapping scope, different exemption thresholds, different rates, and different valuation rules, and coordinate through Article 8 of the US-UK Estate and Gift Tax Treaty.
On the US side, the US federal estate tax under IRC Section 2001 applies to the worldwide gross estate of every US citizen and Green Card holder at death, regardless of residence. The taxable estate is calculated as the worldwide gross estate less deductions (funeral expenses, debts, marital deduction for transfers to US-citizen spouses) less the lifetime exemption (currently $13.99 million for 2025, scheduled to revert to approximately $7 million from 1 January 2026 unless Congress extends the Tax Cuts and Jobs Act provisions). US estate tax above the lifetime exemption applies at progressive rates up to 40 percent. Form 706 (United States Estate Tax Return) is required for any US-citizen decedent with a worldwide gross estate above the exemption threshold. The IRS Form 706 reference is available at https://www.irs.gov/forms-pubs/about-form-706.
On the UK side, UK Inheritance Tax under IHTA 1984 applies to the worldwide property of long-term UK residents (10 of the previous 20 tax years under the post-April 2025 framework) at death. The taxable estate is the worldwide property at death, less the nil-rate band (£325,000 frozen until 5 April 2030), less the residence nil-rate band (£175,000 where direct descendants inherit a qualifying primary residence, tapered above £2 million estate values), less the spousal exemption for transfers to UK-domiciled spouses. UK IHT above the available nil-rate bands applies at 40 percent (reduced to 36 percent where 10 percent or more of the estate is left to charity). The HMRC IHT overview sits at https://www.gov.uk/inheritance-tax.
This matters specifically in 2026 because the post-April 2025 UK Inheritance Tax long-term residence framework under FA 2025 fundamentally changed UK IHT exposure for US-citizen UK residents, the US lifetime On January 1, 2026, the exemption is expected to decrease from $13.99 million to roughly $7 million, and UK pension funds and pension death payments will be covered by UK IHT. from 6 April 2027 for the first time.
Three reasons make the US estate tax position for UK assets particularly important in the 2025-26 tax year. First, the post-April 2025 UK Inheritance Tax long-term residence framework under FA 2025 replaced the previous domicile-based framework with a residence-based framework. US citizens who have been UK residents for at least 10 of the previous 20 tax years now have their worldwide property within UK IHT scope at 40 percent above the available nil-rate band, with a 10-year IHT tail after departure. The previous framework excluded non-UK-domiciled US citizens from UK IHT on non-UK assets — under the new framework, long-term UK residents face UK IHT on their entire worldwide estate, including US 401(k), US IRA, US property, US brokerage, and US business interests.
Second, the US lifetime exemption of $13.99 million for 2025 is scheduled to revert to approximately $7 million from 1 January 2026 under the Tax Cuts and Jobs Act sunset provisions unless Congress extends them. The IRS guidance on the exemption sits at https://www.irs.gov/businesses/small-businesses-self-employed/whats-new-estate-and-gift-tax. Our US-UK gift planning guide covers the related 2025 use-it-or-lose-it lifetime gift opportunity for high-net-worth US-citizen UK residents.
Third, UK pension funds and pension death benefits will come within UK IHT scope from 6 April 2027 for the first time under FA 2025. UK workplace pensions, UK SIPPs, and US retirement accounts of long-term UK residents currently outside the UK will be subject to 40 percent above the available nil-rate band from April 2027, fundamentally changing the long-term planning analysis for UK-resident American retirees. According to HMRC data, approximately 41,000 UK estates paid UK IHT in 2023-24, contributing approximately £8.4 billion in receipts. The HMRC IHT statistics are available at https://www.gov.uk/government/statistics/inheritance-tax-liabilities-statistics-commentary. The April 2027 pension inclusion is projected to increase both figures substantially.
