If you are one of the many Americans considering a move to the UK from the US, you will need a strategy to understand and navigate the two different tax systems.
Additionally, since April 2025, there’s been a significant change in how new arrivals to the UK are taxed.
In this article, we break down what the UK’s new Foreign Income and Gains (FIG) regime and Inheritance Tax (IHT) rules mean for US citizens setting up shop across the pond.
A welcome window: the FIG Regime explained
The FIG regime replaces the old “remittance basis” and is designed to provide relief for qualifying new UK residents. If you haven’t been a UK tax resident for at least 10 consecutive years, you may qualify for four years of tax relief on:
- foreign investment income
- capital gains from non-UK assets
- overseas employment and business earnings
- rental profits on overseas property
Even better, these earnings are exempt from UK tax even if brought into the UK—a significant change from the prior rules.
Top Tip: Use these years to restructure investments and time gains wisely—but remember, the IRS still expects a full report, even if the UK doesn’t tax your income.
This four-year window provides the ideal opportunity to transition your US assets and investments into those that will be more tax efficient in the UK. This might include exiting mutual funds or ETFs that do not have UK reporting status and reviewing asset structures such as companies or trusts held in the US or elsewhere in the world.
You may also want to use this time to begin funding UK tax efficient accounts such as pensions or ISAs. However, consideration is needed to the ongoing US reporting that will be required. Avoiding Passive Foreign Investment Companies (PFICS) is strongly recommended for example.
UK IHT: residency now rules the game
The 2025 reforms also change the UK’s approach to IHT. Previously tied to domicile, the new system is based on residency —a critical shift for long-term expats.
If you’ve lived in the UK for 10 out of the past 20 years, you’ll be taxed on your entire worldwide estate— not just assets physically in the UK. What’s more, if you leave the UK, you remain within the UK IHT net for up to additional 10 years under the “tail rule”, depending on your total amount of time here.
How it hits:
- IHT is charged at 40% on estates above the £325,000 tax free threshold.
- Gifts made within seven years of death may also be taxed.
- Some trust assets, including those created post-residency, may fall into the taxable estate.
Top Tip: US–UK estate tax treaties may help mitigate double taxation, but it’s essential to coordinate Wills, trusts, and lifetime giving between both countries.
With the UK threshold before IHT kicks in so much lower than the US, estate planning in the UK is essential. Any asset you have in the UK (if you buy a property ,for example) will immediately be subject to UK IHT regardless of residency years, so it’s not something to leave for the future. Simple first steps might include covering the risk with life insurance or limiting what assets are in the UK during the initial 10 years.
US citizens: the balancing act
Because the US taxes its citizens on worldwide income and estates, even while living abroad, dual compliance is non-negotiable. Key reminders include:
- Annual tax filing with the IRS and FBAR reporting for foreign accounts.
- Avoiding PFICs (Passive Foreign Investment Companies) like UK mutual funds, which are inefficient under US rules.
- Carefully timing gains and gifts, especially within your four-year FIG window.
- US pensions are not transferrable, it is important to review them and invest in line with your long-term objectives.
Final thoughts
The UK’s updated tax framework opens new doors—but it also introduces new “traps”. For Americans relocating to the UK, success hinges on early planning and working with professionals well-versed in working with US citizens in the UK.
Used wisely, the four-year FIG window can deliver substantial tax efficiency. But once it closes—and as your UK residency lengthens—IHT exposure becomes a serious consideration. With two tax jurisdictions to satisfy and a lot at stake, your move deserves more than a one-size-fits-all plan.
At Partners Wealth Management, our specialist advisers have significant experience advising those with dual US / UK tax considerations and will be pleased to discuss your circumstances. Please call us on 020 7444 4030 or email us for an initial conversation.
Nathan Prior
Partner, Head of PWM International
020 7444 4053
nprior@partnerswealthmanagement.co.uk
Kat Smilewicz
Partner
020 8051 9450
ksmilewicz@partnerswealthmanagement.co.uk
The information and/or any reference to specific instruments contained in this article does not constitute an investment recommendation or tax advice. The contents of the article have been prepared solely for information purposes. The article contains information on financial products and services and such information is designed for and addressed solely to individuals seeking generic industry information. This document reflects our understanding of current legislation. Past performance is no guide to future returns.