The US-UK Estate and Gift Tax Treaty: Which Country Taxes Your Estate

The United States and the United Kingdom have two separate tax treaties, and the one that decides which country taxes a death estate is not the one most people have heard of. Estates, gifts and generation-skipping transfers are governed by a distinct convention signed in London on 19 October 1978 and in force since 11 November 1979; the income and capital gains treaty is a different instrument. Under it, the country where the deceased was treaty-domiciled generally has the primary right to tax, with two exceptions — real property, and the business assets of a permanent establishment, taxable where they sit — and the other country gives a credit.

Key takeaways

The instrument is the 1978 estate, gift and generation-skipping tax convention, enacted in UK law by SI 1979/1454 and in force from 11 November 1979. The separate 2001 income and capital gains convention does nothing for death taxes.
Treaty domicile is its own concept, built in Article 4 from residence, nationality and a three-year look-back on the US side and from general-law or attributed domicile on the UK side, then resolved by a seven-of-ten-year rule.
Allocation: the situs country taxes immovable property and permanent-establishment business assets; everything else is taxable only where the deceased was treaty-domiciled, unless they were a national of the other country. Whichever country holds the secondary right gives the credit, and a claim must be made within six years of the chargeable event, or one year from the last date the creditable tax is due.

Two US-UK treaties, and why the distinction matters

The treaty practitioners usually mean by "the US-UK tax treaty" is the 2001 convention as amended by the 2002 protocol, in force from 31 March 2003, covering income tax, capital gains tax, corporation tax and petroleum revenue tax. It has its own residence test, tie-breaker and saving clause — none of which applies to a death.

Death taxes sit in their own convention. Article 2(1) lists the covered taxes as, in the United States, "the Federal gift tax and the Federal estate tax, including the tax on generation-skipping transfers", and in the United Kingdom, "the capital transfer tax". Capital transfer tax no longer exists; the convention still bites because Article 2(2) extends it to "any identical or substantially similar taxes" imposed later "in addition to, or in place of, the existing taxes", which is how inheritance tax is covered. In UK law it takes effect through section 158 of the Inheritance Tax Act 1984, which gives an Order in Council priority over the Act itself. One quirk: the UK limb of the "nationals" definition in Article 3(1)(e) uses pre-1983 nationality language, so a borderline nationality needs checking.

Treaty domicile is a third concept, not a shortcut

Article 4 does not import either country's domestic test wholesale. On the US side, an individual was domiciled in the United States "if he was a resident (domiciliary) thereof or if he was a national thereof and had been a resident (domiciliary) thereof at any time during the preceding three years" (Article 4(1)(a)). The second limb is the trap: a US citizen who left within the last three years is still treaty-domiciled there.

On the UK side, Article 4(1)(b) covers anyone domiciled in the United Kingdom "in accordance with the law of the United Kingdom or … treated as so domiciled for the purposes of a tax which is the subject of this Convention". That second limb is what keeps the treaty working after April 2025.

Because both can be satisfied at once, Article 4 unwinds the conflict in a fixed order:

Article 4(2) — 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 time, is deemed UK-domiciled.
Article 4(3) — the mirror image for a US national who is not a UK national, tested over "the ten income tax years of assessment" and determined as for income tax "but without regard to any dwelling-house available to him in the United Kingdom for his use".
Article 4(4) — otherwise: permanent home, then centre of vital interests, then habitual abode, then nationality, then mutual agreement.

Treaty domicile can therefore differ from US tax residence, from UK general-law domicile and from UK long-term residence: three different answers to "where were you domiciled?", all correct, on one death.

Primary and secondary taxing rights

Article 5(1)(a) is the engine: subject to Articles 6 and 7 and the rest of Article 5, "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." Article 5(1)(b) removes that protection where the deceased "was a national of that other State". There is no separate saving-clause article of the kind the income treaty contains; Article 5(1)(b) does the equivalent job, more narrowly.

The two situs exceptions are tightly drawn. Article 6 provides that "immovable property (real property) may be taxed in the Contracting State in which such property is situated", defined by local law, with mortgage debts expressly excluded and ships, boats and aircraft expressly not immovable. Article 7 lets a country tax assets forming part of the business property of a permanent establishment there, on a conventional definition, and Article 7(3) does the same for a fixed base used for independent personal services.

What is not in the convention matters as much as what is. No article allocates shares, bank deposits, partnership interests, life policies or debts by situs: they are "other property", caught by Article 5(1)(a) and taxable only in the country of treaty domicile. Domestic situs rules — including the US rules on which assets count as US-situated — decide the point only where the convention does not displace them, typically where the deceased was domiciled in neither country: Article 5(2) then looks to nationality, and Article 5(6) sends a genuine situs conflict to the competent authorities.

