Your Situation, Before Anyone Mentions A Form
You are a US citizen, green card holder or dual national, and the United Kingdom is where you live — or where you have just arrived, or where you have lived long enough that it now feels permanent. Perhaps it is the other way round: you are British, your family is here, and a parent, a property or a trust sits in the United States. Either way, two tax authorities each believe they have a legitimate claim over the same income, the same gain, the same house and eventually the same estate.
Most of the time the difficulty is not the tax rate. It is that the two systems disagree about what a thing is. A trust that the UK treats as a separate taxable entity may be transparent to the US, or the reverse. A fund your UK adviser chose for its low charges is, to the IRS, a passive foreign investment company. A wrapper that makes income tax-free in Britain is invisible to Washington. A pension lump sum that the UK pays out free of tax can still be reached on the other side. None of that is exotic — it is the ordinary content of an ordinary private client file, and it is why answers assembled separately by a UK accountant and a US preparer so often contradict each other.
This page sets out the problems we are actually asked to solve, how we go about it, and where we stop. If you want the straightforward annual position rather than the structural one, our US and UK expat tax accountant service covers the yearly returns, and our guides to tax specialists for the US and UK and accountants for the US and UK explain what the work involves and which credential matters.
The Problems That Bring Private Clients To Us
You Are Taxable On Worldwide Income In One Country And Resident In The Other
The United States taxes its citizens and lawful permanent residents on worldwide income wherever they live. The United Kingdom taxes you by reference to residence, determined by the Statutory Residence Test rather than by how you feel about where home is. Hold both exposures and every item of income has to be placed in both systems, in the right year, in the right currency, with relief claimed in the right order.
The ordering is where money is won or lost. Foreign tax credits are not fungible: they sit in baskets, they can expire unused, and a credit claimed against the wrong category of income is a credit wasted. The two tax years do not even align — the US runs on the calendar year, the UK from 6 April — so income and withholding have to be apportioned before any comparison is meaningful. Our residence test tool shows the shape of the day-counting rules, and we go further into the UK side in the Statutory Residence Test for Americans. If a move is in prospect, relocation planning and the timing of a move between the US and UK are worth reading before you book flights, because split-year treatment turns on facts you can still influence beforehand and cannot influence afterwards.
Leaving the UK deserves its own warning. The temporary non-residence rules can pull income and gains back into charge if you return within a few years, and they were tightened: from 6 April 2026 the post-departure trade profits let-out was removed, so distributions from a close company received while you are temporarily non-resident are chargeable on your return. A departure planned around the old position may no longer work.
The UK Has Moved From Domicile To Residence, And Long-Term Residents Feel It Most
For decades the UK's treatment of foreign income and gains turned on domicile, and the remittance basis let non-domiciled residents keep offshore income outside the UK net so long as it stayed offshore. That architecture has gone. In its place is a residence-based regime: a time-limited relief for foreign income and gains for those newly arrived after a sufficient period of non-residence, and then full exposure to UK tax on worldwide income and gains once you have been resident long enough to be treated as a long-term resident.
If you are a US citizen who has been in Britain for years, this is the single most consequential change of your tax life, and it cuts both ways. Foreign income and gains that were previously outside the UK charge now come inside it, which can increase the UK tax you pay and therefore the credits available against your US liability — sometimes improving the combined position, sometimes not. Offshore structures built for the remittance basis may now be inert, or worse than inert, because a structure that no longer shelters anything can still generate reporting obligations and anti-avoidance exposure on both sides. We walk through the shape of it in the FIG regime for US citizens in the UK.
Inheritance tax moved with it. The deemed-domicile test that used to decide whether your worldwide estate was within the UK net has been replaced by a long-term residence test, which means the question is now about years of presence rather than a concept of permanent home that could be argued about. For a US family that has settled here, that is the moment the estate planning has to be redone rather than reviewed. UK inheritance tax and long-term residence for US citizens covers the ground.
Because the years and the thresholds in this area have changed recently and are capable of changing again, we confirm every figure against current HMRC and IRS guidance at the point of advice rather than quoting a number here that might be stale by the time you read it.
Two Death Taxes, One Estate, And A Treaty Almost Nobody Reads
UK inheritance tax and US federal estate tax can both reach the same assets, and they are built on different principles. IHT looks at the estate and at gifts made in the years before death, with a nil rate band of £325,000 and a residence nil rate band of £175,000 that tapers away for larger estates — above £2m of net estate, £1 of band for every £2 of excess. US estate tax looks at the worldwide estate of a citizen or domiciliary against a basic exclusion amount of $15,000,000 for deaths in 2026, with an annual gift tax exclusion of $19,000 per donee. Those are the current published figures; we re-verify them before any engagement, because they move.
