Financial planning and legal considerations for US citizens moving to Scotland

Moving to Scotland as an American is an exciting adventure, but it comes with financial complexities that require careful planning. While the romanticism of the country makes it hard to imagine thinking of anything other than castles and kilts, there are still some key practical issues that you should plan for in advance.

From understanding taxation to managing investments and updating your wills, there are several key financial considerations to address when you’re making the move. This co-authored article between Susanne Batchelor, Partner and Nikki Neal, Senior Associate at Brodies LLP and Patrick Mulhern, Partner and Financial Advisor at Tanager Wealth Management, discusses some of the legal and financial considerations for US citizens who are contemplating the move to Scotland.

Understanding UK and US tax obligations

One of the biggest financial challenges for US citizens moving abroad is taxation. The US taxes its citizens based on citizenship, not residency, which means that even if you move to Scotland, you will still need to file a US tax return. You may also be liable to pay Scottish and wider UK taxes as well. However, there is a robust dual-tax treaty between the US and the UK that can help avoid double taxation in most circumstances.

From 6 April 2025, the UK tax treatment of offshore income and gains changed, and this discussion focusses on the new rules. If you moved prior to that date, you should speak with a professional to discuss your situation.

The “Foreign Income and Gains” (“FIG”) regime allows new residents of the UK to shelter their non-UK assets from UK tax. Under the FIG regime, foreign income and gains will be fully exempt from UK taxation for the first 4 UK tax years (as long as the individual hasn’t been resident in the UK during the previous 10 years). After this initial 4 year period, all UK residents will be liable for tax on their worldwide income and gains. There are some costs to using the FIG (for example, the loss of your annual income tax personal allowance) and the offshore income and gains still need to be reported on a UK tax return, so you should consult a tax professional.

US citizens who become long-term residents in the UK will need to ensure that their investments are structed in a way that is compliant with both the IRS and the HMRC. Prior to the introduction of the FIG regime, all changes to the portfolio needed to be made before an individual entered the UK, but under the new legislation there is a window to make changes to investments after arrival which affords more flexibility on timings.

US citizens moving to the UK should also be aware of the new UK rules that apply to inheritance tax ("IHT") from 6 April 2025. These rules could expose US citizens to UK IHT so it is important that professional advice is taken at an early stage.

Investments across the pond

US citizens moving to Scotland also need to make a plan for their assets. With tax obligations in both countries, it can be challenging to avoid triggering penalty taxes or double taxation for those with Scottish and US assets.

Both the US and the UK have rules designed to dissuade people from investing in pooled investments registered outside of their jurisdiction. The IRS calls these “Passive Foreign Investment Companies” (“PFICs”), and the UK calls them Offshore Income Gains (“OIGs”). Broadly put, both systems tax capital gains on collective investments like mutual funds and ETFs at higher income tax levels, which can more than double the tax rate.

In light of these restrictions, US citizens should ensure that their US brokerage accounts are free of OIG investments, and they should be careful when considering investing in British accounts, including Individual Savings Accounts (commonly referred to as ISAs), since most fund investments offered will trigger PFIC penalty taxes from the IRS. Expats planning a move should seek advice from both tax and investment professionals about how to structure their portfolio and where to keep their investments. Both jurisdictions come with advantages and disadvantages, so there isn’t a one-size-fits-all solution.

Retirement planning for US citizens in the UK

If you have retirement savings in the US, such as a 401(k) or IRA, you’ll need to consider how your move to Scotland affects these accounts. The good news is that the US/UK tax treaty provides protection to assets inside of retirement accounts ("RAs"), so US citizens can continue to invest inside of their RAs without worrying about the tax implications caused by the underlying funds. This applies to UK pensions, too, for anyone planning to work in Scotland and save into a UK retirement plan.

Before withdrawing or transferring retirement funds or making changes to your portfolio, consult a financial planner to avoid unnecessary penalties and tax burdens.

US Social Security can be paid to recipients living abroad, assuming you’ve earned enough credits to qualify. If you work in the UK you will also build credits in the UK State Pension scheme, providing a second stream of income for retirement. However, Medicare cannot be used for healthcare expenses outside of the United States, so you should get familiar with the National Health System (NHS) in Britain, which provides free healthcare to all residents. Some expatriates also choose to purchase private health insurance in the UK.

Legal considerations

As well as reviewing financial matters, it is also essential for US citizens moving to Scotland or other parts of the UK to seek professional legal advice on the need for a will and power of attorney in the new country. In doing so, it will be essential for the Scottish lawyer to work with any US legal advisors to ensure that the US and Scottish/UK documents are compatible.

Final thoughts

Moving to Scotland as a US citizen can be an incredible adventure. Taking the time to understand the financial and legal implications of your move will help you avoid costly mistakes and ensure a smooth transition. Before making the leap, consult a cross-border financial planner like the experts at Tanager Wealth to ensure you’re fully prepared for your new life in Scotland. With the right planning, you can enjoy everything Scotland has to offer while avoiding unnecessary surprises with just a wee bit of forward planning.

When preparing for an overseas move to the UK from the US, it is important to note the unique elements of estate planning that differ between countries. Brodies wills and estate planning lawyers can advise on Scottish tax and succession matters, as well as English wills and probate. Our personal law team are highly experienced in advising individuals who have connections in the US and UK, and we regularly collaborate with professional advisors in the US and elsewhere to provide comprehensive advice in this area. To speak with a member of our team, please get in touch.

This is not tax advice or a recommendation. You should consult with your tax attorney and accountant to determine whether any of these actions are appropriate in your circumstances.

Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors. Past performance is not a reliable indicator of future results. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your initial investment.