Which country taxes what

Assuming worldwide UK inheritance tax exposure and no Article 5(5) backstop:

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The backstop in Article 5(5), and its carve-out

Article 5(5) stops the convention making property tax-free everywhere: where property would be taxable in only one country and tax, "though chargeable is not paid … in that State", the other country may tax it after all.

The parenthesis is what gets misread. Non-payment only triggers the backstop "otherwise than as a result of a specific exemption, deduction, exclusion, credit or allowance". An estate paying no US tax because it falls under the US basic exclusion amount has therefore not triggered Article 5(5). The backstop targets non-enforcement, not low tax.

HMRC administers it through certification. IHTM27177 says that before HMRC gives up a UK taxing right under Article 5 it needs the US authorities to certify that "the assets have been disclosed to them and any tax due has been paid or will be enforced", using Form 742 — with US Form 706-CE coming the other way. A signed declaration is accepted instead where no US tax arises, or where the US estate is nil-paying "only because of a specific exemption or relief". Two neighbouring clauses matter: Article 13(2) confirms the convention does not restrict any domestic exclusion, exemption, deduction, credit or allowance, and Article 10(1)(b) preserves the US right to tax a non-US-domiciled UK national as a non-resident alien, subject to Article 8(5).

Trusts and settlements

Article 5(1) and (2) are switched off for trusts. Under Article 5(3), no US tax arises on property in a generation-skipping trust or trust equivalent if, when the transfer was made, the deemed transferor was UK-domiciled and not a US national. Under Article 5(4), no UK tax arises on property comprised in a settlement if, when the settlement was made, the settlor was US-domiciled and not a UK national.

Article 5(4) has become more valuable since April 2025, not less. HMRC's IHTM47071 states that where it applies "the UK has no taxing rights even if the settled property would otherwise be in the scope of IHT as a result of the settlor's long term UK residence". Two limits: the rule "does not apply to UK immovable property or assets of a UK business", and HMRC still "expect an IHT 100 to be submitted for each occasion of charge even if the application of the treaty results in nil tax".

How the credit works

Article 9 allocates the credit asset by asset. Where the United States may tax because the deceased was US-domiciled or a US national, Article 9(1)(a) requires it to credit UK tax on property taxed in the United Kingdom under Article 6 or 7, and Article 9(1)(b) requires it to credit UK tax on other property where the deceased was a US national domiciled in the United Kingdom. Article 9(2) mirrors that where the United Kingdom is the domicile or nationality country; Article 9(3) covers property the United States sees as held in trust and the United Kingdom as settled.

Article 9(4) adds three limits: the credit "shall not exceed the part of the tax paid in a Contracting State … which is attributable to the property with respect to which the credit is given"; no credit is final "until the tax … for which the credit is allowable has been paid", which with different due dates on each side usually means filing protectively; and credits must ignore tax not levied because of a credit the other country already gave. Where the convention does not reach, the United Kingdom still has unilateral relief under section 159 IHTA 1984, limited — as HMRC's double taxation relief guidance puts it — to "the actual amount of overseas tax paid on those assets".

Article 9(5) sets the claim window: a claim "shall be made within 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". The competent authority may extend that "in appropriate circumstances" where the final determination is delayed — a discretion, not an entitlement. So file on both sides even where the treaty produces nil, build the Form 742 certification into the timetable early, and diary the Article 9(5) date.

Spouses: Article 8 helps, but less than people expect

Article 8(1) leaves deductions to domestic law, and the rest of the article adjusts them at the margins: a US marital deduction for property passing from a UK-domiciled or UK-national decedent (Article 8(2)), and a 50% UK exemption in defined US-connected spouse cases (Articles 8(3) and 8(4)).

What Article 8 does not do is cure the non-citizen spouse problem: US law still denies the unlimited marital deduction where the surviving spouse is not a US citizen unless the property passes to a qualified domestic trust — see our guide to QDOTs and the non-citizen spouse. On the UK side the spouse exemption is capped at the nil-rate band where the recipient spouse falls outside the UK net (IHTA 1984 s.18(2)), and the US annual exclusion for gifts to a non-citizen spouse is $194,000 for 2026, against $19,000 for other donees.

Does treaty domicile still do any work after 6 April 2025?

Yes, and the mechanism is specific. From 6 April 2025 the United Kingdom replaced domicile with long-term UK residence as the inheritance tax connecting factor: section 267 IHTA 1984 was omitted by Finance Act 2025 Schedule 13, and a new section 6A makes someone a long-term UK resident where they were UK resident for at least 10 of the previous 20 tax years, with tail provisions keeping leavers in scope for three to ten years.

Article 4(1)(b) absorbs the change, because it reaches anyone "treated as so domiciled" for a covered tax. IHTM47071 states that "if a person is a long-term UK resident they will be treated as domiciled in the UK for the purposes of IHT under the terms of these conventions", and IHTM47001 adds that domicile remains relevant "where the common law concept of domicile arises such as within designated Double Taxation Conventions".