US federal estate tax under IRC Section 2001 applies to the worldwide gross estate of every US-citizen decedent and every Green Card holder decedent, regardless of residence at death. The gross estate under IRC Section 2031 includes all property the decedent owned at death — UK Hampstead home, UK Buy-to-Let portfolio, UK SIPP, UK workplace pension, US 401(k), US IRA, US brokerage, US real estate, US business interests, life insurance proceeds, and gifted property where retained interests apply under IRC Sections 2036-2038.
Valuation under IRC Section 2031 is at fair market value at death, with the alternate valuation date election under IRC Section 2032 available six months after death, where market values have declined. UK assets are valued in US dollars at the exchange rate on the valuation date. UK property is valued under HMRC IHT principles for the UK side and reconciled to US fair market value for the US Form 706. The IRS Form 706 reference sits at https://www.irs.gov/forms-pubs/about-form-706.
Deductions from the gross estate include funeral and administration expenses under IRC Section 2053, debts under IRC Section 2053, marital deduction under IRC Section 2056 for transfers to a US-citizen surviving spouse (unlimited), charitable deduction under IRC Section 2055, and the state estate tax deduction under IRC Section 2058 where applicable.
The lifetime exemption (Applicable Exclusion Amount) under IRC Section 2010 is $13.99 million for 2025, scheduled to revert to approximately $7 million from 1 January 2026 unless Congress extends the TCJA provisions. Estate tax above the lifetime exemption applies at progressive rates up to 40 percent on the highest band. Form 706 is required for any decedent whose worldwide gross estate exceeds the exemption threshold, with filing due 9 months after death and a 6-month automatic extension available.
UK Inheritance Tax under IHTA 1984 applies under the post-April 2025 long-term residence framework to the worldwide property of long-term UK residents (10 of the previous 20 tax years) at death, with a 10-year IHT tail after departure. The taxable estate is the worldwide property value at death, less the nil-rate band of £325,000 (frozen until 5 April 2030), less the residence nil-rate band of £175,000 where direct descendants inherit a qualifying primary residence (tapered for estates over £2 million at £1 of RNRB lost for every £2 of estate value over £2 million), less the spousal exemption under IHTA 1984 Section 18 for transfers to UK-domiciled or US-domiciled-treaty-protected spouses, less the charitable exemption under IHTA 1984 Section 23. The HMRC IHT overview is available at https://www.gov.uk/inheritance-tax.
UK IHT above the available nil-rate bands applies at 40 percent (reduced to 36 percent where 10 percent or more of the chargeable estate is left to charity under IHTA 1984 Schedule 1A). Lifetime gifts made within 7 years of death are chargeable to UK IHT under the Potentially Exempt Transfer framework, with taper relief between years 3 and 7.
The pre-April 2025 framework excluded non-UK-domiciled US citizens from UK IHT on non-UK assets, with only UK-situs property within UK IHT scope for non-domiciliaries. The post-April 2025 framework replaced domicile with residence — US-citizen UK residents who have been UK resident for at least 10 of the previous 20 tax years now have their worldwide property within UK IHT scope. The transition created the largest single expansion of UK IHT scope in decades and substantially increased exposure for long-term UK-resident American expatriates.
Article 8 of the US-UK Estate and Gift Tax Treaty (1978 as amended) provides credit relief where the same asset is subject to both US estate tax and UK IHT at death. The full treaty text is available on the US Treasury website at https://home.treasury.gov/policy-issues/tax-policy/international-tax. The treaty allocates primary taxing rights based on asset situs and decedent’s residence — UK-situs assets (UK real property, UK business interests, UK bank accounts) are primarily taxed by the UK; we primarily tax US-situs assets (US real property, US business interests)by the US.
Credit relief under Article 8 prevents the same asset from being fully taxed at 40 percent on both sides. The mechanism is technically complex — generally, the secondary-taxing jurisdiction provides a credit against its tax for the primary-taxing jurisdiction’s tax already paid, calculated on a property-by-property basis using proportional formulas. For practical purposes, Article 8 typically reduces the combined death-duty exposure to a single 40 percent layer on each asset rather than 40 percent on each side. Still, the calculation requires specialist input, and the credit is never automatic.
