US Estate & Gift Tax for Americans in the UK: What to Plan For

US estate tax for Americans in the UK applies to your worldwide assets, because US citizens remain within the US estate and gift tax system wherever they live. The UK separately charges inheritance tax on its own basis, so the two regimes can overlap and require a coordinated plan.

For a high-net-worth American who has built a life in the UK — a home in London, investments on both sides of the Atlantic, perhaps a British spouse — this overlap is not a technicality. It is the single most important, and most commonly overlooked, feature of your long-term wealth plan. This article sets out what to plan for at a high level. It is not a substitute for bespoke advice on your own estate, which is where the real decisions are made.

Key takeaways

• Citizenship, not residence, drives the US side. US estate and gift tax follows US citizens worldwide, so your UK home, pension and investments can all sit inside the US taxable estate.
• The UK taxes on a different basis. UK inheritance tax turns on domicile and long-term residence, so a settled American can fall within both systems at once.
• The marital deduction is limited when a spouse is not a US citizen — a common situation in mixed-nationality marriages — and a QDOT is the usual fix.
• The US–UK estate and gift tax treaty allocates taxing rights and relieves double taxation, but it does not remove either tax.
• Coordinated, forward-looking planning wins. Wills, trusts and gifting must work in both countries at once, drafted before they are needed.

Why does US estate tax for Americans in the UK reach worldwide assets?

The US is one of the very few countries that taxes on the basis of citizenship. That principle, familiar to expats from the income-tax side, applies just as firmly to estate and gift tax. A US citizen's taxable estate includes assets held anywhere in the world — the flat in Kensington, the ISA, the US brokerage account, the pension — regardless of how many years they have lived outside the United States.

The system does provide a substantial but capped lifetime exemption that shelters many estates from US estate tax altogether, alongside annual gift exclusions that allow modest gifting each year without eroding that exemption. For genuinely large estates, however, value above the exemption is exposed, and the rate on the excess is significant. This is why US estate tax for Americans in the UK is a planning issue for the affluent in particular: the exemption is generous for an average estate but finite for a substantial one. Because these thresholds are adjusted over time, we avoid quoting figures here — confirm current amounts with a professional before acting.

How does UK inheritance tax overlap with the US regime?

UK inheritance tax works on an entirely different footing. It is driven by domicile and, following reforms taking effect from April 2025, by long-term UK residence — not by citizenship. An American who has made the UK their permanent home for many years can become within scope for UK inheritance tax on their worldwide estate, while a more recent arrival may initially be taxed only on UK-situated assets.

The practical result is that a long-settled American in the UK can face both taxes on the same estate: the US charging on citizenship, the UK on residence and domicile. The two do not neatly cancel out, and the reliefs, thresholds and exemptions differ in each. Understanding where you sit on the UK domicile and long-term-residence spectrum is the essential first step, and it interacts with your wider filing position — if your US returns are not current, our guide on missed US tax returns is a sensible companion read before any estate planning.

The marital deduction problem when a spouse is not a US citizen

Between two US citizens, assets can pass on death to a surviving spouse free of US estate tax under the unlimited marital deduction — tax is effectively deferred until the second death. In mixed-nationality marriages, which are common among Americans in the UK, that unlimited deduction does not apply where the surviving spouse is not a US citizen.

Instead, a much lower threshold governs what can pass tax-free, and even lifetime gifts to a non-US-citizen spouse are capped at an annual amount well below the freedom two citizens enjoy. For a couple with a valuable home and substantial investments, this can expose a large slice of the first spouse's estate to US estate tax at exactly the moment the family least wants to deal with it. It is one of the most under-appreciated traps in cross-border estate planning, and it is entirely foreseeable.

What is a QDOT, and when does it help?

The standard tool for this problem is the qualified domestic trust (QDOT). In outline, assets passing to the non-US-citizen surviving spouse are directed into a QDOT rather than to the spouse outright. This defers the US estate tax that would otherwise fall due, restoring much of the benefit the marital deduction gives to citizen couples, with tax generally arising later as capital is distributed or on the second death.

A QDOT is not automatic and cannot be improvised after a death. It has to be provided for in the estate plan in advance, with wills and trust deeds drafted so the structure qualifies under US rules while still working sensibly for UK inheritance tax. Getting the interaction right — US trust treatment on one side, UK trust and inheritance-tax treatment on the other — is specialist work for coordinated US and UK advisers.

