UK residents who are not US citizens face US estate tax above just $60,000 of US-situated assets. How situs works, what the 1978 treaty exempts, and how to claim it in time.
If you live in Britain, are not a US citizen or green card holder, and own US shares, US property or a US business interest in your own name, your estate is exposed to US federal estate tax on those assets — and US domestic law gives you a unified credit of only $13,000, above a filing threshold of $60,000. Someone dying US-domiciled in 2026 has a basic exclusion amount of $15,000,000. The 1978 US–UK Estate and Gift Tax Convention usually closes that gap, but only if it is claimed on a US return filed within nine months of death.
This is about people who are not US taxpayers: you live in Britain, have never held a US passport or a green card, and have simply accumulated US assets — American shares, a Florida condo, a stake in a US LLC, a legacy holding from a US employer. US citizens and green card holders in the UK face completely different rules (worldwide estate, full 2026 exclusion), so read our guide for Americans in the UK instead; for the UK side, see Inheritance Tax and the long-term residence test.
US estate tax for a non-resident non-citizen applies only to property situated in the United States. The IRS describes the includible estate as "only assets 'situated' in the United States, such as: U.S. real estate, All tangible property located in the United States, Certain intangible property, such as U.S. marketable securities".
The most misunderstood rule is the one for shares. The Form 706-NA instructions state that "stock of corporations organized in or under U.S. law is property located in the United States", and that "all other corporate stock is property located outside the United States".
That turns on where the company is incorporated — not where the shares are held, not where the broker is, not the currency. Shares in a US corporation held through a UK platform are US-situated. Conversely, US-listed exposure inside a non-US fund — an Irish- or Luxembourg-domiciled UCITS fund, say — is stock of a foreign corporation, and so sits outside the United States. The American companies inside the fund do not drag it into the US net.
| Asset | US situs under US domestic law? | US estate tax exposure | Typical fix |
|---|---|---|---|
| Shares in US-incorporated companies, held directly | Yes | Full, once $60,000 is crossed | Article 5 treaty claim if UK-domiciled; or hold US exposure via a non-US fund |
| US-listed exposure inside a non-US (e.g. Irish) fund | No — "all other corporate stock" | None | Already outside the net; check the fund's domicile |
| US real estate (home, condo, rental) | Yes | Taxable even for a UK domiciliary — Article 6 | Advice before purchase; UK credit under Article 9 |
| Business property of a US permanent establishment | Yes | Taxable — Article 7 | Structuring advice, early |
| Bank deposits not effectively connected with a US trade or business | No — "treated as located outside the United States" | None | Mind the next row |
| Deposits with a US branch of a foreign commercial bank | Yes, per the IRS examinations manual | Exposed | Check where the cash legally sits |
| Debt obligations issued after 18 July 1984 qualifying for the portfolio interest exemption | No | None | Confirm issue date and status |
| Tangible property physically in the US (art, jewellery, a car) | Yes | Exposed | Art on loan to a non-profit gallery or imported solely for exhibition is excepted |
| Proceeds of insurance on the decedent's own life | No — "property located outside the United States" | None | Confirm whose life is insured |
Two numbers do the damage. First, the filing threshold: the IRS states that "If the date of death value of the decedent's U.S.-situated assets, together with the gift tax specific exemption and the amount of the adjusted taxable gifts, exceeds the filing threshold of $60,000, the executor must file a Form 706-NA", and that the threshold "is not indexed for inflation".
Second, the credit. The Form 706-NA instructions say "In general, the maximum unified credit is $13,000" for a non-resident non-citizen estate. Compare somebody dying US-domiciled in 2026: a basic exclusion amount of $15,000,000, an applicable credit of $5,945,800.
The rate schedule is the same one US citizens face — Table A of the Form 706 instructions, topping out at 40% on taxable amounts over $1,000,000.
The UK is one of only a handful of countries with a US estate and gift tax convention. It was signed in 1978 and, as GOV.UK records, entered into force on 11 November 1979.
Article 4 defines domicile for treaty purposes. An individual was domiciled in the UK "if he was domiciled in the United Kingdom in accordance with the law of the United Kingdom or is treated as so domiciled for the purposes of a tax which is the subject of this Convention", and in the US if resident there, or a US national resident there in the preceding three years. Tie-breakers follow: a UK national who is not a US national and who "had not been resident in the United States for Federal income tax purposes in seven or more of the ten taxable years" ending with the relevant year "shall be deemed to be domiciled in the United Kingdom"; otherwise permanent home, centre of vital interests, habitual abode and nationality decide it.
Since 6 April 2025 the UK's connecting factor for Inheritance Tax is long-term residence — broadly, UK residence in at least 10 of the previous 20 tax years — rather than general-law domicile. How the treaty's "treated as so domiciled" wording maps onto that test is a question to confirm estate by estate; our note on proving where you are resident explains why the evidential trail matters.
Article 5 is the operative provision: "Subject to the provisions of Articles 6 … and 7 … if the decedent or transferor was domiciled in one of the Contracting States at the time of the death or transfer, property shall not be taxable in the other State." That exemption "shall not apply if … the decedent or transferor was a national of that other State".
In the ordinary case that is a powerful result: a UK-domiciled British national who dies owning US shares is not taxable in the United States on them, because shares are neither immovable property (Article 6) nor business property of a permanent establishment (Article 7).
