Inheritance From a UK Parent as a US Citizen: Tax and What to Report

On an inheritance from a UK parent, a US citizen usually owes no tax in either country when the money or property arrives. The reporting is what catches people: receipts of more than $100,000 in a tax year from a foreign estate go on IRS Form 3520, and income or gains after the date of death are taxable. The estate, not the heir, normally settles any UK Inheritance Tax.

This guide is for US citizens and green card holders, wherever they live, who are inheriting from a parent who was British and not a US citizen or US resident. It follows the order in which things happen: the estate is administered in the UK, assets are passed to you, you report the receipt to the IRS, and later you may sell.

Is an inheritance from the UK taxed when a US citizen receives it?

Usually not, on either side.

In the UK, GOV.UK says you do not usually owe any tax on an inheritance at the time you inherit it. The personal representative, meaning the executor or administrator, usually pays any Inheritance Tax due before giving you the inheritance. The standard Inheritance Tax rate is 40%, charged on the part of the estate above the £325,000 threshold, and the threshold can rise to £500,000 where a home is left to children or grandchildren. Whether your parent's estate is within the charge at all, and how the rules apply to people who have lived abroad, is covered in our guide to UK Inheritance Tax for Americans.

GOV.UK lists three situations in which HMRC may ask the beneficiary to pay Inheritance Tax: the person who died gave you a gift in the seven years before death, your inheritance went into a trust and the trust does not or cannot pay, or the personal representative could not or did not pay before you received it.

In the US, the IRS describes gifts and bequests from foreign persons as amounts the recipient excludes from gross income. The United States taxes estates, not heirs, and the estate of someone who was neither a US citizen nor a US resident is within US estate tax only on assets situated in the United States. The IRS says an estate tax return, Form 706-NA, is required for such a person only where US-situated assets exceed $60,000. A UK parent whose assets were all in the UK is outside it.

If your parent was a US citizen, or held a green card, the position is different, because the US taxes the worldwide estate of its own citizens and residents. That case needs advice before the estate is distributed.

What does a US citizen have to report after inheriting from the UK?

Up to four things, depending on the size of the inheritance and where it ends up.

Form	When it applies	Due	How it is filed
Form 3520, Part IV	More than $100,000 received in the tax year from a nonresident alien individual or foreign estate	15 April; 15 June if living abroad; 15 October with an extension	On paper, by post, separately from Form 1040
FBAR (FinCEN Form 114)	Combined value of your foreign financial accounts exceeded $10,000 at any time in the year	15 April, automatic extension to 15 October	Online through FinCEN's BSA E-Filing System
Form 8938	Specified foreign financial assets above the threshold for your filing status and residence	With your income tax return	Attached to Form 1040
Form 1040 schedules	Income the inherited assets produce, and gains when you sell	With your income tax return	Schedule B, Schedule E, Schedule D and Form 8949 as relevant

Form 3520: the one people miss

The Instructions for Form 3520, revised in December 2025, require a US person to file if they received more than $100,000 during the tax year from a nonresident alien individual or a foreign estate that they treated as gifts or bequests. Amounts from related persons are added together. The form reports the receipt. It does not charge tax on it.

Three features make it easy to get wrong.

It is separate from your tax return. The instructions say the form is generally due on the 15th day of the fourth month after the end of your tax year, which is 15 April for most individuals. US citizens and residents who live and work abroad have until 15 June and must attach a statement saying they qualify. If you have an extension for your income tax return, the date becomes 15 October.

It cannot be e-filed. The IRS page for citizens abroad says Form 3520 is not eligible for e-filing. The instructions give the address as the Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409. Tax software that e-files your Form 1040 will not send it, and only a complete form with all attachments counts as filed on time.

The penalty is based on the inheritance, not on any tax. The IRS states the penalty as five percent of the value of the gift or bequest for each month it is not reported, capped at 25 percent. On an inheritance where no tax was ever due, that is the entire cost of the mistake. The instructions provide that no penalty applies where the failure was due to reasonable cause and not wilful neglect.

FBAR and Form 8938

The inheritance itself is not reported on an FBAR, but the accounts it passes through may be. If a parent's bank or investment account is re-registered in your name, or the executor pays your share into your own UK account, those balances count towards the $10,000 FBAR threshold, which is tested on the combined value at any time during the calendar year. Someone who has never had to file an FBAR can be brought in by a single inheritance payment. Our comparison of the FBAR and Form 8938 explains how the two overlap.

What is taxed after you inherit?

Income and gains arising after the date of death. Both countries agree on the principle and differ on the detail.

Income during the administration of the estate

Estates often take a year or more to wind up, and the assets earn income in the meantime. In the UK the personal representative accounts for tax on that income and gives beneficiaries form R185 (Estate Income), a statement of the income from the estate. Keep it. It is the evidence of UK tax paid that you may need when reporting the same income on your US return.