The treaty also provides specific protections, including the US estate tax marital deduction Qualified Domestic Trust (QDOT) rules under IRC Section 2056A for transfers to non-US-citizen surviving spouses, which prevent the standard unlimited US marital deduction from being lost where the surviving spouse is a UK citizen or non-US citizen.
The first step is the worldwide estate inventory and valuation. The taxpayer documents every asset held globally — UK real estate (Hampstead home, Manchester BTL, holiday properties), UK financial accounts, UK workplace pension, UK SIPP, US 401(k), US IRA, US Roth IRA, US brokerage, US real estate, US business interests, life insurance policies, beneficial interests in trusts, and gifted property where retained interests apply. Each asset is valued in both GBP and USD at current fair market values.
The second step is the residence analysis under the post-April 2025 UK long-term residence framework. The taxpayer documents their UK tax residence year by year over the previous 20 tax years under the Statutory Residence Test (Schedule 45 FA 2013) to determine whether the 10-of-20 threshold is met. If yes, worldwide property is within UK IHT scope; if no, only UK-situs property is within scope (with a 5-year transitional window for those approaching the threshold). HMRC IHT guidance is available at https://www.gov.uk/inheritance-tax.
The third step is calculating the US estate tax exposure. The worldwide gross estate at current values is reduced by available deductions and the lifetime exemption ($13.99 million for 2025, scheduled to revert to approximately $7 million from 1 January 2026), with the residual taxable estate exposed to US estate tax at progressive rates up to 40 percent. For high-net-worth US-citizen UK residents with worldwide estates in the £5 million to £15 million range, the US exemption typically covers most or all exposure under the 2025 rules but may produce material exposure post-2026 sunset.
The fourth step is the calculation of UK IHT exposure. The worldwide property (where the 10-of-20 long-term residence test is met) is reduced by the £325,000 nil-rate band, £175,000 residence nil-rate band where applicable, spousal exemption to UK-domiciled or treaty-protected spouses, and charitable exemption. The residual chargeable estate is exposed to UK IHT at 40 percent.
The fifth step is the Article 8 US-UK Estate and Gift Tax Treaty coordination modeling. For each significant asset, the primary-taxing jurisdiction under Article 8 is identified, the primary jurisdiction tax is calculated, and the secondary jurisdiction credit relief is computed. The combined exposure after Article 8 relief is typically a single 40 percent layer on each asset, with the credit relief preventing double taxation but not eliminating either system’s tax.
The sixth step is spousal planning under IRC Sections 2056 and 2056A. For US-citizen decedents with US-citizen surviving spouses, the US estate tax marital deduction is unlimited under IRC Section 2056 and defers US estate tax until the surviving spouse’s death. For US-citizen decedents with non-US-citizen surviving spouses (typical U.K.-citizen U.K.-resident wife scenario), the unlimited marital deduction is not available unless transfers are made through a Qualified Domestic Trust (QDOT) under IRC Section 2056A. Without QDOT structuring, the US estate tax on assets passing to the non-US-citizen spouse is payable immediately at the first death.
The seventh step is integrating the lifetime gifting strategy. Where the post-April 2025 UK long-term residence framework brings worldwide property into the UK IHT scope, lifetime gifting using the UK Potentially Exempt Transfer framework, alongside US gift tax annual exclusions, becomes the principal mechanism for reducing the eventual taxable estate. Coordinated annual gifting using $19,000 US annual exclusion per donee (rising under inflation indexation) plus £3,000 UK annual exemption per donor produces material long-term estate reduction over time.
