The US UK Estate Tax Treaty: Who Taxes What When You Die

The US UK estate tax treaty decides which country taxes an estate first, which country gives a credit, and which assets one country cannot tax at all. The deciding factors are treaty domicile, nationality and where each asset sits. US citizens stay within US estate tax wherever they live; British nationals domiciled in the UK are largely protected from US estate tax except on US land and business property.

Most cross-border families know there is an income tax treaty between the US and the UK. Fewer know there is a second, older convention that deals only with estates and gifts. It is short, it uses its own definition of domicile, and it is often the single most valuable document in a cross-border estate. This guide walks through it article by article, then shows how it plays out for the four people we see most often: the American in London, the long-settled American, the Briton with US investments, and the dual national.

What is the US UK estate tax treaty?

The US UK estate tax treaty is the Convention between the two governments for the avoidance of double taxation on estates of deceased persons and on gifts. It was signed in London on 19 October 1978 and the UK gave it effect through a 1979 Order, whose full text is on legislation.gov.uk. HMRC's page on Inheritance Tax double taxation relief lists the USA convention as in force from 11 November 1979.

Article 2 says the treaty covers the US federal estate tax, gift tax and generation-skipping transfer tax, and the UK's capital transfer tax. Inheritance Tax replaced capital transfer tax, and the treaty applies to "substantially similar" later taxes, so HMRC applies it to Inheritance Tax today. The UK's Inheritance Tax Manual at IHTM27161 names the USA as one of only ten countries with which the UK has an Inheritance Tax convention.

Because it covers gifts as well as deaths, the same rules apply to a lifetime transfer from a US citizen to a child in London, or from a British grandparent to a grandchild in California. For the wider picture of how the two systems treat trusts and lifetime planning, see our guide to US UK trust and estate tax planning.

How does the treaty decide where you are domiciled?

Treaty domicile is decided by Article 4 of the US UK estate tax treaty, and it is not the same as domicile in either country's domestic law. Each country's own test is applied first; only if both countries claim the person do the tie-breakers apply.

Step one: each country's own claim

Under Article 4(1), a person is domiciled in the US for treaty purposes if they were a US resident (domiciliary), or a US national who had been a US domiciliary at any time in the preceding three years. A person is domiciled in the UK if they were domiciled there under UK law, or are "treated as so domiciled" for a tax the treaty covers. Since 6 April 2025 that second limb matters a great deal: HMRC's manual at IHTM47071 lists the USA convention among those where deemed domicile through long-term UK residence is relevant. Our article on UK Inheritance Tax for Americans explains the long-term resident test itself.

Step two: the 7-out-of-10-year rule for single nationals

If both countries claim the person, Article 4(2) and 4(3) give a quick answer for someone who holds only one of the two nationalities:

• A US national who is not a UK national is treated as domiciled in the US if they had not been resident in the UK in seven or more of the ten UK tax years ending with the year of death or gift. UK residence is tested as for income tax, but ignoring any UK home available to them.
• A UK national who is not a US national is treated as domiciled in the UK if they had not been resident in the US for federal income tax purposes in seven or more of the ten taxable years ending with that year.

Step three: the general tie-breaker

Where the 7-year rule does not settle it, for example for a dual national or for a single national past the seven-year mark, Article 4(4) applies a sequence of tests: the country where the person had a permanent home; if a home in both or neither, the country of their centre of vital interests; then habitual abode; then nationality; and if none of these decides it, agreement between the two tax authorities.

Which country taxes which assets under the US UK estate tax treaty?

Once domicile is fixed, Article 5 sets the main rule. If the person was domiciled in one country, the other country may not tax their property, except for two classes of asset that the country where they are located can always tax:

• Immovable property (Article 6): land and buildings may be taxed where they are situated. A London flat can always be taxed by the UK; a Florida condominium can always be taxed by the US. Mortgage debts are not treated as immovable property.
• Business property of a permanent establishment (Article 7): assets of a business carried on through a fixed place of business, such as a branch or office, may be taxed where that establishment is.

There is one large exception. Article 5(1)(b) says the protection does not apply where the person was a national of the other country. In practice this means the US never gives up the right to tax a US citizen's estate. The treaty instead manages the overlap through credits.