How does the US–UK estate and gift tax treaty allocate taxing rights?

The US and UK have a dedicated estate and gift tax treaty that exists precisely because both countries might otherwise tax the same estate in full. The treaty allocates primary taxing rights between the two jurisdictions and provides relief — largely through credits for tax paid in the other country — so that the same assets are not simply taxed twice over.

Crucially, the treaty relieves double taxation; it does not abolish either tax. Which country has the primary claim can depend on the type of asset, where it is situated, and the deceased's domicile and citizenship. Applying it correctly to a mixed-nationality estate with assets on both sides of the Atlantic is genuinely technical, and small drafting or situs details can change the outcome. This is a case where the value of good advice is measured in the tax it lawfully avoids.

Lifetime gifting and why cross-border couples need one plan, not two

Gifting during life can reduce a taxable estate, but it has to satisfy both systems at once. The US permits annual gifts within an exclusion amount, and larger strategies can shift future growth out of the estate; the UK has its own gifting rules, including survivorship periods before a gift falls fully outside the estate. A gift that is efficient for US purposes can create a UK exposure, or vice versa, if the two are planned in isolation.

That is the recurring theme of US estate tax for Americans in the UK: the answer is never one country's rules in isolation. Wills, trusts, gifting, life insurance ownership, pension nominations and the ownership of the family home all need to be read through both the US and UK lens together. Our global tax calculators can help you frame the scale of the question, but the plan itself is bespoke.

At Next Tax Source, our cross-border team works alongside a CPA/EA and a chartered accountant so both regimes are handled by the right licensed professional, and every plan is reviewed and signed off before you rely on it. If you would like a coordinated view of your own position, start with our US–UK expat tax service, or book a consultation to talk it through.

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Reviewed by a CPA/EA and a chartered accountant. This article is general information for planning purposes, not advice on your specific facts; exemptions, thresholds and rules change, so confirm current figures before acting.

Last updated: 12 August 2026.

Official sources: IRS — Estate Tax · IRS — Gift Tax · IRS — Estate & Gift Tax Treaties (International) · GOV.UK — Inheritance Tax

Frequently asked questions

Do American citizens living in the UK still pay US estate and gift tax?

Yes. US citizens remain within the US estate and gift tax system on their worldwide assets no matter where they live, so an American in London or Edinburgh is treated much like one in New York. A substantial but capped lifetime exemption shelters many estates, but larger estates and lifetime gifts above the annual exclusions can still be exposed. Domicile does not remove US citizenship-based reach.

Does the UK also charge inheritance tax on a US citizen living there?

It can. UK inheritance tax is based on domicile (and, from April 2025, long-term UK residence) rather than citizenship. An American who has settled in the UK for many years may become within scope for UK inheritance tax on their worldwide estate, on top of the US regime. That is precisely where the two systems overlap and coordinated planning matters.

What is the marital deduction limit if my spouse is not a US citizen?

For US estate tax, transfers between spouses are normally free of tax under the unlimited marital deduction, but that unlimited deduction does not apply when the surviving spouse is not a US citizen. Instead, a much lower threshold applies, and lifetime gifts to a non-US-citizen spouse are capped at an annual amount well below the transfers allowed between two citizens. A qualified domestic trust (QDOT) is the usual workaround.

What is a QDOT and do I need one?

A qualified domestic trust (QDOT) lets an estate defer US estate tax on assets passing to a non-US-citizen surviving spouse, restoring much of the benefit of the marital deduction. Whether you need one depends on the size of your estate, your spouse's citizenship, and how your wills and trusts are drafted. It is a planning decision to take before death, with US and UK advice together.

Does the US–UK estate tax treaty prevent double taxation?

The US–UK estate and gift tax treaty allocates taxing rights between the two countries and provides mechanisms to relieve double taxation, largely through credits for tax paid in the other country. It reduces the risk of the same assets being fully taxed twice, but it does not make either tax disappear, and applying it correctly to a mixed-nationality estate is technical. Bespoke advice is essential.

Can lifetime gifting reduce US estate tax for Americans in the UK?

It can, if planned carefully. The US allows annual gifts within an exclusion amount without touching your lifetime exemption, and larger gifting strategies can move future growth out of a taxable estate. But UK inheritance tax has its own gifting rules and survivorship periods, and gifts to a non-citizen spouse are capped. Uncoordinated gifting can trigger tax in one country while saving it in the other, so model both regimes first.