Estate and Investment Planning Around Selling US Assets From the UK
Estate investment planning and selling US assets require coordinating FIRPTA withholding, US capital gains tax, UK CGT, and inheritance tax rules at once, because a single disposal or death can trigger four separate tax regimes with different exemptions, credits, and deadlines.
By the TaxYork Cross-Border Tax Team — reviewed by a US-UK dual-qualified adviser (CPA / Enrolled Agent).
Why does estate investment planning that sells us assets from the U.S. matter so much right now?
Anyone holding US brokerage accounts, US real property, or a US-situs inheritance while living in the UK now faces a materially different rulebook than five years ago. The One Big Beautiful Bill Act made the $15,000,000 US federal estate tax exemption permanent from 2026, while the UK replaced domicile with a residence-based Long-Term Resident test for inheritance tax from April 2025. Getting estate investment planning wrong, selling us assets from the UK at the wrong moment,t can mean paying tax twice on the same pound or dollar of value.
The compound event nobody plans for
Selling a US asset while UK-resident, or inheriting one, is rarely a single tax event. A sale of US real property triggers FIRPTA withholding under IRS FIRPTA rules at the point of completion, US capital gains tax on the actual net gain, UK capital gains tax on the same disposal converted into sterling, and potentially UK inheritance tax exposure on the remaining estate. Treating these as separate problems, rather than one coordinated exercise, is the single biggest planning failure we see among dual filers. Our related piece on capital gains timing between two tax years covers the mismatch in more depth.
How does the US estate tax apply to Americans and UK residents selling US assets?
US citizens and domiciliaries are taxed on their worldwide estate at death, but the exemption is now $15,000,000 per person or $30,000,000 per married couple in 2026, permanently indexed from 2027. Non-US-domiciled individuals holding US-situs assets, by contrast, get only a $60,000 exemption before Form 706-NA and a 40% top rate apply, a threshold that has not moved for decades.
Where the US-UK treaty changes the maths
The 1980 US-UK Estate and Gift Tax Treaty gives a UK-domiciled decedent access to a pro-rated share of the $15,000,000 US unified credit rather than the bare $60,000 statutory exemption, provided the estate is properly reported. Article 5 of the treaty also extends an unlimited marital deduction to transfers passing to a spouse, though a QDOT is required where the receiving spouse is not a US citizen. This treaty mechanic is precisely why estate investment planning, selling us assets from the UK, should never be done using US domestic rules in isolation. Our guide on how the treaty protects high-net-worth dual filers sets out the credit calculation step by step.
What tax applies when a UK resident sells US real property or shares?
Selling US real property as a non-US person triggers FIRPTA withholding of 15% of the gross sale price, reduced to 10% for buyer-occupied homes between $300,000 and $1,000,000, and to 0% below $300,000 where the buyer intends to occupy the property. The buyer withholds this via Form 8288 within 20 days of completion, and the seller's actual US tax liability, computed on Form 1040-NR against the net gain, is frequently lower than the amount withheld, producing a refund once the return is filed.
NIIT and the stacking effect on investment sales
US persons selling investments also face the 3.8% Net Investment Income Tax above $200,000 (single) or $250,000 (married filing jointly) modified adjusted gross income, thresholds that have been frozen since 2013. This stacks directly on top of ordinary capital gains tax so that a large one-off sale can push otherwise moderate income well into NIIT territory in the year of disposal. Anyone approaching estate investment planning who is selling us assets from the UK needs to model NIIT exposure before signing contracts, not after completion.
How does UK capital gains tax interact with a US asset sale?
UK resident individuals pay Capital Gains Tax on worldwide gains, including the disposal of US brokerage holdings or US property, at 18% or 24% depending on total income for 2025/26, with an annual exempt amount of only £3,000. The gain itself is calculated by converting each dollar leg — acquisition cost and disposal proceeds — into sterling at the prevailing exchange rate on each date, which can create a UK gain even where the US-dollar transaction shows a loss, or vice versa.
Claiming relief so the same gain is not taxed twice
Foreign Tax Credit relief allows UK residents to offset US tax actually suffered, including FIRPTA withholding and US capital gains liability, against the equivalent UK CGT bill on the same disposal. This relief has to be claimed and evidenced correctly on the UK self-assessment return, and the currency mismatch between the two calculations means the credit rarely cancels out perfectly. Careful sequencing through the four steps below prevents a client from paying full tax twice on one transaction.
Step
Action
Governing rule
1
FIRPTA withholding at completion
15% (or 10%/0%) of gross proceeds, Form 8288
2
US net gain computed
Form 1040-NR, refund of over-withheld tax possible
3
UK gain computed in GBP
Worldwide gains, 18%/24%, £3,000 exempt amount
4
Foreign Tax Credit claimed
US tax offset against UK CGT via self-assessment
What happens to UK inheritance tax after the April 2025 residence reforms?