For property the US can still tax — US real estate above all — Article 8(5) offers a second line of defence to UK nationals. Where property may be taxed in the US on the death of a UK national "who was neither domiciled in nor a national of the United States and a claim is made under this paragraph, the tax imposed in the United States shall be limited to the amount of tax which would have been imposed had the decedent become domiciled in the United States immediately before his death, on the property which would in that event have been taxable." In substance the US bill is recomputed as though the person had been US-domiciled, bringing the far larger US exclusion into the arithmetic proportionately. The Form 706-NA instructions point to the treaty credit rule at section 2102(b)(3)(A); the calculation is technical and not one to attempt from a template.
Note the different conditions: Article 8(5) requires UK nationality and a claim, while Article 5 turns on domicile, so it can help a non-British national who is UK-domiciled.
A treaty position must be taken on a return: the IRS tells filers to "Attach Form 8833 to the return indicating that the return position is treaty-based". The estate still files Form 706-NA whenever US-situated assets cross $60,000, and claims the relief on it. Where both countries tax the same property, Article 9 allocates the credit and Article 9(5) limits claims to "six years from the date of the event giving rise to a liability to tax or, where later, within one year from the last date on which tax for which credit is given is due".
Margaret, a British national, has lived in London all her life and has never held a US passport or green card. She dies in 2026 owning $2,000,000 of US-incorporated shares in a US brokerage account, a $400,000 condo in Florida, $150,000 in a US bank deposit unconnected with a US trade or business, an Irish-domiciled fund tracking a US index worth $600,000, and a house and pension in the UK.
Step 1 — situs. The US shares and the condo are US-situated. The bank deposit is not, and nor is the Irish fund, which is stock of a foreign corporation. US-situated assets total $2,400,000, so Form 706-NA is required.
Step 2 — domestic law. With only the $13,000 unified credit, the whole $2,400,000 is in charge. Everything above $1,000,000 of taxable estate sits in the 40% top bracket: on that slice alone the tax is $560,000, before the tax on the first $1,000,000 and before the credit.
Step 3 — the treaty. Margaret was UK-domiciled and not a US national, so under Article 5 the $2,000,000 of US shares is not taxable in the United States. The condo stays within US taxing rights under Article 6, and Article 8(5) is then considered to limit the US tax on it.
Step 4 — the UK. As a long-term UK resident her worldwide estate is within UK Inheritance Tax at 40% above the available £325,000 nil-rate band, and any US tax paid on the condo is credited against the UK tax on that same asset.
Figures are illustrative.
Even where no US tax is due, the practical obstacle arrives first. US brokers and banks generally will not release a deceased non-resident's assets until the IRS issues a transfer certificate — "a release of the Federal estate tax lien on a decedent's property", issued "when satisfied that the tax imposed upon the estate, if any, has been fully discharged or provided for".
Two facts matter. First: "A transfer certificate is not required for property administered by an executor or administrator appointed, qualified and acting within the United States." Second: "The time frame for the IRS to process the affidavit and supporting documents is 12 to 18 months from the time the IRS receives all necessary documentation."
Families discover this only after a bereavement, when the money is needed. Our guide to a US brokerage account while living in the UK covers the mechanics.
A parallel regime applies to lifetime gifts, and it is narrower. The IRS says donors "who are nonresidents not citizens of the United States are subject to gift (and generation-skipping transfer (GST)) taxes for gifts made of real and tangible property situated in the United States", adding that "Under certain circumstances, nonresidents who are not U.S. citizens are also subject to gift (and GST) taxes for gifts of intangible property."
So giving away US shares during life is treated very differently from giving away a US house. For 2026 the annual exclusion is $19,000 per recipient, and $194,000 for gifts to a spouse who is not a US citizen. Because the two regimes diverge here, lifetime giving is one of the few places they can be played against each other — with advice.
There are recognised ways to take US situs out of an estate, all with consequences elsewhere:
None of this should be implemented from an article: each interacts with UK Inheritance Tax, UK capital gains tax, US income tax and the terms of your will.
1. Fix the domicile position at the date of death under Article 4, with evidence: residence history, permanent home, family and economic ties.
2. Inventory the US-situated assets at date-of-death value, applying the situs rules above rather than asking where the account was held.
3. Test the filing requirement — US-situated assets, the gift tax specific exemption and adjusted taxable gifts against $60,000.
4. Diarise nine months from the date of death, and file Form 4768 for the automatic six-month extension of time to file if the position will not be ready. An extension of time to pay is a separate application on the same form.
5. Take the treaty position explicitly, with the treaty-based return position disclosure attached.
6. Start the transfer certificate request in parallel, not after the return is accepted.
7. Coordinate the UK account, so any US tax paid is certified and credited rather than lost. HMRC notes a case "must not be closed until the payment has been certified by the US authorities on Form 742".
Most UK families holding US shares are one correctly claimed treaty position away from no US estate tax at all — and one missed deadline away from a charge they never expected. The work is not voluminous, but it is unforgiving.
If your estate includes directly held US shares, US real estate or a US business interest, it is worth a session to establish where you stand. At Next Tax Source a licensed CPA or Enrolled Agent reviews and signs off the US filings, and an ACCA-qualified accountant handles the UK Inheritance Tax interaction, working alongside your solicitor on the will. Read how we handle US–UK cross-border personal tax, or book a consultation. This article is general information, not advice.