Income after the assets are yours

GOV.UK says you may have to pay Income Tax on any profit you earn from an inheritance, such as dividends from shares or rent from a property. As a US citizen you report the same income on Form 1040 wherever you live, and relief for UK tax paid normally comes through the foreign tax credit. If you keep and let the family home, our guide to UK rental income for US citizens covers both returns.

Gains when you sell

The IRS says the basis of inherited property is generally its fair market value on the date of the decedent's death, and that if you sell for more than your basis you have a taxable gain, reported on Schedule D and Form 8949. Decades of growth during your parent's lifetime drop out of the US calculation.

The UK takes a similar starting point. For Capital Gains Tax, GOV.UK's market value rules point to the value at the date of death for inherited assets where the Inheritance Tax value is not known. And if you are not UK resident, GOV.UK says you must report a disposal of UK property within 60 days of completion, even if you have no tax to pay or made a loss.

Two cross-border points sit on top of that. The US gain is measured in dollars, so the sterling value at death is converted at the rate on that date and the sale proceeds at the rate on the sale date; a property that sold for what it was worth at death can still show a dollar gain or loss. And cash left in a sterling account after the sale can produce its own currency gain when you convert it, as our article on currency gains under section 988 explains. The wider rules are in our guide to UK Capital Gains Tax for US citizens.

A timeline from death to sale

1. At death. Ask the executor for the probate valuation of each asset. That figure is the starting point for your US basis and for UK Capital Gains Tax.
2. During administration. The personal representative pays any Inheritance Tax and deals with tax on estate income. You receive nothing to report yet unless interim payments are made.
3. On each distribution. Record the date, the sterling amount, the exchange rate and what it was: cash, shares or a share of property. Add up everything received from the estate in the calendar year.
4. By 31 December. Check the highest combined balance of your non-US accounts for the year for FBAR purposes.
5. By 15 April, 15 June or 15 October of the following year. File Form 3520 by post if the year's total was more than $100,000. File the FBAR online. Report any income and Form 8938 with your return.
6. When you sell. Report the gain in dollars on your US return. If you are not UK resident and the asset is UK property, report to HMRC within 60 days of completion.

Illustrative example: a US citizen living in Chicago inherits half of her late mother's estate in Kent. In September 2026 the executor transfers £180,000 to a UK bank account opened in her name, and in February 2027 a further £40,000. The September payment is more than $100,000, so she must mail Form 3520 for 2026, due 15 April 2027 or 15 October 2027 if her return is extended. Her UK account balance was above $10,000 in 2026, so she also files an FBAR. No US tax is due on either payment. The February 2027 payment is tested against the $100,000 threshold for 2027. Had she filed nothing for 2026, the penalty could have reached 25% of the amount received that year. This example is illustrative and does not describe a real client.

Where it gets more complicated

The will leaves your share in trust. A UK will trust is likely to be a foreign trust for US purposes, which brings a different part of Form 3520 and possibly Form 3520-A, with their own penalties. Take advice before the trust makes its first distribution.

You inherit a pension. Death benefits from UK pensions follow their own rules in both countries and are not treated like an ordinary bequest.

You inherit UK funds. Unit trusts, OEICs and investment trusts held outside a pension can fall under the US passive foreign investment company rules from the day they become yours.

You are asked to act as executor. Signature authority over the estate's accounts can create an FBAR obligation for you personally.

You plan to pass some of it on. Giving part of the inheritance to your own children is a gift by you under US rules; see our gift tax returns service.

What people get wrong about a UK inheritance

"No tax, so nothing to file." Form 3520 is an information return. Its penalty does not depend on tax being due.

"My accountant e-filed everything." Form 3520 cannot be e-filed. Ask for proof of posting.

"It came in two payments, so each is under the limit." The test is the total received during the tax year, with related parties aggregated.

"The UK already taxed it, so the US cannot." Inheritance Tax paid by the estate is not a credit against US income tax on later income and gains.

"I will use the price my parents paid." For both countries the starting point is the value at death, which is usually much higher and works in your favour.

Getting it reported properly

Most of the work is record-keeping done at the right moment: the probate values, the dates and amounts of each distribution, and the exchange rates. With those, the US forms are straightforward and the later sale is taxed only on what changed after you inherited.

US/UK Cross Border Tax — US CPAs and UK tax advisers working as one team; London, Manchester, New York, San Francisco. Our estate and trust planning service handles the tax on an inheritance from the UK for a US citizen, including Form 3520, and our page for families covers planning before an estate passes. To talk through an inheritance you are expecting or have received, get in touch.