Key Takeaways
- U.S. expats living in the United Kingdom face unique financial, tax and retirement planning complexities.
- It’s important to take steps to avoid challenges related to changing tax laws, investments, retirement planning, estate planning and more.
As an American living in the United Kingdom, it’s essential to navigate the unique financial challenges you face. Two very different taxation rules, specialized investment regulations and recently introduced changes to UK tax laws make it especially important to approach financial planning with a coordinated strategy.
Fortunately, there are steps you can take to successfully manage your financial life as a UK resident.
Remain Up to Date On Changing Tax Laws
Both U.S. and UK tax laws are constantly evolving, and it’s critical to remain up to date on how these changes may impact you. For example, the United Kingdom’s Labour Party introduced sweeping tax law changes in October 2024 that included:
- Abolishing the remittance basis of taxation and the use of the common law concept of domicile
- A shift in the inheritance tax from domicile-based to residency-based
- An increase in capital gains tax rates
Similarly, in the United States, both the One Big Beautiful Bill Act (OBBBA) of 2025 and the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2022 introduced significant tax law changes that affect a wide range of financial planning considerations.
It’s important to understand how foreign tax credit rules, the foreign earned income exclusion and the U.S.-UK income tax treaty interact to mitigate double taxation on worldwide income. A great way to stay informed about UK tax developments to help ensure your UK and U.S. tax planning strategies are aligned is to work with an experienced international wealth manager.
Foreign Income and Gains exclusion
For your first four tax years as a new resident in the UK, your foreign (non-UK) income and gains aren’t subject to tax in the UK. Unlike under the previous remittance regime, this income will never be taxed by the UK even when brought to the UK.
Review Your Estate Planning Strategies
On April 6, 2025, UK inheritance tax changed from a domicile-based system to a residency-based system. For the first 10 years of your residence in the UK, UK inheritance tax (IHT) only applies to your UK situs assets. After 10 years of residency, you’ll be a long-term resident subject to IHT on your worldwide assets. Your worldwide estate will be subject to a 40% tax on assets that exceed your IHT allowance (£325,000 frozen until 2030).
It’s also important to understand that once you’re a long-term resident, you’ll be subject to both UK inheritance tax laws and U.S. estate tax laws. This can be a significant estate planning consideration, especially if your worldwide assets exceed the U.S. lifetime gift and estate tax exclusion amount ($15 million per individual in 2026).
Finally, make sure any U.S.-based wills and trusts will continue to operate as intended when you reside in the United Kingdom. It’s likely that a U.S. revocable trust won’t operate as intended if you’re a UK long-term resident. Whether you should have one or two wills depends on your individual circumstances.
Your international wealth manager can provide guidance to help you navigate the specific estate and inheritance tax complexities you face living in the United Kingdom.
Navigate Investment Complexities
The most significant investment challenge for U.S. expats living in the United Kingdom is the need to avoid investing in passive foreign investment companies (PFICs). Any non-U.S. mutual funds, UCITS funds and ETFs are PFICs, and investing in these funds will result in significant complex U.S. tax reporting requirements and punitive rates of income tax on capital gains and “excess distributions.”
A great way to avoid investing in PFICs is by maintaining a U.S.-based investment account while living abroad. However, due to complex reporting requirements, many U.S. brokerage firms won’t work with individual investors living overseas. Fortunately, several investment firms will maintain individual brokerage accounts for Americans abroad who work with a third-party advisor, such as Creative Planning. In addition to accessing U.S. investment accounts, partnering with an advisor who understands both U.S. and UK rules can help you avoid other investment management complexities as a UK resident.
Plan for Retirement
When living in the United Kingdom as a U.S. expat, it’s important to navigate the challenges of maintaining both U.S.- and UK-based retirement savings as part of your broader retirement planning.
Tax-advantaged U.S. retirement accounts
While tax-deferred retirement accounts, such as 401(k)s and traditional IRAs, are typically recognized in the United Kingdom, some American investment custodians impose restrictions on non-U.S.-based residents, which can make these accounts a challenge to manage while living abroad. Contributions to U.S. retirement accounts may not be deductible for UK income tax purposes, resulting in taxation on both the contribution and the eventual distribution.
Tax-advantaged UK retirement accounts
Similarly, while tax-deferred retirement accounts, such as a UK workplace pension, are recognized in the U.S., there are significant limitations on the amount that can be contributed to a UK “pension pot” in any given year. Those amounts are reduced, potentially to as low as £10,000 for higher-income earners.
U.S. Social Security payments and UK state pension
If you’re eligible for U.S. Social Security benefits, you can typically receive payments while living abroad. While the dollar amount of your benefits is based on U.S. earnings, the U.S.-UK totalization agreement may provide for National Insurance contributions made in the United Kingdom to count toward U.S. Social Security eligibility, which is an important element of your long‑term financial future. Contributions to your UK state pension may entitle you to receive a UK state pension independent of your U.S. Social Security entitlement.
How an International Wealth Manager Can Help
An international wealth manager can help you navigate the complexities of multi-jurisdictional tax issues, international investment considerations, estate planning questions, retirement planning challenges and more.
At Creative Planning International, we specialize in helping expats and cross-border families maximize their wealth and avoid costly mistakes. We understand the complex interaction of multi-jurisdiction tax and regulatory regimes across the United States and the United Kingdom. We help clients develop operationally and financially efficient wealth management strategies customized to their unique set of financial goals and circumstances. Because we serve in a fiduciary capacity, you can be confident that we’re acting solely in your best interests at all times.