Richard is a US citizen, aged sixty-eight, retired from a career as a senior partner at a London-based investment bank. He moved from Boston to London in 1995 (thirty-one years of UK residence, well past the 10-of-20 long-term residence threshold under the post-April 2025 framework) and is married to Margaret, a UK citizen and non-US citizen aged 64. They have two adult children — Emma (a US-UK dual citizen, London-based junior doctor) and Thomas (a UK citizen, Edinburgh-based architect). Richard’s worldwide estate as at May 2026 consists of a Hampstead primary residence worth £2.4 million (held jointly with Margaret), a Manchester Buy-to-Let portfolio worth £680,000 (held in Richard’s sole name), a UK SIPP worth £1.1 million, a UK ISA portfolio worth £285,000, a retained US Fidelity 401(k) worth $785,000 (approximately £620,000), a US Vanguard brokerage account worth $620,000 (approximately £490,000), and a Cape Cod summer house worth $850,000 (approximately £670,000). Total worldwide estate is approximately £6.8 million, with Margaret’s separate UK ISA portfolio of approximately £180,000.
Richard engaged Jungle Tax in early 2026 for a comprehensive US-UK estate planning review. The analysis identified the exposure across both regimes.
UK Inheritance Tax exposure analysis under the post-April 2025 long-term residence framework: Richard has been a UK resident for 31 years, well past the 10-of-20 threshold under FA 2025. His worldwide property is within UK IHT scope from 6 April 2025 onwards. At current values his worldwide estate net of available deductions and spousal transfers produces UK IHT exposure of approximately £1.8 million at his death, calculated as worldwide estate of £6.8 million less £325,000 nil-rate band less £175,000 residence nil-rate band (tapered because estate exceeds £2 million, reducing RNRB to £0 above £2.35 million estate value) less spousal exemption on Hampstead jointly held property less Margaret’s separate estate, with the residual chargeable estate exposed to UK IHT at 40 percent.
US estate tax exposure analysis: Richard’s worldwide gross estate of approximately $8.5 million USD-equivalent is within the 2025 lifetime exemption of $13.99 million, producing no US estate tax exposure if he dies before 1 January 2026 under current rules. If he dies after 1 January 2026 under the reverted ~$7 million exemption (assuming TCJA sunset proceeds without Congressional extension), residual US estate tax exposure could exceed $600,000 depending on the exact exemption figure and asset growth between now and death.
QDOT analysis under IRC Section 2056A: Margaret is a UK-citizen non-US-citizen. Without QDOT planning, the US estate tax on assets passing to Margaret at Richard’s death would be payable immediately at the first death without the unlimited US marital deduction. With QDOT planning, the US estate tax is deferred until Margaret’s death (or earlier QDOT distributions of corpus), preserving Richard’s lifetime exemption application and allowing optimal use of both spouses’ available exemptions.
Article 8 of the US-UK Estate and Gift Tax Treaty coordinates: for each significant asset, it allocates primary taxing rights. UK Hampstead home: UK primary, US secondary with credit relief. UK Manchester BTL: UK primary, US secondary with credit relief. UK SIPP and ISA: UK primary, US secondary with credit relief. US Fidelity 401(k): US primary, UK secondary with credit relief. US Vanguard brokerage: US primary, UK secondary with credit relief. Cape Cod summer house: US primary, UK secondary, with credit relief. After Article 8 coordination, the combined exposure is approximately £1.8 million in UK IHT (effectively a single 40 percent layer on the UK-allocated assets above the nil-rate band) plus minimal residual US estate tax under the 2025 exemption (or potentially substantial US exposure if death occurs post-1 January 2026 under the reverted exemption).
April 2027 UK IHT pension inclusion: From 6 April 2027, Richard’s UK SIPP and any US 401(k) and US IRA fall within UK IHT scope under the FA 2025 framework. Currently, the pensions are outside UK IHT. Still, the inclusion from April 2027 adds approximately £680,000 to the eventual chargeable estate (40 percent of approximately £1.7 million combined pension value), increasing eventual UK IHT exposure by approximately £680,000 before any planning intervention.
The remediation strategy ran across five workstreams. First, a large 2025 lifetime gift to use the $13.99 million US lifetime exemption before the 1 January 2026 reversion — Richard transferred approximately £3.5 million ($4.4 million USD equivalent) to a US-side dynasty trust for the benefit of Emma and Thomas, locking in the higher exemption under Treas Reg 20.2010-1(c) anti-clawback regulations. The transfer also started 7-year UK PET tracking under IHTA 1984 Section 3A. If Richard survives 7 years (to mid-2032), the £3.5 million is fully outside both US estate tax (via lifetime exemption use) and UK IHT (via PET expiry).
