Inheriting US Assets as a UK Resident: Tax When a US Parent Dies

A UK resident inheriting US assets from an American parent does not normally pay tax on receiving them in either country: any US estate tax is settled by the estate, and the UK does not tax a beneficiary on an inheritance. The tax comes afterwards, as a UK resident, on what the assets earn and on what you do with them. An inherited IRA, a US fund portfolio and a US house each carry a different mix of US and UK tax, and the answers change again if you are a US citizen yourself.

This guide is for people living in the UK who are inheriting from a parent in the United States. It covers both the heir who is a US citizen and the heir who is not, because the US treats them very differently. The reverse case is in our guide to an inheritance from a UK parent for a US citizen.

Is inheriting US assets taxable for a UK resident?

Inheriting US assets is not in itself a taxable event for a UK resident. Each country looks to the estate first.

United States. The federal estate tax is paid by the estate before distribution, and it reaches very few estates. The IRS lists the estate tax filing threshold as $15,000,000 for a death in 2026 ($13,990,000 for 2025). Some US states charge their own estate or inheritance taxes at lower levels; the executor deals with those. An inheritance is not income of the heir for US income tax.

United Kingdom. GOV.UK's guidance on tax on property, money and shares you inherit says you do not usually owe any tax at the time you inherit. UK Inheritance Tax is charged on the estate of the person who died, and for someone based abroad it is paid only on their UK assets. HMRC treats a person as based abroad if they lived in the UK for fewer than 10 of the last 20 years. A parent who lived their life in the United States and owned no UK assets is outside UK Inheritance Tax altogether.

One reporting point for US citizen heirs: a bequest from a US parent's estate is not a bequest from a foreign person, so the Form 3520 filing that applies to a foreign inheritance over $100,000 does not apply to it.

Your starting value: the date of death

Both countries reset the cost of inherited assets. The IRS states that the basis of inherited property is generally its fair market value on the date of the decedent's death. The UK treats an heir as acquiring an asset at its market value at the date of death. Growth during your parent's lifetime is not taxed to you in either country.

The UK works in sterling. Your UK cost is the dollar value at death converted to pounds at that date, and your proceeds are converted at the date of sale, so a fall in the pound can create a UK gain on an asset whose dollar price has not moved. Ask the executor for the date-of-death valuation of every asset and keep it.

The reset does not apply to retirement accounts. An inherited IRA or 401(k) has no stepped-up basis; it is untaxed income waiting to be paid out.

How are inherited US assets taxed for a UK resident afterwards?

Once the assets are yours, a UK resident pays UK tax on the income and gains they produce, because the UK taxes its residents on foreign income, reported through Self Assessment. Whether the US also taxes you depends on the asset and on whether you are a US citizen.

Inherited asset	US tax after you inherit	UK tax after you inherit
Cash in a US bank	US citizens: interest taxable. Others: generally none	Interest taxable as foreign income; currency movements can matter on large balances
Traditional IRA or 401(k)	Withdrawals are taxable income; withholding for non-US heirs unless a treaty exemption applies	Withdrawals are foreign pension income of a UK resident, subject to the treaty
US mutual funds and ETFs	US citizens: dividends and gains taxable. Others: US withholding on dividends	Dividends taxable; gains on non-reporting funds charged to Income Tax as offshore income gains
Individual US shares	US citizens: dividends and gains taxable. Others: US withholding on dividends	Dividends taxable; gains subject to Capital Gains Tax
US house or land	Rent and gains taxable for everyone; FIRPTA withholding on sale by a non-US heir	Rent and gains taxable, with credit for US tax

People who have recently moved to the UK may qualify for the four-year foreign income and gains regime, which changes the UK column for those years. Double taxation relief is available where both countries tax the same income.

Inherited IRAs and 401(k)s

Retirement accounts are usually the hardest part of an American parent's estate for a child in the UK. The IRS rules for retirement account beneficiaries say that where the owner died in 2020 or later, a designated beneficiary who is not an eligible designated beneficiary must empty the account by the end of the tenth year following the year of death. Adult children fall into that group. Eligible designated beneficiaries, who have longer, include a minor child of the owner, a disabled or chronically ill person and someone not more than ten years younger than the owner.

Taxable distributions are included in the beneficiary's gross income for US purposes. Withdrawals from an inherited Roth account are different: the IRS says withdrawals of contributions are tax-free and most withdrawals of earnings are too, unless the Roth was less than five years old.

