The US-UK estate tax treaty: which country taxes a death

Is the US-UK estate tax treaty separate from the income tax treaty

Yes. The 2001 income tax treaty does not deal with estate tax or inheritance tax. A separate convention on estates of deceased persons and gifts, signed on 19 October 1978, covers those taxes. The UK publishes its text as a schedule to a 1979 statutory instrument, and it remains in force.

On the US side it covers the federal estate tax, the federal gift tax and the generation-skipping transfer tax. On the UK side it was written for capital transfer tax, the predecessor of inheritance tax, and it extends to taxes that are identical or substantially similar. HMRC's Inheritance Tax Manual treats UK inheritance tax (opens the official GOV.UK page in a new tab) as a covered tax under it. The treaty applies to lifetime gifts as well as deaths, so a gift reported on Form 709 can fall within it too.

The income tax treaty, summarised on our US-UK tax treaty page, contains a saving clause that lets the US tax its citizens largely as if the treaty did not exist. The estate treaty has no saving clause of that kind. Instead it says when the country of nationality keeps its right to tax and which country gives the credit.

How does the treaty decide where someone is domiciled

It starts from each country's own rules. A person is domiciled in the US for treaty purposes if they were a US resident in the estate tax sense, which means domiciled there, or a US national who was so resident at any time in the three years before death. They are domiciled in the UK if UK law treats them as domiciled there for a covered tax.

Where both countries claim the same person, the treaty breaks the tie. Two rules for single nationals come first. A UK national who is not a US national is deemed domiciled in the UK if they were not resident in the US for federal income tax purposes in seven or more of the ten taxable years ending with the year of death. A mirror rule deems a US national who is not a UK national to be US-domiciled if they were not UK resident in seven or more of the previous ten UK income tax years.

Anyone those rules do not settle goes through a sequence of tests. Dual nationals often end up here. The first test that gives a clear answer decides the case.

• Where the person had a permanent home available to them
• If a home was available in both countries or neither, where their personal and economic ties were closer
• If that cannot be decided, where they had a habitual abode
• If that is both or neither, the country of which they were a national
• If they were a national of both or neither, the two tax authorities settle it by mutual agreement

Which country taxes real estate and business property

The country where it is located may tax it, whatever the person's domicile. Article 6 lets each country tax immovable property, meaning land and buildings, situated there. Article 7 does the same for assets of a permanent establishment of a business, and for assets of a fixed base used for independent professional services, located there.

Everything else generally belongs to the country of domicile. Article 5 says that where the person was domiciled in one country, the other country may not tax property outside Articles 6 and 7. The exception is nationality: the other country keeps its right to tax if the person was its national. So a US citizen domiciled in the UK under the treaty stays within US estate tax on worldwide assets.

For a non-US person, the US domestic rules decide what counts as US-situated, and the treaty then narrows them. The IRS page on estate tax for nonresidents not citizens (opens the official IRS page in a new tab) treats the figure of $60,000 as a filing threshold for Form 706-NA, measured on US-situated assets plus certain gifts. Our post on W-8BEN for UK investors in US shares explains how American shares held by a UK resident fit that picture.

• Land and buildings. Taxable where situated, under Article 6
• Business property of a permanent establishment. Taxable where the establishment is, under Article 7
• Shares, bank accounts and other movable assets. Generally reserved to the country of domicile, unless the other country taxes by nationality
• Settled property. Subject to separate rules that look at the settlor's domicile when the trust was made

How do credits stop an estate being taxed twice

Article 9 says which country gives the credit. As a rule, the country that taxes only by domicile or nationality credits the tax of the country where land or business property sits. Where both countries tax other assets because the person was domiciled in one and a national of the other, the country of nationality gives the credit.

So when a UK-domiciled US citizen dies, the US credits UK tax on UK land, and it also credits UK tax on shares, cash and other assets the UK taxes by domicile. The UK credits US tax on a house in Florida, because Article 6 gives the US the first right there. The Form 706 (opens the official IRS page in a new tab) instructions confirm that a treaty credit for foreign death taxes may be claimed and that the estate may use the treaty credit, the statutory credit, or the combination that gives the best result.

The credit is limited. It cannot exceed the tax attributable to the property concerned, it is not final until the other tax is actually paid, and the treaty sets a time limit for claims measured from the death or from when the credited tax falls due. Our estate and trust planning service works out both computations together.

Can a British spouse inherit without US estate tax

Not automatically. US law generally refuses the unlimited marital deduction where the surviving spouse is not a US citizen. The IRS Form 706 instructions allow it if the property passes to a qualified domestic trust, or is transferred or irrevocably assigned to one before the return is filed, and the executor elects that treatment.

A qualified domestic trust needs at least one trustee who is a US citizen or a domestic corporation, and no capital may be paid out unless that trustee can withhold the tax. It defers estate tax rather than removing it: tax generally falls due when capital is distributed to the surviving spouse, other than income or hardship payments, and on the surviving spouse's death.

The treaty adds its own marital deduction rule. Article 8 lets property passing from a UK-domiciled or UK-national decedent to a spouse qualify for a US marital deduction to the extent it would if the decedent had been domiciled in the US. Because that yardstick is itself a US-domiciled decedent, it is not a simple route around the qualified domestic trust rules, and how it applies to a particular estate needs review. During life, the gift tax (opens the official IRS page in a new tab) annual exclusion for a non-citizen spouse is $190,000 for 2025, and larger gifts go on Form 709 (opens the official IRS page in a new tab) through our gift tax returns service.

How do the UK long-term residence rules affect the treaty

From 6 April 2025, UK inheritance tax on worldwide assets turns on long-term residence rather than domicile. A person who has been UK resident for ten of the previous twenty tax years is within its scope, and remains so for a period after leaving that grows with the length of residence. Above the nil-rate band of £325,000 and other reliefs, the rate is 40%.

The treaty still speaks of domicile. HMRC's Inheritance Tax Manual says that, under the conventions that refer to UK deemed domicile, the US one included, a long-term UK resident is treated as domiciled in the UK for inheritance tax. The tie-breaker in Article 4 then applies as before where the US also claims the person. Our article on what changed after non-dom sets out the wider reforms.

Questions remain. The UK test counts tax years of residence under the Statutory Residence Test, while the treaty's own seven-in-ten rules refer to income tax residence in each country, and the two counts will not always match. The transitional rules for people who were not UK domiciled on 30 October 2024 add another layer. We review how the new UK test and the treaty interact for each family rather than assume it.

How does this work for a US citizen who has lived in London for years

Take a US citizen employed in London who moved from Boston many years ago. She owns a London flat, a US brokerage account and a US holiday home, and is married to a British national. She has not lived in the US for well over three years.

For the treaty, she is probably not US-domiciled: she was not a US resident in the estate tax sense in the three years before death. She has been UK resident for far longer than the long-term residence test requires, so HMRC would treat her as UK-domiciled. If the US did claim her, the tie-breaker looks first to her permanent home, in London. The UK then has the main right to tax her worldwide estate, and the US taxes her too because she is a US citizen, crediting UK tax on her London flat and her other non-US assets.

The holiday home is different. Article 6 gives the US the first right to tax US land, so the UK credits US tax on it. Her estate also has to consider the US basic exclusion (opens the official IRS page in a new tab), which was $13.99 million for 2025, the absence of a US marital deduction for her British husband without a qualified domestic trust, and the UK spouse exemption. Our private client service and the trusts and estates division review wills in both countries, and the guide to avoiding US-UK double taxation shows how this sits beside the income tax rules on her Form 1040.