Do US citizens pay both UK inheritance tax and US estate tax?

They can, on the same assets. The UK charges inheritance tax and the US charges estate tax, and a US citizen living in the UK with UK property may be exposed to both. The two systems are built differently — the US taxes based on citizenship and asset location, while the UK (from 6 April 2025) taxes based on long-term residence rather than domicile. The US-UK Estate and Gift Tax Treaty and credits are designed to reduce double taxation, but exposure to both is possible.

How did UK inheritance tax change in 2025?

From 6 April 2025, the UK replaced domicile with a residence-based test for inheritance tax. Broadly, someone who has been UK tax resident for 10 of the previous 20 tax years becomes a 'long-term resident' and is exposed to UK inheritance tax on their worldwide assets — and a 'tail' of between 3 and 10 years can keep that exposure after they leave the UK. Before this, exposure turned on domicile and deemed domicile. UK real estate, however, is always within UK inheritance tax regardless of residence.

Is UK property always subject to UK inheritance tax?

Yes. UK real estate is UK-situated property, so it falls within UK inheritance tax regardless of the owner's residence, domicile, or nationality. Even a US citizen who is not a long-term UK resident — and whose other worldwide assets are outside UK inheritance tax — will still have their UK property within the UK inheritance tax net. This makes UK property a near-universal UK inheritance tax exposure for Americans.

Does the US-UK treaty stop double estate taxation?

It helps significantly but doesn't always eliminate it. There's a separate US-UK Estate and Gift Tax Treaty (distinct from the income tax treaty) that sets tie-breaker rules for 'treaty domicile' and provides credits so the same assets aren't fully taxed twice. For a US citizen who is not a UK national, the treaty can limit UK exposure and even shorten the post-departure tail in some cases — but UK real estate generally remains within UK inheritance tax.

What is the US estate tax exemption for someone with UK assets?

US citizens have a large unified estate and gift tax exemption (in the multi-millions), so many estates owe no US estate tax — though the top rate above the exemption is 40%. Because the specific exemption amount changes with legislation, the practical point is the mechanism: US citizens get the full exemption on worldwide assets, while non-domiciled non-citizens get only a small exemption on US-situs assets unless the treaty increases it. Always check the current figure for the year of death.

UK Inheritance Tax vs US Estate Tax: What Americans with UK Property Need to Know

Estate planning across the US and UK is one of the most technically demanding areas of cross-border tax — and it got more complex in April 2025, when the UK tore up the domicile rules that had governed inheritance tax for generations. For a US citizen with UK property, both the UK's inheritance tax and the US's estate tax can reach the same assets, using completely different logic. This guide compares the two systems, explains the 2025 change, and shows where the treaty helps.

The short answer

UK inheritance tax and US estate tax can both apply to a US citizen's UK property, because the two systems are built on different foundations. The US taxes based on citizenship and asset location (US citizens on worldwide assets; others on US-situs assets). The UK, from 6 April 2025, taxes based on long-term residence — being UK resident for 10 of the previous 20 years brings worldwide assets into UK inheritance tax, with a 3–10 year "tail" after leaving. Crucially, UK real estate is always within UK inheritance tax regardless of residence. The separate US-UK Estate and Gift Tax Treaty reduces double taxation but doesn't always eliminate it.

Key takeaways

US estate tax is based on citizenship and asset location; UK IHT (from April 2025) on long-term residence.
The UK replaced domicile with a residence-based test for inheritance tax on 6 April 2025.
UK real estate is always within UK inheritance tax, whatever the owner's residence or nationality.
A separate US-UK Estate and Gift Tax Treaty (not the income treaty) reduces double taxation.
Both systems have a 40% top rate; exemptions differ enormously and change with legislation.

Executive summary

The US and UK death-tax systems were never designed to align. US estate tax turns on who you are (a US citizen is taxed on worldwide assets; a non-domiciled non-citizen only on US-situs assets) and carries a large unified exemption with a 40% top rate. UK inheritance tax, historically based on domicile, shifted on 6 April 2025 to a residence-based test: a "long-term resident" (UK resident 10 of the last 20 years) faces UK IHT on worldwide assets, with a tail of 3–10 years after departure. Sitting across both is UK real estate, which is always within UK IHT as UK-situs property. The US-UK Estate and Gift Tax Treaty — separate from the income treaty — provides tie-breaker rules and credits, and survived the 2025 reforms, making it more important than ever for US citizens (especially non-UK-nationals) with UK assets.

How the US estate tax works

US estate tax is built on status and situs:

A US citizen (or US-domiciled person) is subject to US estate tax on their worldwide estate, with a large unified exemption (in the multi-millions) and a 40% top rate above it. Most estates fall under the exemption and owe nothing — but the exposure is worldwide.
A non-citizen, non-US-domiciled person is subject to US estate tax only on US-situs assets (US real estate, US stocks), with a much smaller exemption unless the treaty increases it.

Because the exemption amount moves with legislation, the durable point is the mechanism: citizenship pulls your whole worldwide estate into the US system, with a generous exemption cushioning most estates.

How UK inheritance tax works — after April 2025

This is where recent change matters, and where most older guidance is now wrong.

Before 6 April 2025: UK IHT exposure turned on domicile and deemed domicile — a complex, fact-heavy concept.

From 6 April 2025: the UK replaced that with a residence-based test. Broadly:

Someone UK tax resident for 10 of the previous 20 tax years becomes a long-term resident (LTR), exposed to UK IHT on worldwide assets.
A "tail" of between 3 and 10 years can keep that worldwide exposure running after they leave the UK.
The 40% top rate and the nil-rate-band structure continue, but the connecting factor is now residence, not domicile.

For a US citizen who has lived in the UK for years, this means their worldwide estate may now be within UK IHT — a significant widening of exposure compared with the old domicile rules.

The fact that catches everyone: UK property is always in scope

Whatever your residence or nationality, UK real estate is UK-situated property and is always within UK inheritance tax. So even a US citizen who is not a long-term UK resident — and whose other worldwide assets sit outside UK IHT — will still have their UK home or rental within the UK IHT net. For a property-owning American, this makes UK IHT a near-universal exposure, which is exactly why it belongs at the centre of any UK-property plan.

Where the treaty helps

There's a separate US-UK Estate and Gift Tax Treaty (the 1980 treaty — distinct from the income tax treaty), and the UK confirmed it survives the 2025 reforms. It works by:

providing tie-breaker rules to decide a person's "treaty domicile" (which is its own concept, not the same as UK residence or general domicile);
allocating primary taxing rights and giving credits so the same assets aren't fully taxed twice;
in some cases, limiting a non-UK-national US citizen's UK exposure and even shortening the post-departure tail.

The treaty is genuinely powerful for the right person — particularly a US citizen who is not also a UK national — but it's fact-sensitive and evidence-driven, and UK real estate generally stays within UK IHT regardless. We cover its mechanics in the US-UK estate and gift tax treaty.

Common mistakes we see

Relying on pre-2025 "domicile" guidance that no longer reflects how UK IHT works.
Assuming UK property can escape UK IHT — UK real estate is always in scope.
Overlooking the post-departure tail when planning a move out of the UK.
Confusing the estate/gift treaty with the income treaty — they're separate.
Planning with US-style trusts without checking the UK IHT consequences, which changed in 2025.