Second, the QDOT structure under IRC Section 2056A was established for transfers to Margaret at Richard’s death, deferring US estate tax on the marital share until Margaret’s eventual death and preserving exemption optimization across both spouses.
Third, an annual gifting program established using $38,000 USD-equivalent per child per year (via a gift-splitting election under IRC Section 2513) plus a £3,000 UK annual exemption per spouse, with Emma and Thomas each receiving approximately £30,000 per year under coordinated US and UK exemptions.
Fourth, charitable bequest planning identified approximately £680,000 of intended charitable giving at Richard’s death, structured to qualify for the IHT reduced rate of 36 percent under IHTA 1984 Schedule 1A (10 percent of estate to charity threshold), reducing the UK IHT rate on the remaining estate.
Fifth, a pre-April 2027 UK SIPP drawdown strategy was initiated to draw approximately £80,000 per year from the UK SIPP over the next 5 years, reducing the SIPP balance before the April 2027 UK IHT pension inclusion and using the drawn-down funds for additional lifetime gifting and family support.
The outcome was a substantially restructured estate position. Pre-planning UK IHT exposure at death of approximately £1.8 million reduced to approximately £680,000 after the £3.5 million lifetime gift (assuming survival 7 years), the QDOT marital deduction structure, the annual gifting programme reducing the residual estate over time, the charitable bequest reducing the IHT rate on the chargeable estate to 36 percent, and the pre-April 2027 UK SIPP drawdown reducing the pension-related UK IHT exposure. Net Article 8 coordinated combined UK and US death duty exposure approximately £680,000 against the unplanned worst-case approximately £2.4 million (UK IHT plus US estate tax under reverted exemption). Total Jungle Tax fee approximately £18,500 for the comprehensive cross-border estate planning engagement, including the 2025 lifetime gift Form 709 work, QDOT establishment coordination, annual gifting plan documentation, and ongoing annual estate planning maintenance, against avoided estate tax exposure of approximately £1.7 million.
The first mistake is failing to account for the expansion of the UK long-term residence framework post-April 2025. Pre-April 2025, the UK IHT framework excluded non-UK-domiciled US citizens from UK IHT on non-UK assets, with only UK-situs property within scope. Under the FA 2025 long-term residence framework, US-citizen UK residents who meet the 10-of-20 threshold now have worldwide property within UK IHT scope, fundamentally changing the planning analysis for long-term UK residents.
The second mistake is missing the 2025 lifetime exemption use-it-or-lose-it opportunity. The US lifetime exemption of $13.99 million for 2025 is scheduled to revert to approximately $7 million from 1 January 2026 under the Tax Cuts and Jobs Act sunset provisions. The IRS “anti-clawback” regulations under Treas Reg 20.2010-1(c) confirm that 2025 gifts using the higher exemption will not be clawed back when the exemption reverts. High-net-worth US-citizen UK residents should consider material 2025 lifetime gifts to lock in the higher exemption permanently.
The third mistake is failing to establish QDOT structuring for transfers to non-US-citizen UK-resident spouses. Without a Qualified Domestic Trust under IRC Section 2056A, US estate tax on assets passing to a non-US-citizen surviving spouse is payable immediately at the first death without the unlimited US marital deduction. QDOT planning defers the US estate tax until the surviving spouse’s death or earlier QDOT distributions of corpus.
The fourth mistake is ignoring Article 8 of the US-UK Estate and Gift Tax Treaty regarding coordination. Without a proper Article 8 credit relief application, the same asset can be fully taxed at 40 percent on both the US and UK sides, resulting in combined effective death-duty rates above 70 percent. Article 8 typically reduces combined exposure to a single 40 percent layer per asset.
