In a recent PCD podcast, David Bell spoke with Martin Scullion, dual-qualified US/UK private client tax adviser at Buzzacott, and Nick Wood, Partner and Investment Manager for international and US-connected clients at Sarasin & Partners, to walk through the financial planning challenges facing an archetypal American family relocating to London in 2026., to walk through the financial planning challenges facing an archetypal American family relocating to London in 2026. Their case study — the Harrington family — is fictional, but the issues they face are entirely real.

A New Planning Landscape

The abolition of the remittance basis in 2025 transformed the planning conversation for arriving non-domiciliaries. For American families in particular, the change is arguably welcome. Under the old regime, remittance planning was painstaking: segregated accounts, clean capital pools, and constant vigilance about where money was moved. For Americans — already taxed on worldwide income in the US — the remittance basis often created as many problems as it solved, with double taxation risks that were difficult to untangle.

The new Foreign Income and Gains (FIG) regime is, in Martin Scullion's words, "actually probably more beneficial for most Americans." It gives newly arrived UK residents a four-year window during which foreign income and gains are fully exempt — no remittance restrictions, no complex account structures. Critically, assets can be remitted to the UK freely during this period. The Harringtons, arriving in summer 2026, qualify from day one.

But the FIG window is finite. "Get advice straight away," says Martin. "Plan, rather than wait until it's too late." The four years go quickly, and the cost of inaction compounds.

The PFIC Problem: Why Their US Portfolio Doesn't Travel Well

The first major challenge for families like the Harringtons is their investment portfolio. Most Americans arrive in the UK holding exactly what made sense at home: US mutual funds, US-listed ETFs, dollar-denominated bonds. These are efficient, familiar instruments — until you move jurisdictions.

From a UK perspective, the majority of these holdings are likely to be classified as offshore non-reporting funds. The tax consequences are severe: gains on disposal are treated as income rather than capital and are taxed at rates of up to 45% for higher earners in England. Compare that to the 20% long-term capital gains rate available in the US, and the mismatch is stark.

Meanwhile, from the US side, the mirror problem exists. UK collective investment vehicles — investment trusts, UK-listed ETFs, unit trusts — are likely to be classified as Passive Foreign Investment Companies (PFICs) by the IRS. The PFIC regime imposes punitive rates: potentially 37% income tax plus an interest charge that, over a ten-year holding period at current rates, could push the effective tax rate towards 75% or beyond. "Avoid at all costs," is Martin's advice. The stocks and shares ISA, a natural suggestion for a new UK resident, is particularly dangerous territory for Americans — the unit trusts inside it will almost certainly be PFICs.

Nick Wood's team at Sarasin approaches the restructuring challenge by building bespoke portfolios of individual stocks and bonds, complemented where appropriate by dual-qualifying ETFs that hold reporting fund status in the UK and do not fall foul of the US PFIC rules. "Simplicity is really important," he explains. "Individual stocks and bonds give us greater scope to manage gains from both tax jurisdictions — whether that's long or short-term gains from the US, or UK gains to the fifth of April."

The FIG window allows selling non-compliant holdings without triggering UK tax on the gains — but the restructuring must be paced. "We still want to plan the liquidation over the four-year period," Nick notes. "We don't want to suddenly sell everything in year one and give them a very large US tax bill."

The 529 Plans: A Quiet Disaster

The Harringtons' IRA and 401(k) retirement accounts are, relatively speaking, manageable. The US-UK income tax treaty provides for tax-deferred growth in both jurisdictions, and the question of withdrawals can be addressed later. But their 529 education savings plans — set up for children Sophie and Caleb — are a different matter.

In the US, 529 plans are an elegant tax-free savings vehicle: contributions grow tax-free, and withdrawals for qualified education expenses are also tax-free. In the UK, they are treated as settlor-interested trusts, meaning the contributing parent is taxed annually on all income and gains arising inside the plan — regardless of whether any money has been withdrawn. The FIG exemption provides temporary relief during the four-year window, but once that expires, the ongoing tax drag is significant.

Martin's advice for families in this position is direct: during the FIG period, consider simply closing the 529s. "If you've got, say, £200,000 in there, just withdraw it. You'll pay US tax on any growth plus a 10% penalty — but it might be better than the anguish I've seen clients go through under these plans once they're in the UK long term."

Trusts, LLCs, and the Transparency Trap

The Harrington family's legal structures present further complexity. Their revocable New York trust was created purely for US probate efficiency — a standard instrument for American families. In the UK, it is almost certainly a bare trust, meaning Daniel and Emily are simply treated as direct owners of the underlying assets. That is the most straightforward outcome, and in 99% of cases it will be correct — but it needs to be confirmed by a UK adviser, since in some cases revocable trusts can be treated as substantive offshore trusts, which would change the planning entirely.

Emily's 1% LLC interest in a US commercial real estate vehicle is a smaller holding but a genuine banana skin. The US treats LLCs as transparent — she is taxed on her proportionate share of the LLC's rental profits, even if they are not distributed to her. The UK treats the LLC as an opaque company, meaning Emily would only be taxed when she actually receives a distribution, and then as a dividend. The result is potential double taxation on the same underlying income with limited ability to claim relief. With only a 1% stake, she has no control over the timing of distributions or the sale of the interest. The FIG window is the moment to assess whether the investment is worth retaining.

Inheritance Tax: A Long Game

The Harringtons arrive as US domiciliaries, with no exposure to UK inheritance tax on their worldwide assets. That changes — but more slowly than many families realize. Under the new residence-based IHT regime, they will not become subject to worldwide IHT until they have been UK residents for 10 out of the last 20 years — around 2036 at the earliest.

However, there is a significant planning opportunity available to them now, rooted in Article Five of the US-UK Estate Tax Treaty. As long as they remain US domiciled and have not acquired UK citizenship, they can establish trust structures that are protected from UK IHT for life — including on UK-sited assets, with limited exceptions. This protection is not available to everyone, and it has not been targeted by recent UK tax changes. Martin describes it as "a massive opportunity" that advisers are only beginning to engage with systematically.

The message is consistent across every dimension of the Harrington case: act early, assemble the right team, and use the four-year FIG window to its full value. "If they miss it," says Martin, "it could be expensive."

Martin Scullion is a dual-qualified US/UK private client tax adviser and cross-border trust specialist at Buzzacott. Nick Wood is a partner at Sarasin & Partners, where he manages portfolios for international and US-connected clients. This conversation was recorded for the PCD Group podcast series.