The asymmetry is the point. A couple can be comfortably inside the US exclusion and badly exposed to UK inheritance tax at the same time, which is the position a great many US families in Britain are in without knowing it. And a non-US-domiciled person holding US-situs assets — US real estate, US shares held directly — gets only a small fraction of that exclusion, so a US brokerage account or a Manhattan apartment can produce a US estate tax bill on an estate that would never have been troubled by US tax in life.
There is a separate treaty for this. The US–UK estate and gift tax convention is not the income tax treaty; it has its own situs rules, its own tie-breaker for individuals with connections to both countries, and its own credit mechanism. Used properly it can decide which country taxes an asset first and stop relief being lost. Used late, or not at all, it cannot fix an ownership structure that has already been put in place. We set out how it operates in the US–UK estate and gift tax treaty, with the detail for each side in US estate and gift tax for Americans in the UK and US estate tax for UK residents holding US assets. Where an inheritance has already been received, a deed of variation can create a US gift tax problem that the UK side does not see at all.
Pensions are the live issue in this area. Legislated changes are bringing unused pension funds within the scope of UK inheritance tax, which unsettles a generation of planning built on pensions sitting outside the estate — and for a US person the same fund is being looked at by two systems with different ideas about what it is. Any estate plan that leans on pension death benefits needs re-examining rather than re-filing.
Trusts That Work In One Country And Are Punished In The Other
Trusts are where cross-border private client work is won or lost. The US asks first whether a trust is a grantor trust — if it is, its income is taxed to the settlor as though the trust did not exist — and separately whether it is foreign or domestic, which governs an entire reporting regime. The UK asks a different set of questions: whether the trust falls within the relevant property regime, with its own charges on the way in, at ten-yearly intervals and on the way out; whether it is settlor-interested; and whether gains are attributed to the settlor or to beneficiaries.
Those two frameworks are not merely different, they are sometimes opposed. A UK discretionary trust that is entirely orthodox for IHT planning is, to the IRS, a foreign non-grantor trust whose accumulated income carries a throwback charge with an interest element when it is finally distributed — a charge that can approach the value of the distribution where income has been accumulating for years. A US revocable living trust, the most ordinary estate planning instrument in America, may be treated quite differently once the settlor becomes UK resident. And the settlor charge on trust gains is now tested on residence rather than domicile, which quietly brought a population of settlors into charge who had been outside it.
The reporting is unforgiving. A US person who creates, funds, holds an interest in or receives a distribution from a foreign trust is in Form 3520 and Form 3520-A territory, with penalties set as a percentage of the amounts involved and charged per form, per year. The same applies to large gifts and inheritances received from non-US persons, which clients routinely do not realise are reportable at all because no tax is due on them. We cover the mechanics in foreign trusts and Form 3520, the beneficiary's side in a US trust with a UK resident beneficiary, the comparative position in how the US, UK and UAE tax trusts differently, and the UK registration obligation in the Trust Registration Service for US-connected trusts. Even informal arrangements count: bare trusts and designated accounts are a common surprise in US families.
PFICs Hiding Inside Perfectly Sensible UK Portfolios
A UK investor holding a diversified portfolio of funds has done exactly what good practice suggests. A US person holding the same portfolio has, in US terms, a collection of passive foreign investment companies. Almost every UK OEIC, unit trust, investment trust and exchange-traded fund falls inside the PFIC definition, and the default treatment is punitive: gains and excess distributions are allocated back over the holding period and taxed at the highest rates for those years with an interest charge on top, so a modest gain on a long-held fund can be taxed at an effective rate that bears no relation to the economics.
There are better elections — qualified electing fund treatment, or mark-to-market — but a QEF election needs an annual information statement that most UK funds simply do not produce, and mark-to-market has its own consequences. As a rule each holding needs its own Form 8621 each year, though that is a default rather than an absolute: a de minimis exception can switch off the annual report where all your PFIC stock is worth $25,000 or less on the last day of the year ($50,000 on a joint return), no excess distribution or disposition gain arose, and no qualified electing fund election is in force. It relieves only the annual report — a distribution, a disposition or an election still brings the form back. The arithmetic is tedious and the elections are time-sensitive, which is why PFIC exposure is usually discovered late.