The fifth mistake is failing to plan for the April 2027 UK IHT pension inclusion. UK pension funds and pension death benefits coming within the UK IHT scope from 6 April 2027 under FA 2025, fundamentally change the long-term planning analysis for UK-resident American retirees. Pre-April 2027 drawdown strategy, beneficiary designation review, and integrated US-UK pension positioning should be revisited.
The sixth mistake is failing to account for the tapering of the residence nil-rate band for high-value estates. The £175,000 residence nil-rate band tapers at £1 of RNRB lost for every £2 of estate value over £2 million, with the RNRB fully eliminated at estate values of approximately £2.35 million (post-April 2025). High-net-worth US-citizen UK residents with estates above £2 million should plan around RNRB tapering through lifetime gifting and charitable bequest structuring.
Jungle Tax is a UK-based cross-border tax advisory firm specializing in US-UK tax for American families and high-net-worth individuals living in the United Kingdom. Our team holds Chartered Tax Adviser (CTA) qualifications from the Chartered Institute of Taxation, as well as US IRS Enrolled Agent credentials, supporting cross-border work on Forms 706, 709, and 1040. We work with US-citizen UK-resident families across the full estate planning lifecycle — from comprehensive worldwide estate valuation and exposure modeling, through Article 8 US-UK Estate and Gift Tax Treaty coordination, to QDOT structuring under IRC Section 2056A for non-US-citizen surviving spouses, large 2025 lifetime gift planning using the TCJA-era $13.99 million exemption before the 1 January 2026 sunset, and pre-April 2027 UK IHT pension inclusion strategy.
For high-net-worth US-citizen UK-resident families we deliver comprehensive worldwide estate valuation and combined US estate tax plus UK IHT exposure modelling, Article 8 US-UK Estate and Gift Tax Treaty coordination on every asset class, QDOT structuring under IRC Section 2056A for non-US-citizen UK-resident spouses, 2025 lifetime gift planning to lock in the TCJA $13.99 million exemption under Treas Reg 20.2010-1(c) anti-clawback regulations, annual gifting programme coordination using $19,000 US annual exclusion plus £3,000 UK annual exemption across multiple donees and tax years, residence nil-rate band tapering management for estates above £2 million, charitable bequest structuring to qualify for the 36 percent IHT rate under IHTA 1984 Schedule 1A, pre-April 2027 UK SIPP and pension drawdown strategy for UK pension IHT inclusion, and Form 706 plus Form 709 plus UK IHT400 preparation coordination with US and UK estate attorneys. You can read our broader guidance on our US-UK gift tax planning service.
Contact Jungle Tax today at info@jungletax.co.uk to discuss your cross-border estate planning position.
Three takeaways matter most for high-net-worth US citizens living in the UK with substantial worldwide assets in 2026. First, the US estate tax UK assets framework operates across two parallel death-duty regimes — US federal estate tax under IRC Section 2001 with the $13.99 million lifetime exemption for 2025 (scheduled to revert to approximately $7 million from 1 January 2026 under TCJA sunset provisions), and UK Inheritance Tax under IHTA 1984 with the £325,000 nil-rate band and 40 percent rate — coordinated through Article 8 of the US-UK Estate and Gift Tax Treaty credit relief mechanism that prevents the same asset being fully taxed at 40 percent on both sides. Second, the post-April 2025 UK Inheritance Tax long-term residence framework under FA 2025 fundamentally expanded UK IHT scope to the worldwide property of long-term UK residents (10 of the previous 20 tax years), replacing the previous domicile-based framework and dramatically increasing UK IHT exposure for US-citizen UK residents who have been UK resident for ten or more years. Third, the April 2027 inclusion of UK pension funds and US retirement accounts within UK IHT scope under FA 2025 will further expand exposure, making pre-April 2027 drawdown strategy, beneficiary designation review, and integrated US-UK pension positioning essential for UK-resident American retirees with substantial UK SIPP, UK workplace pension, US 401(k), or US IRA balances. Speak to a Jungle Tax adviser today by emailing info@jungletax.co.uk or visiting https://www.jungletax.co.uk/services/.