For a UK resident who is not a US citizen, the US/UK Double Taxation Convention matters. Article 17(1)(a) makes pensions and similar remuneration owned by a resident of one country taxable only in that country, Article 17(1)(b) carries across an exemption that would have applied in the country where the scheme is established, and Article 17(2) makes a lump-sum payment from a pension scheme taxable only in the country where the scheme is established. How those paragraphs apply to a beneficiary's withdrawals from an inherited account, and whether a payment is a pension or a lump sum, should be settled with an adviser before the first withdrawal. The IRS notes that distributions to nonresident aliens are generally subject to US withholding unless a treaty exemption applies, so the custodian needs the right form on file first.

A US citizen heir in the UK is taxed by the US on withdrawals regardless of the treaty's residence rule, and by the UK as a resident, with foreign tax credits to prevent double taxation. Spreading withdrawals over the ten years, instead of taking one large payment in year ten, usually keeps more of the money out of the top rates in both countries. Our guides to IRA withdrawals for UK residents and Roth IRAs and UK tax cover the background.

US funds in a brokerage account

A typical American parent holds mutual funds and exchange-traded funds. For a UK resident these are offshore funds, and unless a fund has registered with HMRC as a reporting fund, HMRC's helpsheet HS265 says a gain on disposal will normally be an offshore income gain, taxed as income. Most US-domiciled funds are not reporting funds; our guide to HMRC reporting funds explains how to check.

Because your UK cost is the value at death, a sale shortly after the account is transferred to you normally produces little or no offshore income gain. Holding the funds for years lets growth accumulate that will be taxed at income rates. Individual shares in US companies are not funds and stay within Capital Gains Tax.

Illustrative example: a UK-resident son who is not a US citizen inherits his father's US brokerage account, made up of US mutual funds worth $400,000 at the date of death. If he sells within weeks of the transfer for about the same amount, his UK gain is small. If he keeps the funds and sells five years later for $520,000, the increase, measured in sterling, is an offshore income gain charged to Income Tax at his marginal rate, not to Capital Gains Tax.

A US house

US real estate stays within US tax whoever owns it. Rent is US-taxable and so is the gain on sale, and the UK taxes both as well for a resident, giving credit for the US tax.

If the heir is not a US citizen or resident, the sale is subject to FIRPTA withholding: the buyer generally withholds 15% of the amount realised, which is the sale price and not the gain. Because an inherited house has a cost equal to its value at death, the real gain on a prompt sale is often small and the withholding far exceeds the tax. The seller can apply to the IRS on Form 8288-B for a reduced withholding certificate before closing, and recovers any excess by filing a US return. Where several siblings inherit and only some are US persons, the withholding applies to the foreign sellers' shares, so tell the closing agent early.

The heir's own estate: the $60,000 problem

An inheritance changes your own estate planning, and for a British heir this is the point most often missed. The IRS explains that the estate of a nonresident who is not a US citizen must file Form 706-NA when US-situated assets exceed $60,000 at death. US-situated assets include US real estate and stock of corporations organised in the United States, even if held through a nominee. A UK resident who simply leaves a parent's US share portfolio or US house in their own name has taken on US estate tax exposure at a threshold a small fraction of the one that applied to the parent. The IRS notes that estate tax treaties can change the position, and the US/UK estate tax treaty should be reviewed with an adviser.

On the UK side, someone who has lived in the UK for at least 10 of the last 20 years is within UK Inheritance Tax on worldwide assets, so the inherited US assets also join the heir's UK estate. See UK Inheritance Tax for Americans for how the long-term resident test works.

If the inheritance comes through a US trust

Many American parents hold their assets in a revocable living trust, which carries on after the death as the vehicle that distributes to the children, or continues for their benefit. For a UK-resident beneficiary a continuing US trust raises separate questions: how the UK taxes distributions of income and capital, whether a UK-resident child acting as trustee changes the trust's tax residence, and what US reporting follows. None of that has a general answer. If the estate documents mention a trust, show them to an adviser before accepting a trusteeship or a distribution.

A checklist for a UK resident inheriting US assets

1. Establish your own US status: citizen, green card holder or neither. It decides most of the US column.
2. Get the executor's inventory with date-of-death values, and convert each to sterling at that date.
3. Identify the retirement accounts and the deadline for emptying them.
4. Give each US custodian the correct tax form before any payment is made.
5. Decide what to sell promptly: US funds and, for non-US heirs, US-situated assets above $60,000.
6. For a house, plan the sale around FIRPTA and apply for a withholding certificate where it helps.
7. Register for Self Assessment if you are not already in it, and report the income and gains each year.

How we help

US/UK Cross Border Tax is a team of US CPAs and UK tax advisers working as one team, in London, Manchester, New York and San Francisco. We work with American executors and UK heirs to plan withdrawals from inherited retirement accounts, deal with US withholding and FIRPTA, and report the result correctly on both sides. Read about our estate and trust planning for people inheriting US assets as UK residents and our UK Self Assessment service, or contact us for a fee quote.