Two further rules matter for families with trusts. Under Article 5(4), the UK may not tax property in a settlement if, when it was made, the settlor was domiciled in the US and was not a UK national (subject to Articles 6 and 7). HMRC confirms in IHTM47071 that this protection holds even if the settlor later becomes a long-term UK resident. Article 5(3) gives the mirror rule for US generation-skipping trusts. And under Article 5(5), if an asset is left taxable in only one country and that country does not actually collect the tax (other than through a specific exemption or relief), the other country may tax it.

The four common cases at a glance

The table below summarises how the US UK estate tax treaty usually applies. It is a starting point for the analysis, not a substitute for it: domicile under general law depends on intentions and facts that need to be reviewed case by case.

Person	Usual treaty domicile	US may tax	UK may tax	Who gives the credit
US citizen (not British), UK resident in fewer than 7 of the last 10 UK tax years	US, if a dual claim arises	Worldwide estate	Only UK land and UK permanent establishment property	US credits UK tax on UK land and business property (Article 9(1)(a))
US citizen (not British), long-term UK resident	Often UK, after the tie-breakers	Worldwide estate (US national)	Worldwide estate	US credits UK tax on non-US-situated property (Article 9(1)(b)); UK credits US tax on US land and business property
British national (not American), domiciled in the UK, with US investments	UK	Only US land and US permanent establishment property	Worldwide estate	UK credits US tax on that US property (Article 9(2)(a))
Dual US/UK national	Decided by Article 4(4) tie-breakers	Worldwide estate	Worldwide estate if UK-domiciled or long-term resident	Depends on treaty domicile and where each asset is located

How the credits work

Article 9 of the US UK estate tax treaty removes most double taxation through credits rather than exemptions. The basic logic: the country where land or business property sits taxes it first, and the country of domicile or nationality credits that tax. Where an American is domiciled in the UK, the UK takes first place on everything else, and the US credits the UK tax on that property.

Article 9(4) adds three limits. A credit is only finally allowed once the other country's tax has been paid. The credit cannot exceed the part of the crediting country's own tax attributable to that property. And no credit is given for tax the other country did not levy because it gave its own credit. HMRC's domestic guidance says the same thing in plainer words: relief is limited to the overseas tax actually paid on the same assets.

The timing rule in Article 9(5) catches executors out. A claim for a credit or refund under the treaty must be made within six years of the death or gift, or within one year of the last date the tax being credited is due, if later. Because US and UK estates rarely finish at the same pace, the crediting country's return may need to be filed on an estimated basis and then corrected.

What the treaty does for spouses

Mixed-nationality couples are where the US UK estate tax treaty earns its keep, because both countries restrict their spouse relief when the surviving spouse is a foreigner.

On the UK side: Article 8(3)

UK law limits the spouse exemption where the person giving is UK-domiciled or a long-term UK resident and the recipient spouse is not. HMRC's manual at IHTM47030 says that limit equals the nil-rate band at the date of transfer and applies to the cumulative total of all transfers to a spouse. The nil-rate band is £325,000 for 2026 to 2027 and is fixed at that level up to 2030 to 2031.

Article 8(3) offers an alternative where the person who died was domiciled in or a national of the US. If the transfer to a non-UK-domiciled spouse would have been wholly exempt had the spouse been UK-domiciled, the UK exempts 50% of the value transferred. It applies only where UK law would not give a bigger exemption anyway, so for a large estate the executor compares the two and uses whichever is better. HMRC notes at IHTM47070 that spousal elections to be treated as UK-domiciled or long-term resident are disregarded when applying existing conventions, which is worth knowing before an election is made.

On the US side: Article 8(2)

Where a person domiciled in or a national of the UK leaves US-taxable property to their spouse, Article 8(2) allows a US marital deduction (the US spouse exemption) to the extent it would have been allowed had they been domiciled in the US. The US rules still apply in full, including the rule that the marital deduction is generally not allowed for a surviving spouse who is not a US citizen unless the property passes through a qualified domestic trust (QDOT). The IRS instructions for Form 706-QDT explain how those trusts are taxed later.

Illustrative example, with invented figures: Michael is a US citizen who has lived in London for five years and is not a British citizen. He is married to Claire, who is British and has never been an American. Michael owns a London flat worth £800,000 and a US share portfolio worth $1,000,000, and leaves everything to Claire. Because Michael was resident in the UK for fewer than 7 of the last 10 UK tax years, if both countries claimed him the treaty would treat him as domiciled in the US. The UK may then tax only the London flat, and because the restriction on the UK spouse exemption bites only when the spouse who dies is the UK-domiciled or long-term resident one, the flat passing to Claire should be covered by the ordinary spouse exemption. The US portfolio stays outside UK Inheritance Tax under Article 5(1). On the US side, Michael's estate is far below the $15,000,000 filing threshold for deaths in 2026, so no US estate tax arises, though Claire, as a non-citizen, would not get the US marital deduction without a QDOT if the estate were larger.