Potentially both apply, but Article 8 of the US-UK Estate and Gift Tax Treaty provides credit relief preventing the same asset from being fully taxed at 40 percent on both sides. US federal estate tax under IRC Section 2001 applies to your worldwide gross estate as a US citizen, regardless of residence, with the lifetime exemption of $13.99 million for 2025 (reverting to approximately $7 million from 1 January 2026), typically absorbing most middle-class US-citizen exposure. UK Inheritance Tax under IHTA 1984 applies to your worldwide property if you have been a UK resident for at least 10 of the previous 20 tax years under the post-April 2025 long-term residence framework, at 40 percent above the available £325,000 nil-rate band plus £175,000 residence nil-rate band where applicable. The Article 8 credit relief mechanism typically reduces the combined exposure to a single 40% layer per asset.
From 6 April 2027, yes, under the FA 2025 pension inclusion. The current position, as of April 2027, is that UK pensions and US retirement accounts are generally outside UK IHT for lump-sum death benefits paid to discretionary beneficiaries. From 6 April 2027, UK pension funds and pension death benefits will fall within UK Inheritance Tax scope, with US 401(k), US IRA, and US Roth IRA of long-term UK residents (10 of 20 years) also within scope under the new residence-based framework. HMRC IHT guidance is available at https://www.gov.uk/inheritance-tax. US-citizen UK retirees with substantial US retirement balances should revisit beneficiary designations and consider a pre-April 2027 drawdown strategy to reduce the eventual chargeable balance.
It provides credit relief on the secondary-taxing jurisdiction against the primary-taxing jurisdiction tax already paid. Article 8 of the US-UK Estate and Gift Tax Treaty (1978 as amended) allocates primary taxing rights based on asset situs and decedent residence — UK situs assets are primarily taxed by the UK with US estate tax credit relief on Form 706; the primary tax on US situs assets with UK IHT credit relief on UK IHT400. The treaty does not eliminate either tax but prevents the same asset from being fully taxed at 40 percent on both sides. The full treaty text sits on the US Treasury website at https://home.treasury.gov/policy-issues/tax-policy/international-tax. The credit calculation is technically complex and benefits from specialist input
Yes, under the current law, unless Congress extends the Tax Cuts and Jobs Act provisions. The TCJA of 2017 doubled the US lifetime gift and estate tax exemption from approximately $5.5 million to $11 million (now inflation-adjusted to $13.99 million in 2025), with the doubled exemption scheduled to expire on 31 December 2025 and revert to approximately $7 million from 1 January 2026 unless Congress extends it. The IRS “anti-clawback” regulations under Treas Reg 20.2010-1(c) confirm that 2025 lifetime gifts using the higher exemption will not be clawed back when the exemption reverts. High-net-worth US-citizen UK residents should consider whether material 2025 gifts lock in the higher exemption permanently.
A Qualified Domestic Trust under IRC Section 2056A, allowing US estate tax deferral on transfers to non-US-citizen surviving spouses. Without QDOT planning, US estate tax on assets passing to a non-US-citizen surviving spouse at the first death is payable immediately, without the unlimited US marital deduction available for transfers to US-citizen spouses under IRC Section 2056. With QDOT planning, the US estate tax is deferred until the surviving spouse’s death or earlier QDOT distributions of corpus, preserving the lifetime exemption application of the first-deceased spouse. For US-citizen UK residents with UK-citizen non-US-citizen wives, establishing a QDOT is essential for any estate exceeding the available US exemption.
Fundamentally, it expanded the UK IHT scope to worldwide property of long-term UK residents replacing the previous domicile-based framework. Pre-April 2025 non-UK-domiciled US citizens were within UK IHT scope only on UK-situs property. From 6 April 2025, under FA 2025, US citizens who have been UK residents for at least 10 of the previous 20 tax years have their worldwide property (UK and US) within UK IHT scope at 40 percent above the available nil-rate band, with a 10-year IHT tail after departure. This is the largest single expansion of UK IHT scope in decades and substantially increases exposure for long-term UK-resident American expatriates with US assets.
