US estate tax and UK residents meet whenever someone living in the UK dies owning US-situated assets, such as shares in US companies or a home in the US. US estate tax can reach 40% on value above a US-situs exemption of only USD 60,000 for a non-US person. The 1978 US-UK treaty usually removes the charge on everything except US real estate for a person domiciled in the UK.
Do UK residents pay US estate tax?
UK residents can owe US estate tax, but only on US-situated assets, and often not at all once treaty relief is claimed. What decides the charge is not your UK residence but your domicile. A person domiciled outside the US who is not a US citizen is a non-resident alien for US estate tax, taxed on US-situs assets above a USD 60,000 exemption at rates up to 40%.
Domicile and residence are separate ideas. You can be UK tax resident, and be treated as UK domiciled for the US treaty, at the same time. The trigger for US estate tax is simply owning the wrong kind of asset at death, not moving to America.
The people caught are ordinary UK savers and investors: someone holding shares in a US company through a UK broker, or a UK family with a Florida holiday home. The estate of a US citizen living in the UK is a different case, taxed by the US on worldwide assets, and is not the focus of this guide (irs.gov, as at August 2026, subject to change).
Which of your assets count as US-situs?
Only US-situated (US-situs) assets fall inside US estate tax for a non-US person. The most common trap is US company shares, which stay US-situs no matter where they are held, including inside a UK ISA or a UK nominee account. US bank deposits and certain US bonds usually sit outside the charge.
| US-situs (inside US estate tax) | Not US-situs (outside US estate tax) |
|---|---|
| Shares in US companies, wherever held (including in an ISA or nominee account) | Cash on deposit with a US bank, in most cases |
| US real estate (a home, land or investment property) | US Treasury and corporate bonds meeting the portfolio-interest rules |
| Tangible property in the US (art, a car, jewellery) | Proceeds of a life policy on your own life |
| US-listed funds and ETFs that are US-domiciled | Shares in non-US companies (for example UK or Irish-domiciled funds) |
Source: irs.gov, estate tax FAQ for nonresidents not citizens, as at August 2026, subject to change.
The important point is that a UK tax wrapper gives no US protection. A US share or a US-domiciled ETF held in an ISA or a SIPP is still US-situs, so the tax-free UK treatment does nothing to remove the US estate tax exposure.
How much is US estate tax, and what is the $60,000 trap?
US estate tax is charged on a graduated scale from 18% up to a top rate of 40%. A non-US person gets a US-situs exemption of only USD 60,000, against USD 15 million for a US citizen in 2026, so a modest holding of US shares can produce a real bill before any treaty relief.
Take a UK resident who dies owning USD 300,000 of US shares and nothing else US-situated. After the USD 60,000 exemption, US estate tax on the balance works out at roughly USD 75,000, an effective rate of about 25% on the holding. That figure is what the treaty below is there to address.
Illustrative US estate tax on USD 300,000 of US shares for a non-US person before treaty relief, using the 2026 rate schedule. Source: irs.gov, Instructions for Form 706-NA, as at August 2026, subject to change.
US gift tax is narrower. For a non-US person it applies only to gifts of US real estate and tangible US property, not US shares, with an annual exclusion of USD 19,000 per recipient for 2026 and a larger indexed exclusion for gifts to a non-US-citizen spouse (irs.gov, as at August 2026, subject to change).
How does the US-UK estate tax treaty protect UK residents?
The 1978 US-UK Estate and Gift Tax Convention is a domicile treaty. For a person domiciled in the UK who is not a US citizen, it gives taxing rights on most assets to the UK alone, so US shares, bonds and brokerage holdings usually escape US estate tax. Only US real estate and US business property stay taxable in the US.
The treaty works in two ways. First, it reallocates taxing rights: for a UK-domiciled person, assets other than US real estate and US business property are treated as taxable only in the UK, which is why a portfolio of US shares typically drops out of the US charge entirely (gov.uk, US-UK estate and gift tax convention, as at August 2026, subject to change).
Second, where US real estate does remain taxable, the treaty replaces the USD 60,000 exemption with a pro-rata share of the full US exemption, scaled by US-situs assets as a proportion of the worldwide estate. For most estates that credit is far larger than USD 60,000, so even US property can end up with little or no US estate tax.
One current subtlety matters. Since 6 April 2025 the UK charges its own inheritance tax on a residence basis, using a long-term resident test of 10 of the last 20 tax years, but the US treaty still turns on domicile. So a person can be a long-term UK resident for UK inheritance tax and UK-domiciled for the US treaty at once. Our guide to international and cross-border estate planning covers how the two systems line up.
