Marriage has significant tax implications that extend across both jurisdictions. From filing status elections to inheritance tax exposure and Net Investment Income Tax (NIIT) pitfalls, here’s what cross-border couples need to consider.

Navigating US/UK tax rules for married couples

Marriage brings more than just personal and emotional commitments, it can significantly reshape your tax landscape, especially for US citizens living in the UK. Filing status choices, inheritance tax updates, and the impact of cross-border elections like 6013(g) and 6013(h) must all be carefully considered. The implications can be far-reaching, affecting everything from annual tax liabilities to long-term estate planning strategies.

Below is a list of the key considerations that you need to look out for to better understand your tax position as a married couple.

Filing status: Married filing jointly vs. separately 

For US taxpayers, selecting the correct filing status is more than a procedural formality, it can materially affect your overall tax outcome. Married couples can either file jointly (Married Filing Jointly - MFJ) or separately (Married Filing Separately - MFS), and the choice should be made with a full understanding of your financial picture. 

Joint filing benefits: 

• access to higher income thresholds for tax rates and credits, 

• eligibility for valuable tax credits and deductions, and 

• the administrative convenience of filing a single return. 

When separate filing might be better: 

• Protection from liability for the spouse’s tax issues, including audits, 

• potentially beneficial when one spouse has substantial student loans on income-driven repayment plans, as MFS may reduce the repayment amount, and 

• important when one spouse has significant business liabilities or is involved in complex financial arrangements. 

Elections for mixed-nationality couples: 6013(g) and 6013(h)

Mixed-nationality couples, particularly where one spouse is a US citizen and the other is a non-resident alien (NRA) face additional challenges. However, the 6013(g) or (h) election allows the NRA spouse to be treated as a US person for income tax purposes, enabling the couple to file jointly. 

Why elect? 

• useful when the NRA spouse has little or no income, as joint filing can reduce the overall tax burden, and 

• once elected, the spouse is considered a resident for income tax purposes. However, crucially, the NRA spouse is not treated as a resident for self-employment tax or Net Investment Income Tax (NIIT). 

Caution: The NIIT trap 

NIIT applies a 3.8% surtax on investment income (e.g. dividends, interest, and capital gains) when a taxpayer’s modified adjusted gross income exceeds certain thresholds of $125,000 for MFS and $250,000 for MFJ. 

When making a 6013(g) or (h) election to treat the NRA spouse as a US person for income tax purposes, married couples can file jointly and access the broader tax benefits of the MFJ status. However, this introduces a common NIIT pitfall. 

While the NRA spouse is treated as a US resident for income tax, they are not considered a US person for NIIT. If a joint return is filed and the NRA spouse has investment income, the IRS default treatment is that the US spouse is subject to NIIT only subject to the $125,000 threshold. 

There is a potential election that you can make on Form 8960, to have the NRA spouse subject to NIIT and access the MFJ threshold of $250,000. This could be particularly useful if your overall adjusted gross income is below this threshold. However, it may not be the right decision if the NRA spouse has a large amount of investment income, or where there will be any future large one-off events such as a house sale. 

Alternative filing status: Head of Household

In specific cases, a US taxpayer married to an NRA may qualify to file as Head of Household (HoH). This can offer more favourable tax brackets and a higher standard deduction than MFS. To be eligible, the US taxpayer must have paid more than half the household expenses for the tax year and must have a qualifying person (such as a dependent child) who lived in the home for more than half of the year.  

Transfer taxes and estate planning 

Marriage typically brings tax advantages when transferring wealth between spouses. However, when one spouse is not a US citizen or is not a long-term UK resident, the usual exemptions may not apply. 

Recent changes to UK Inheritance Tax (IHT):

• UK IHT is now based on long-term residence rather than domicile, and  

• a non-UK domiciled spouse who becomes a long-term UK resident (typically ten out of the previous twenty years) may face IHT on their worldwide assets. 

US transfer tax considerations:

• US marital exemption for lifetime gifts to an NRA spouse is capped at $190,000 (2025 value, indexed annually) 

• no unlimited marital exemption on death for gifts from a US to an NRA spouse, unless assets are held in a Qualified Domestic Trust (QDOT), and 

• the US lifetime estate and gift tax exemption remains significant ($13.99m in 2025), but careful planning is still essential. 

UK transfer tax limits: 

• lifetime and death transfers from a UK long-term resident spouse to a non-UK long-term resident spouse are limited to a £325,000 exemption, and 

• above this, IHT could apply unless covered by other reliefs (such as Potentially Exempt Transfers (PETs)). 

Other tax benefits of marriage

Marriage can also provide several smaller but meaningful tax benefits: 

• No gain/no loss: Transfers between spouses are generally tax-neutral in both the US and UK. This can reduce the risk of double taxation on appreciated assets. 

• Inherited cost basis: If an asset is gifted between spouses, the receiving spouse assumes the original cost basis. This can be beneficial if sold under favourable conditions later. 

• Marriage allowance: In the UK, if one spouse earns less than the personal allowance, a portion can be transferred to the higher-earning spouse, providing modest but useful tax relief. 

Case Study 

Scenario 

Alex, a US citizen working in London, is married to Priya, a UK citizen with minimal income from part-time work. Alex’s income is £150,000 ($195,000), while Priya’s income is £10,000 ($13,000). They have joint investment income of £30,000 ($39,000). 

Analysis 

• Filing jointly (using 6013(g)) would allow them to use the MFJ standard deduction and lower joint tax brackets, and 

• Electing for joint filing would still result in NIIT being assessed at the MFS threshold of $125,000 on Alex’s share of investment income. 

Recommendation 

• Consider 6013(g) for income tax, but also make a separate NIIT election to subject Priya’s investment to NIIT. This locks in the $250,000 threshold, which results in no NIIT liability. 

• Bear in mind that this election could impact future events, which could create an NIIT liability for the NRA spouse, such as a house sale or other big events. 

What should you do? 

For Americans living in the UK, marriage introduces a layer of complexity into tax planning that goes far beyond choosing a filing status. Decisions around joint verses separate returns, NIIT exposure, inheritance tax rules, and gift limits require careful coordination between two tax systems. 

With rules frequently evolving, and significant implication at stake, an initiative-taking approach is essential. Buzzacott’s specialist cross-border tax advisors can help you navigate these decisions confidently and ensure your filings and estate plans are as tax-efficient as possible. 

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The full Stepping Stones series can be found here.

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