Your American shares carry a tax your family finds out about later

Figures relate to tax year 2025-26 (UK) · 2025 (US)

You hold shares in a handful of American companies through a British platform. You pay British tax on the dividends, you pay British tax on the gains, and everything feels settled.

Then somebody mentions US estate tax. Those shares are American property, and America taxes American property in the estate of anyone who dies owning it, whatever passport they held. The exempt amount for a non-American is $60,000.

Key takeaways

• US estate tax reaches certain assets in the estate of a non-resident who dies owning them.
• The exemption is $60,000, against $13.99 million for an American in 2025.
• Rates climb to 40% on the amount above the threshold.
• US shares count, even held through a British broker in a nominee account.
• The estate tax treaty can raise the effective exemption considerably.
• Funds domiciled in Ireland or Luxembourg usually sit outside the charge.

What is US estate tax for a non-resident?

It is a charge on the value of American-situated assets passing on death. The estate of somebody who was never American and never lived there still falls within it, provided the assets themselves are American. According to IRS guidance, a non-resident estate files where those assets exceed $60,000.

US estate tax is not an income tax, and it has nothing to do with capital gains. It looks only at value on the date of death.

The rate reaches 40%. Below the threshold there is no charge at all.

Which assets are caught?

Shares in American companies are the big one, wherever the certificate sits and whoever holds the nominee account. American real estate counts, and so does tangible property physically located there. A holiday home in Florida and a holding of American technology shares sit in exactly the same category for this purpose.

Cash in an American bank account usually falls outside it, which surprises people.

So does most American corporate and government debt held by a non-resident. The exemptions here are narrower than they look.

Does holding through a UK broker help?

No, and this is the misunderstanding that does the most damage. US estate tax follows the underlying asset rather than the account it sits in, so shares in an American company held in a British nominee account remain American property. The platform's location changes nothing at all.

The same applies inside an ISA or a general investment account.

We see this assumption constantly, usually from people who were told an ISA is tax free. It is tax free in Britain.

A worked example

The figures below are illustrative and use round numbers to show the mechanics.

David, a British citizen living in Bristol, dies holding $400,000 of American shares alongside his British assets. He never lived in America and holds no American passport.

Without treaty relief, roughly $340,000 sits above the threshold. At rates reaching 40%, the exposure runs well into six figures.

With a treaty claim, his exemption is prorated by reference to his worldwide estate. If his American assets are a small fraction of the total, the relief can remove the charge entirely.

How does the estate tax treaty help?

Britain and America have a separate treaty covering estates and gifts, and it allows a British estate to claim a share of the larger American exemption. The share is worked out by comparing the American assets with the worldwide estate, so a modest American holding inside a large estate attracts substantial relief.

The relief is not automatic. Somebody has to file a return and claim it.

That filing arrives at the worst possible moment, which is why the planning belongs now rather than later.

The two positions compared

What happens to a surviving spouse?

Less than you would hope. The unlimited spousal exemption American couples rely on is restricted where the surviving spouse is not American, and a British widow or widower inheriting American shares does not automatically escape the charge. The estate treaty offers some help, and specific structures offer more.

Plan for it while both spouses are alive. Afterwards the options narrow sharply.

Our guide to the marital deduction for a non-citizen spouse covers the American side in more detail.

Can funds solve the problem?

Often, and this is the simplest fix available. A fund domiciled in Ireland or Luxembourg that happens to hold American shares is generally not itself American property, so the investor holds a European asset rather than an American one. Plenty of British platforms offer exactly these funds.

Check the domicile rather than the index. Two trackers following the same benchmark can differ here.

Most British platforms label the domicile on the fund page. If yours does not, the factsheet will say.

Americans face the opposite problem with those same funds, which our guide to the ISA and PFIC problem explains.

What about a holiday home in America?

Real estate is squarely inside the charge and it cannot be moved. A Florida condominium owned directly by a British couple sits in the American estate of whoever holds the title, at full market value, with only the small threshold and any treaty relief to set against it.

Ownership structures exist, and each carries its own American and British consequences.

Mortgages can reduce the taxable value, but only in part and only with disclosure. Assume the gross figure until somebody checks.

