US Estate and Gift Tax Exemptions for UK Residents

The Basics

The estate tax 2025 rules provide a significant exemption for US citizens. The lifetime gift tax exemption 2025 and gift and estate tax exemption 2025 are set at $13.99 million per person. Amounts above this threshold are subject to US estate tax at 40%.

Transfers between US spouses remain fully tax-free. For a non-US citizen spouse, transfers are more limited, with an annual tax-free allowance of $190,000 in 2025. With the right planning, this allowance can be applied annually to reduce exposure.

In addition, the gift tax exclusion 2025 allows annual gifts of up to $19,000 without affecting the lifetime exemption. Larger amounts reduce the US estate tax exemption 2025 and may require an IRS filing, even where no immediate tax is due.

UK Inheritance Issues for US Citizens

The position is more complex for US estate tax for UK citizens and residents. A US citizen residing in the UK for fewer than 15 of the last 20 years is typically regarded as non-domiciled for UK inheritance tax purposes, meaning liability applies only to UK assets.

Once a US citizen has been UK resident for 15 out of 20 years, their worldwide estate becomes subject to UK inheritance tax. The UK Inheritance Tax nil rate band remains £325,000 per person (2024/25), above which tax is payable at 40%.

Points to Note

The UK non-dom rules have been replaced from April 6, 2025.
From then, residence will determine exposure: anyone resident in the UK for at least 10 of the last 20 years will be taxed on worldwide assets.
There will also be a "ten-year tail" for those leaving the UK, meaning continued IHT liability depending on their years of residence.

With proper estate and gift planning, US citizens in the UK can mitigate exposure under both systems and safeguard assets against overlapping gift and estate tax exemption 2025 rules.

Next Steps

Our specialists advise on both US estate tax exemption 2025 issues and the complexities of UK inheritance tax. Planning ahead can optimise the lifetime gift tax exemption 2025 and reduce unnecessary tax burdens.

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