What is Form 706-NA, and when must you file it?
Form 706-NA is the US estate tax return for a person who was neither a US citizen nor US-domiciled at death. It must be filed where US-situs assets exceed USD 60,000, even when treaty relief reduces the tax to nil, because the relief is claimed on the return itself.
- Check the threshold. If the deceased held more than USD 60,000 of US-situs assets at death, a Form 706-NA filing is required, whether or not any tax is finally due.
- Value the US-situs assets. List and value the US shares, US property and other US-situated items as at the date of death, in US dollars.
- File within nine months. Form 706-NA is due nine months after the date of death, with a six-month extension available on request using Form 4768.
- Claim the treaty on the return. Disclose the treaty position and the pro-rata unified credit on the form, so any US real estate is taxed on the treaty basis rather than the bare USD 60,000 exemption.
- Obtain an IRS transfer certificate. A US bank, broker or registrar will usually not release the assets until the IRS issues a transfer certificate confirming the estate tax position, which can take several months.
Source: irs.gov, Instructions for Form 706-NA, as at August 2026, subject to change.
What UK owners of US assets get wrong
The recurring mistake is assuming there is nothing to do because no tax is finally payable. Treaty relief is not automatic, a return still has to be filed, and a US custodian will hold the assets until the IRS clears the estate. Four errors cause most of the trouble.
- Trusting the ISA or SIPP wrapper. A US share or US-domiciled ETF inside a UK ISA or SIPP is still US-situs. The UK tax-free treatment gives no protection from US estate tax.
- Confusing US estate tax with UK inheritance tax. They are separate charges. US estate tax turns on situs and domicile; UK inheritance tax at 40% applies above the GBP 325,000 nil-rate band, plus up to GBP 175,000 residence nil-rate band, frozen until 5 April 2031 (gov.uk, as at August 2026, subject to change).
- Skipping Form 706-NA because "no tax is due". The custodian needs an IRS transfer certificate to release the assets, and that comes only after the return is filed, so skipping it can freeze an estate for months.
- Forgetting the UK side. A long-term UK resident is within UK inheritance tax on worldwide assets, so the same US shares can sit inside the UK estate as well, with treaty relief preventing a full double charge on any US property.
Because the position depends on which assets are US-situs, on domicile, and on both tax systems at once, US and UK planning usually need to be considered together. Our estate planning service can coordinate the UK side and work alongside a US adviser, and you can book a consultation to start.
Frequently asked questions
US estate tax reaches a UK resident only on US-situated assets, above a USD 60,000 exemption, at rates up to 40%. The 1978 US-UK treaty usually removes it on US shares and leaves only US real estate exposed, with a pro-rata credit far larger than USD 60,000. These are the questions owners ask most, answered for England and Wales as at August 2026.
Do UK residents pay US estate tax on US shares?
US company shares are US-situs, so they fall within US estate tax for a UK resident who is a non-US person, with an exemption of only USD 60,000. In practice, the 1978 US-UK treaty usually reallocates shares to the UK alone, removing the US charge, but a Form 706-NA return is still needed to claim that position (irs.gov, as at August 2026, subject to change).
What is the $60,000 US estate tax exemption?
USD 60,000 is the value of US-situs assets a non-US person can hold at death before US estate tax applies, against USD 15 million for a US citizen in 2026. Above it, tax runs on a graduated scale up to 40%. The US-UK treaty can replace this small exemption with a pro-rata share of the full US exemption (irs.gov, as at August 2026, subject to change).
Does the US-UK treaty mean I pay no US estate tax?
Often, but not always. For a UK-domiciled person who is not a US citizen, the 1978 treaty gives taxing rights on most assets, including US shares, to the UK, so those usually escape US estate tax. US real estate and US business property stay taxable in the US, though the treaty's pro-rata credit can still reduce that charge (gov.uk, as at August 2026, subject to change).
Do I need to file Form 706-NA if no tax is due?
Yes, where US-situs assets exceed USD 60,000 at death. The return must be filed within nine months even if treaty relief reduces the tax to nil, because the relief is claimed on the form. A US bank or broker will usually hold the assets until the IRS issues a transfer certificate, which follows the filing (irs.gov, as at August 2026, subject to change).
Are US shares in an ISA safe from US estate tax?
No. A US share or a US-domiciled ETF held inside a UK ISA or SIPP is still US-situs, so the tax-free UK wrapper gives no protection from US estate tax. Some investors instead hold UK or Irish-domiciled funds that track US markets to avoid the situs issue (irs.gov, as at August 2026, subject to change).