Understanding your UK tax residency position under the UK Statutory Residence Test (SRT) is a crucial first step for anyone planning to move to the UK. This determines whether you are considered UK resident for tax purposes, from which point.  This status influences how your worldwide income and gains are treated.

For individuals who have been non-UK resident for the previous ten tax years, the UK’s Foreign Income and Gains (FIG) regime may provide relief, allowing certain foreign income and gains to remain outside the UK tax net for the first four years of residence. This allows for some breathing space to restructure investments and employment or business interests to ensure that tax treatment is most effective cross-border. 

For individuals considering a permanent move, or for those who do not qualify for the FIG regime, dual residency can offer significant flexibility. Dual residency arises where an individual is considered tax resident under domestic law in both jurisdictions, i.e. in both the UK and US. In such cases under the US-UK Double Tax Treaty, the tie breaker tests are reviewed to determine who between the IRS and HMRC hold primary taxing rights.

Dual residency allows you to spend time in both countries without being immediately subject to full UK taxation, providing the opportunity of time to make the decision to move. Careful planning ensures that your relocation aligns with personal and financial objectives while minimising the risk of unexpected tax liabilities.

It is worth noting that the US state in which the individual is resident will be pertinent to their overall tax status. 

LLCs

Many US individuals hold investments through LLCs, which are typically treated as transparent entities for US tax purposes, so income is taxed as it arises. In the UK, however, LLCs are generally viewed as opaque, akin to corporations, meaning tax is normally triggered only when profits are distributed to the owner or member.

This mismatch can create the risk of double taxation, and foreign tax credit relief may not be available to offset the tax payable in one jurisdiction against the other. Timing and management of distributions therefore becomes critical before considering a relocation to the UK.

Trusts

Grantor and Non-Grantor Trusts are similarly common in US wealth planning, but they do not automatically align with UK trust and tax law. A careful review of each trust, its terms, structure, funding, and historical activity, is essential before relocation, to clarify potential UK tax exposure before you become UK tax resident.

Inheritance Tax Considerations

For high-net-worth individuals, UK Inheritance Tax (IHT) is a key consideration when planning long-term residence.

From 6^th April 2025, UK IHT applies to those who have been UK resident for at least 10 of the previous 20 tax years. The UK IHT limit is very low at £325,000 per person, but the IHT rate, being 40%, is high.  This is a clear contrast with the US estate tax regime, which currently allows an exemption of approximately £13.9 million per individual (effectively doubled for married couples).  This is a significant difference between the UK IHT regime and the US estate tax regime.

Provisions in the US-UK Estate Tax Treaty may mean that assets exempt from US estate tax due to the generous allowance, may be liable to UK IHT at 40%, creating unexpected tax exposure cross border. Against this backdrop, reviewing estate plans and treaty provisions is key to ensure alignment.