Our guide to US property for UK residents covers the income tax side of the same asset.

Does Britain charge inheritance tax as well?

Yes, on the worldwide estate of someone with a long-standing connection to Britain. So the same American shares can sit in two charges at once, with the estate treaty deciding which country gives credit for the other. That mechanism usually prevents genuine double taxation.

Usually is not always. The rates and thresholds differ enough to leave gaps.

Ask which country taxes first. The order decides who gives the credit, and it is not always the answer people expect.

Our guide to US-UK inheritance tax covers how the two systems interact.

Do pensions and life policies count?

Usually not, and that is a relief. A British pension escapes US estate tax, so it sits outside the charge even when the fund inside it buys American shares. Life policies written on your own life also fall outside it in most cases.

But check what the pension actually holds if you draw it down into a general account. Once the money leaves the wrapper, the shares you buy with it are visible again.

So the wrapper matters here, even though it made no difference for an ISA. The two work in opposite directions.

What about a joint account?

It depends on who really owns what. America looks at the beneficial share rather than the name on the statement, so a joint holding usually splits according to who contributed. If one spouse funded everything, that spouse may own all of it for this purpose.

Keep a note of who paid in. Years later nobody remembers, and the burden of proof sits with the estate.

Then review the split while both of you can still explain it.

Do American depositary receipts count?

Often yes. A receipt over a foreign share is generally treated as the foreign share itself, so a receipt over a Japanese company is not American property. But a receipt is a different thing from a direct holding, and the analysis turns on the detail.

Also watch dual-listed groups. Where a company has both British and American parent entities, which line you hold changes the answer.

So read the holding name carefully. Two similar tickers can sit on opposite sides.

When should you act on this?

Before it matters, because every useful option needs you alive. Switching a direct holding into a fund is simple while you are here and impossible afterwards. Reviewing a joint account is easy now and contentious later.

If your American holdings sit near the threshold, look at them this year.

And if they sit far above it, look at them this month. The cost of waiting is measured in tens of thousands.

How to review your exposure

1. List every holding and identify where each company is incorporated.
2. Separate direct American shares from funds domiciled elsewhere.
3. Add any American real estate at current market value.
4. Total the American assets and compare with the $60,000 threshold.
5. Estimate your worldwide estate, since the treaty relief depends on it.
6. Consider switching direct holdings into non-American funds where suitable.
7. Tell your executors which assets are American and where the records sit.

Who actually files the return?

The executors, and usually within nine months of the death. Obtaining a transfer certificate can be slow, and a broker may freeze the American holdings until the paperwork clears, which leaves a family unable to sell at precisely the moment they need liquidity.

Delays of a year are common. Build that into your expectations.

Name a firm that has done one before. These returns are rare in Britain, and a general practice can lose months simply learning the form.

Leave your executors a note listing the American assets. It saves months.

Is there a gift tax too?

Yes, and it works on a smaller base. America taxes gifts of American real estate and tangible property made by a non-resident. But gifts of shares sit outside it, which opens a route the estate charge does not.

So giving shares away can work where selling them would cost too much in British tax.

Take advice first. A gift has British consequences of its own, and they last seven years.

Mistakes and penalties we see with US estate tax

The first is assuming a British platform makes the shares British. It does not, and that single belief accounts for most of the exposure we find.

The second is assuming the treaty applies automatically. Relief needs claiming on a return that somebody has to prepare.

The third is leaving executors with no list. They cannot claim relief on assets they have not identified.

The fourth is switching holdings without checking the capital gains cost in Britain first. The cure should not cost more than the disease.

How US UK Tax Accountants helps

We work through the portfolio holding by holding, separate the American assets from the rest, and size the exposure against the threshold and the treaty. Then we set out the options, including the British tax cost of any switch.

Where a death has already happened, we prepare the estate return and the treaty claim. Our treaty relief service covers that work.

If you hold American shares or property, get in touch. This is one of the few taxes where the planning has to happen while you are still around to do it.

Last reviewed 25 September 2026. This article is general information and not personal tax advice. Estates turn on their own facts, so take advice on yours before acting.