Wrappers make it worse rather than better. An ISA is a UK creation with no US recognition, so its tax-free status buys nothing on the US return while the funds inside it remain PFICs — and the Lifetime ISA and Junior ISA bonus structures add their own wrinkles. Our guides are blunt about this: why the ISA wrapper does not cross the Atlantic, PFIC rules for US investors abroad, Form 8621 and the QEF and mark-to-market elections, the Lifetime ISA for US citizens and the Junior ISA for US citizen children. Further up the wealth scale the same logic reaches private funds: private equity and hedge fund interests for US citizens in the UK, carried interest for US citizens in UK funds, and the UK venture reliefs that look attractive until the US side is applied — EIS and SEIS and VCTs.
UK Pensions, And The Lump Sum Question
The income tax treaty does deal with pensions, which is why UK pension savings are not the disaster that unwrapped investments can be. Growth inside a registered UK scheme is generally respected, and the treaty allocates taxing rights over pension income between the two countries. But the detail matters: employer contributions, member contributions, drawdown, and the treatment of a self-invested personal pension are not all handled the same way, and the reporting position for pensions on the foreign account and foreign asset forms has never been as clear as clients would like.
The tax-free lump sum is the sharpest edge. HMRC's own double taxation guidance records that the treaty's saving clause reaches the relevant article, with the consequence that the United States may tax a lump sum paid from a UK scheme to a US citizen even where the UK pays it free of tax. Many people plan around that lump sum for years without being told. It is a position worth confirming against current guidance in any particular case, and we do confirm it, because the outcome changes the whole drawdown strategy. See the UK pension tax-free lump sum for US citizens, US tax on UK pensions and SIPPs, and for inherited funds inheriting a UK pension as a US person. Transfers deserve particular caution: moving a UK pension to the US is rarely the clean solution it appears to be.
Married To A Non-Citizen, Which Changes Everything About Giving
Spouses of the same citizenship can usually move assets between themselves without tax. Mixed-citizenship couples cannot assume it. The US unlimited marital deduction, for gifts and at death, applies where the recipient spouse is a US citizen; where they are not, lifetime giving is limited to a capped annual amount and an estate generally needs a qualified domestic trust to defer the tax rather than escape it. The UK spousal exemption has its own limits where one spouse is outside the UK net.
The practical consequences are counter-intuitive. Equalising assets between spouses — standard advice in both countries taken on its own — can be a taxable gift. Putting the non-citizen spouse on the deeds of a house can be a taxable gift. Funding a joint account can be a taxable gift. None of these is an argument against doing any of it; it is an argument for doing it in the right order, with the right instruments, and with the figures confirmed for the year in question. We cover the structures in QDOTs and the non-citizen spouse, the portability question in estate tax portability and DSUE for cross-border couples, and the receiving end of it in inheriting money from overseas and the Form 3520 trap.
The Family Company, And The Share Classes Built Around It
Freezer and growth share structures are a staple of UK family company planning: the founder's value is capped, future growth accrues to a new class held by the next generation or by management, and the UK capital gains and business relief treatment is well understood. Introduce a US person into the shareholder register and three separate problems appear at once.
First, the share award itself. US rules tax property transferred in connection with services, with an election available only within a short window of receipt, and a growth share issued at a low value is exactly the kind of instrument those rules are built for. Second, the company. A UK company controlled by US shareholders is a controlled foreign corporation, which brings Form 5471 for each US shareholder each year, the subpart F and GILTI regimes, and a current US tax charge on profits the family never intended to distribute. Our Form 5471 guide covers the filing itself, with the category question in which filing category applies to you and the income regimes in subpart F and GILTI for small foreign company owners. Third, the reliefs do not travel. UK business property relief is a UK relief; it does not reduce US estate tax, as UK business property relief for US citizens explains. The US qualified small business stock exclusion applies to US corporations, not to a UK company. A structure optimised on one side can be expensive on the other.
The same caution applies to the vehicles families use to hold investments and property. A family investment company with US persons among its shareholders is a different animal from the UK textbook version; incorporating a property portfolio can create a CFC; a UK LLP interest held by a US citizen raises its own classification questions; and ATED on UK residential property held through a company catches US owners who were advised only on the US side. Where UK property is being sold, selling UK property as a US citizen and, in the other direction, FIRPTA for a UK resident selling US property are the starting points. Operating businesses with people or contracts in both countries belong with our US–UK cross-border business tax service.