So treaty domicile still does work — arguably more than before, because two connecting factors must now run in parallel: long-term residence for the domestic charge, treaty domicile for the allocation. Two cautions are honest to state. The Article 4 tie-breakers were not rewritten for long-term residence and still turn on nationality, income tax residence and general-law notions such as permanent home and centre of vital interests. And HMRC's position sits in its own manual, which is guidance rather than legislation; neither the IRS nor the US Treasury has published anything confirming it reads the 2025 change the same way. Where real money turns on it, document the analysis and keep Article 11 in view.

Two positions that come up constantly

The US citizen who is a UK long-term resident

Both countries tax the worldwide estate: the United Kingdom because long-term residence brings non-UK assets into charge, the United States because citizenship is enough and Article 5(1)(b) switches off the domicile protection. Article 9(1) then makes the United States the credit-giving country for everything except US real property and US permanent-establishment assets, where the United States holds the situs right and Article 9(2)(a) reverses the direction.

In practice UK inheritance tax — 40% above a £325,000 nil-rate band, or a £500,000 threshold where a home passes to children or grandchildren — is usually the binding cost, and the US credit is worth nothing where the estate sits under the 2026 US basic exclusion amount of $15,000,000, because there is no US tax to relieve. The treaty prevents double taxation; it does not stop the higher of the two bills landing. More in US estate and gift tax for Americans in the UK and UK inheritance tax and long-term residence for US citizens.

The UK national with US-situs assets

Under US domestic law an executor must file Form 706-NA once US-situated assets exceed $60,000, and stock in a US corporation counts as US-situated even where held through a non-US broker. Article 5(1)(a) changes that: US shares, US deposits and other intangibles fall outside US estate tax altogether for someone who died UK-domiciled and was not a US national, leaving only Article 6 and 7 property exposed.

Where US tax does arise, Article 8(5) is the underused provision. On a claim, where property may be taxed in the United States on the death of a UK national "who was neither domiciled in nor a national of the United States", the US tax "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". The charge is capped by a notional US-domiciled computation rather than the estate being confined to the small non-resident credit — but it must be claimed, and the arithmetic turns on the worldwide estate. More in US estate tax for UK residents holding US assets.

Where this needs a professional

Almost every real question under this convention turns on a domicile determination, the most fact-sensitive concept in either system: nationality, length of residence, where a permanent home was kept and when a trust was settled can each flip the answer. We run the analysis in the order the treaty does — connecting factor, treaty domicile, allocation under Articles 5 to 7, then the direction of the credit under Article 9, with the Article 9(5) deadline on file from day one. Every US filing is reviewed and signed off by a licensed IRS Enrolled Agent who is also ACCA-qualified on the UK side. If you are weighing a move, a trust or a US property purchase, our US-UK tax specialists can model the position first.

General information on the US-UK estate and gift tax convention, current at the date of publication. Not tax or legal advice. Outcomes depend on individual facts — nationality, residence history, treaty domicile, the situs of each asset and the date a trust was created — so take advice on your own circumstances before acting.

Frequently asked questions

Is the US-UK estate tax treaty the same as the US-UK tax treaty?+

No. They are two separate instruments. The convention most people mean by “the US-UK tax treaty” is the 2001 income and capital gains convention, as amended by the 2002 protocol, which entered into force on 31 March 2003 and covers income tax, capital gains tax, corporation tax and petroleum revenue tax. Death taxes sit in a different convention, signed in London on 19 October 1978 and in force since 11 November 1979, which covers the US federal estate tax (including the tax on generation-skipping transfers), the US federal gift tax and the UK capital transfer tax — now inheritance tax, which the convention picks up through Article 2(2) as a substantially similar replacement tax. Nothing in the income treaty, including its saving clause and its residence tie-breaker, applies to an estate.

What is “treaty domicile”, and can it differ from my UK domicile?+

Yes, routinely. Article 4 builds its own test. You are treaty-domiciled in the United States if you were a resident (domiciliary) there, or if you were a US national who had been a resident there at any time in the preceding three years. You are treaty-domiciled in the United Kingdom if you were domiciled there under UK law or are treated as so domiciled for inheritance tax. Where both apply, Article 4(2) and 4(3) resolve it with a seven-of-ten-year residence test keyed to nationality, and Article 4(4) then falls back on permanent home, centre of vital interests, habitual abode, nationality, and finally mutual agreement between HMRC and the IRS. Treaty domicile can therefore differ from your general-law domicile, from your US tax residence and from your UK long-term residence status, all on the same death.