Domicile no longer determines UK inheritance tax exposure. Since April 2025, anyone who has been a UK tax resident for 10 of the previous 20 tax years becomes a Long-Term Resident, exposing their worldwide estate — including US assets — to UK IHT at 40% above the frozen £325,000 nil-rate band. Leaving the UK does not end the exposure immediately either, because an IHT "tail" of three to ten years continues to apply depending on how long the individual was resident before departure.
Layering the US and UK estate taxes on the same US asset
A US brokerage account or property held by a UK Long-Term Resident can now sit inside both the UK IHT net and, if the value is significant, the US estate tax net for non-domiciliaries or the worldwide net for US citizens. Careful estate investment planning, such as utilizing assets from the UK, uses the treaty's situs-country credit mechanism, described in our article on what the treaty means for a UK property portfolio, to prevent the same US-situs value from being taxed at full rates by both revenue authorities. From April 2026, unused pension funds also enter the UK taxable estate, adding a further layer that many families have not yet modeled, as set out in the Autumn Budget 2025 inheritance tax measures.
Why do PFIC rules complicate US investment planning for UK investors?
Nearly every UK-domiciled fund, OEIC, unit trust or ETF — including those held inside an ISA or SIPP — counts as a Passive Foreign Investment Company for a US person, taxed under the default excess-distribution method at the top 37% rate plus a non-deductible interest charge. UK ISAs offer no shelter from US tax, and every PFIC holding requires its own Form 8621, an administrative burden many UK-based US citizens discover only after building a substantial ISA balance.
Rebuilding a portfolio around cross-border tax efficiency
The practical fix is holding US-compliant, PFIC-free investments such as US-domiciled ETFs or direct shares rather than UK collective funds, which also simplifies the eventual step-up in basis calculation on death. Our companion article on US tax on UK dividends for wealthy dual filers explains how the same treaty-qualification logic applies to income, not just gains. Getting the underlying asset structure right before a sale or death is the difference between a straightforward filing and a multi-year unwind.
How does step-up in basis work for US assets inherited by UK residents?
US assets inherited from a decedent generally receive a step-up in US income tax basis to fair market value at the date of death under IRC Section 1014, wiping out pre-death appreciation for future US capital gains purposes. This step-up is a US-law concept only, though, and the UK's own capital gains treatment of that same inherited asset on a later disposal by a UK-resident beneficiary is calculated entirely separately under UK non-resident CGT rules, with its own acquisition value and currency conversion rules.
A worked example of the mismatch
Consider a beneficiary who inherits US shares worth $500,000 at death, sells them two years later for $650,000. The US basis steps up to $500,000, leaving a $150,000 US taxable gain; the UK, however, may calculate its own base cost using probate value converted to sterling at a different exchange rate, producing a different — and sometimes larger — UK gain figure. Practitioner-grade estate investment planning selling us assets from the UK models both calculations before the sale, not after, so the beneficiary is not surprised by two mismatched tax bills.
Case study: coordinating a US property sale and a UK estate together
A married couple, one a US citizen and the other a UK-domiciled Long-Term Resident, held a Florida rental property valued at $900,000 and a US brokerage account valued at $1,200,000. On the US citizen's death, the property and account passed to the surviving UK-resident spouse. Because the receiving spouse was not a US citizen, the unlimited marital deduction under Article 5 was unavailable without a QDOT, so the estate set one up to defer US estate tax on the transfer.
When the surviving spouse later sold the Florida property for $950,000, FIRPTA withholding of $142,500 (15% of gross proceeds) applied at completion, later refunded to the true US liability of roughly $9,500 after the stepped-up basis reduced the taxable gain to near zero. UK capital gains tax on the same disposal, converted at the prevailing rate, produced a modest UK gain, fully offset by Foreign Tax Credit relief for the US tax paid. Coordinated estate investment planning, selling us assets from the UK across both the estate and the later sale, kept the family's total tax leakage under 2% of asset value, against a worst-case scenario north of 30% if each event had been handled in isolation.
Get help planning your US asset sale or estate from the UK.
TaxYork's Cross-Border Tax Team structures US estate and investment disposals for UK residents every week, from FIRPTA withholding recovery to Long-Term Resident IHT exposure and treaty-based double tax relief. Speak to a dual-qualified adviser before you sign a sale contract or make a QDOT decision, not after. Contact us at hello@taxyork.com or call 020 3488 8606, or visit taxyork.com to arrange a consultation.