The Reporting Load, Which Is Where The Penalties Live
For a private client with assets in both countries, the information returns outnumber the tax returns and carry the harsher penalties. The headline items are the FBAR — FinCEN Form 114, required where the aggregate value of your foreign financial accounts exceeded $10,000 at any time during the calendar year, due 15 April with an automatic extension to 15 October that needs no request — and Form 8938 for specified foreign financial assets, which overlaps with the FBAR without replacing it. Then come Form 3520 and 3520-A for foreign trusts and large foreign gifts, Form 5471 for foreign corporations, Form 8621 for each PFIC, Form 8865 for foreign partnerships and Form 926 for transfers of property to a foreign corporation.
These are the filings where the firm is most insistent, because the penalty regimes are assessed per form and per year and several of them are set as a percentage of the assets or amounts involved rather than as a modest fixed sum. A client with a trust, two companies and a fund portfolio can accumulate a penalty exposure that dwarfs the tax at stake, entirely on reporting failures. On the UK side the obligations are quieter but real: trust registration, the register of overseas entities for non-UK entities holding UK land, and the annual charge regime for companies holding UK residential property.
Start with the complete foreign account reporting guide and Form 8938 versus the FBAR, and if a bank has written to you, the UK bank FATCA letter explains what it is and what it is not. If years have already been missed, the IRS Streamlined Foreign Offshore Procedure is usually the route back, and it is a better conversation to have early than late. And if you have concluded that the US side of your life should end rather than continue, renouncing US citizenship has its own expatriation tax regime that needs modelling before, not after, the appointment at the embassy.
How We Work
Cross-Border Analysis First
Nothing is prepared until the structural questions are answered in writing. Our cross-border desk builds an analysis that states the facts it relies on — residence days, the ownership percentages, where contracts are signed, when each structure was created and funded, who the beneficiaries are and where they live — then applies the relevant treaty articles, domestic rules and anti-avoidance provisions to reach a conclusion, with the alternatives and the risks named rather than buried. Assumptions are listed explicitly so you can correct them, because a cross-border conclusion built on a residence day count nobody checked is worthless.
That memo is the controlling document. It says what each country will tax, in what order, with what relief, and what each side must therefore report.
Then The Country Workpapers
Only then do the country desks prepare. The US side builds the 1040 and the information returns from the conclusions in that memo; the UK side builds the Self Assessment and any trust or company filings from the same conclusions. Because both come from one analysis, the credits claimed on one return match the tax actually suffered on the other, and the two filings tell the same story about the same assets. Where a figure cannot be verified from your documents or from current official guidance, we flag it for confirmation rather than assuming last year's number still holds.
Then Review And Sign-Off By A Licensed Professional
Every cross-border position is escalated for human review by default — not as a formality, but because this is the area where penalties are severe and judgement is required. Our licensed professional, an IRS Enrolled Agent who is also an ACCA-qualified accountant, reviews the analysis and the filings on both sides and signs off the engagement. One reviewer across both systems means nobody is relying on a colleague's unexamined assumption about the other country.
Then you sign and submit your own returns. We prepare everything to a ready-for-sign-off state, with complete workpapers behind every figure, and we do not file to the IRS or HMRC on your behalf or sign documents for you.
What We Do Not Do
We are tax advisers and tax preparers, not investment advisers. We will tell you how an investment, a trust or a share class is taxed in each country and what it will cost you to hold or unwind it; we will not tell you what to buy or sell, and we do not hold ourselves out as giving personalised investment advice. Where a decision needs a UK solicitor, a US attorney or a licensed investment manager, we say so and work alongside them.
We also do not quote outcomes we cannot control. Nobody can guarantee how a tax authority will treat a position, and any adviser who tells you otherwise is selling something. What we will do is state the position honestly, document the basis for it, and make sure the file would stand up to being read by someone unsympathetic.
Talk To Us
If any of the above described your situation, a conversation is the efficient next step — this is not work that can be scoped from a price list, and we will not pretend otherwise. Tell us roughly what exists and where: the citizenships and residence of the family, whether there are trusts and where they were created, what the investment portfolio is held through, whether there is a family company and who owns which shares, and whether anything has gone unreported.
Request a private consultation and we will tell you honestly whether we are the right firm for it, or ask us to scope the work and we will come back with a proposal covering both countries. Either way the first conversation is confidential and carries no obligation.