I am a UK national living in the UK and I hold US shares. Will the US tax them when I die?+

Under US domestic law, yes — stock in a US corporation is treated as a US-situated asset even where it is held through a non-US broker, and an executor must file Form 706-NA once US-situated assets exceed $60,000. The convention changes that. Article 5(1)(a) provides that where the deceased was domiciled in one country, the property is not taxable in the other, subject only to Articles 6 and 7 (real property and permanent-establishment assets) and the rest of Article 5. Shares and bank deposits are not covered by those exceptions, so for someone who died UK-domiciled and was not a US national they fall outside US estate tax. The protection is lost under Article 5(1)(b) if the deceased was a US national. A US return is normally still where the treaty position is claimed and disclosed.

I am a US citizen living in the UK. Does the treaty stop the US taxing my estate?+

No. Article 5(1)(a) would normally stop the United States taxing the estate of someone domiciled in the United Kingdom, but Article 5(1)(b) disapplies that protection where the deceased was a national of the other state. US citizenship therefore keeps the whole worldwide estate within the US charge, whatever your UK position. What the treaty does instead is fix the direction of relief. Because you were a US national domiciled in the United Kingdom, Article 9(1)(b) makes the United States credit the UK tax on property other than UK real property and UK business assets, and Article 9(1)(a) achieves the same for those. So the United Kingdom is generally the primary taxing country and the United States gives the credit — the exception being US real property and US permanent-establishment assets, where the United States holds the situs right under Articles 6 and 7 and Article 9(2)(a) makes the United Kingdom credit instead. Either way a credit is worth nothing where the estate is below the US basic exclusion amount, because there is no US tax to relieve.

Does the 1978 convention still work now that UK inheritance tax is based on long-term residence?+

Yes, and the route is Article 4(1)(b), which treats someone as UK-domiciled for treaty purposes if they are domiciled there under UK law or are “treated as so domiciled” for a covered tax. From 6 April 2025, section 267 IHTA 1984 was omitted by Finance Act 2025 Schedule 13 and a new section 6A made an individual a long-term UK resident where they were UK resident for at least 10 of the previous 20 tax years. HMRC's manual at IHTM47071 states that a long-term UK resident will be treated as domiciled in the UK for IHT purposes under these conventions, and IHTM47001 confirms that domicile remains relevant where a convention uses the common-law concept. Two caveats are worth stating plainly: the Article 4 tie-breakers were not rewritten for long-term residence and still turn on nationality, income tax residence and general-law concepts; and HMRC's view sits in its own guidance, with no equivalent published IRS or US Treasury statement confirming the same reading.

Can the treaty keep a US-settled trust outside UK inheritance tax?+

In defined circumstances, yes. Article 5(4) switches off the general domicile protection for property comprised in a settlement, then provides that UK tax is not imposed on that property if, at the time the settlement was made, the settlor was domiciled in the United States and was not a UK national. HMRC confirms at IHTM47071 that where this applies the UK has no taxing rights even if the settled property would otherwise be in the scope of inheritance tax because of the settlor's long-term UK residence. Two limits matter: the rule does not extend to UK immovable property or assets of a UK business, and HMRC still expects an IHT 100 for each occasion of charge — entry, exit and ten-year anniversary — even where the treaty produces no tax. Article 5(3) is the mirror provision on the US side for generation-skipping trusts.

Which country gives the credit, and how long do I have to claim it?+

The country with the secondary taxing right gives the credit. Under Article 9, where the United States taxes because the deceased was US-domiciled or a US national, the United States credits UK tax on UK real property and UK permanent-establishment assets, and also on other property where the deceased was a US national domiciled in the United Kingdom; Article 9(2) mirrors this where the United Kingdom is the domicile or nationality country. Article 9(4) caps the credit at the tax attributable to that property, refuses a final credit until the other country's tax has actually been paid, and bars double-counting of tax not levied because of a credit the other country already gave. Article 9(5) requires a claim within six years of the event giving rise to the liability or, if later, one year from the last date the creditable tax is due. The competent authority may extend that in appropriate circumstances where the final determination is delayed, but that is a discretion rather than a right.

Does the treaty give my non-US-citizen spouse an unlimited marital deduction?+

No. Article 8(2) gives a US marital deduction for property passing to a spouse from someone domiciled in or a national of the United Kingdom, but only to the extent a marital deduction would have been allowable had the deceased been US-domiciled and the estate limited to US-taxable property. It does not override the US domestic rule denying the unlimited marital deduction where the surviving spouse is not a US citizen, which is why a qualified domestic trust is so often needed. Going the other way, Article 8(3) exempts 50% of the value transferred from UK tax in defined cases where the transferor was US-domiciled or a US national and the spouse was not UK-domiciled, and Article 8(4) offers an equivalent 50% election for settled property. On lifetime gifts, the US annual exclusion for gifts to a non-citizen spouse is $194,000 for 2026, against $19,000 for other donees.