A Briton with US assets: the treaty and Form 706-NA

The US taxes a non-resident, non-citizen on US-situated assets, which include US real estate and shares in US corporations. The IRS says the executor must file Form 706-NA if those assets exceed $60,000 at death, and the Form 706-NA instructions put the maximum unified credit for most non-resident estates at $13,000, a small allowance compared with the $15,000,000 filing threshold for US citizens dying in 2026. The return is due within 9 months of death unless an extension is granted.

The US UK estate tax treaty changes this picture for a British national domiciled in the UK. Under Article 5(1), the US may tax only US real property and US permanent establishment property; US shares and US bank deposits fall away. On whatever US tax remains, Article 8(5) lets the executor claim that the US tax be limited to the amount that would have been due had the person become domiciled in the US immediately before death. The Form 706-NA instructions tell executors to attach a statement showing that alternate computation, and to attach a statement saying the return position is treaty-based.

Illustrative example, with invented figures: Helen is a British national who has always lived in Manchester and has never been American. She dies owning a UK home, a US brokerage account holding $400,000 of US shares and a Florida apartment worth $300,000. Without the treaty, all $700,000 would be US-situated and well above the $60,000 filing threshold. With the treaty, the US may tax only the Florida apartment, and her executor can ask for the Article 8(5) alternate computation on it. The UK taxes her worldwide estate at 40% above the available thresholds and, under Article 9(2)(a), credits any US estate tax actually paid on the apartment.

If you are on the receiving end of a US estate, our guide to inheriting US assets as a UK resident covers what happens after the estate is settled.

What people get wrong about the US UK estate tax treaty

• Assuming the income tax treaty covers estates. It does not. The income tax treaty and the 1978 estate and gift convention are separate documents with separate rules on residence and domicile.
• Assuming a US citizen escapes US estate tax by living in the UK. Article 5(1)(b) keeps the US right to tax its nationals. The treaty changes which country gives the credit, not whether the US return is needed.
• Not filing because "the treaty exempts it". A treaty exemption is usually something the executor claims on a return. Under the IRS's $60,000 rule a Form 706-NA may still be needed, and HMRC says in IHTM47071 that where a UK charge arises on settled property it expects an IHT100 account even if the treaty brings the tax to nil.
• Missing the six-year credit window. When one country's figures are delayed, the claim in the other country can run out of time.
• Ignoring settlements made before moving. A trust set up by an American before coming to the UK may be protected from UK Inheritance Tax under Article 5(4), but only if it was made while the settlor was US-domiciled and not a UK national. Adding property later can change the answer.

How should an executor apply the treaty?

An executor applies the US UK estate tax treaty in a fixed order, because each step depends on the one before. The working sequence we use is:

1. Establish each country's domestic claim: US citizenship and US domicile; UK domicile under general law and long-term UK residence.
2. If both countries claim the person, apply Article 4: the 7-out-of-10-year rule for single nationals, then the permanent home, vital interests, habitual abode and nationality tests.
3. List every asset with its location, separating land (Article 6) and permanent establishment property (Article 7) from everything else.
4. Apply Article 5 to decide which country may tax each asset, including the trust rules in Articles 5(3) and 5(4).
5. Work out spouse relief in each country, comparing Article 8(3) with the UK domestic limit and checking whether a QDOT is needed in the US.
6. Calculate the tax in the country with the first right, then the credit in the other under Article 9, and diarise the Article 9(5) deadline.
7. File both returns with the treaty position disclosed: Form 706 or Form 706-NA in the US with the treaty statement, and the Inheritance Tax account in the UK.

Getting advice on both sides

A treaty claim only works when both returns tell the same story. US/UK Cross Border Tax is US CPAs and UK tax advisers working as one team, in London, Manchester, New York and San Francisco, so the US and UK sides of an estate are prepared together. Our US UK estate tax treaty and estate planning service covers treaty domicile reviews, will and trust structuring, and executor support, and our gift tax return service deals with lifetime transfers. If you are an American living in Britain, start with our page for Americans in the UK; if you are a British family with US assets, see our page for Brits in the US. To talk through your own position, contact us.