Gift to Non-US Spouse: The US Annual Limit and UK Rules

Gift to non-US spouse: an introduction

A gift to a non-US spouse is not covered by the unlimited US marital deduction. Instead, a special annual exclusion applies, which is $194,000 for 2026. Anything above that uses part of your lifetime exemption and must be reported on Form 709. In the UK, gifts between spouses are usually free of inheritance tax and capital gains tax, with one cap to watch.

This article explains both sets of rules for couples where only one spouse is American. Our guide to US-UK tax for founders and executives covers the wider position for high-earning and high-net-worth families.

Why a gift to a non-US spouse is different

The marital deduction is the US rule that lets spouses give each other unlimited amounts free of gift tax. However, section 2523(i) of the Internal Revenue Code switches it off where the receiving spouse is not a US citizen. In its place, the law gives a larger annual exclusion. Consequently, a US citizen married to a British spouse can still give a lot, but not without limit.

Who this affects

Each gift to a non-US spouse is tested on the citizenship of the spouse who receives it. A green card holder is not a US citizen, so they are also a non-citizen spouse. By contrast, gifts from a British spouse to an American spouse can qualify for the marital deduction. Therefore, the direction of each gift matters.

How much can you give a non-US spouse tax-free in 2026?

For 2026, you can give a spouse who is not a US citizen up to $194,000 without using any lifetime exemption. For 2025, the figure was $190,000.

The special annual exclusion

The IRS 2026 inflation release sets the exclusion for gifts to a non-citizen spouse at $194,000 for calendar year 2026. The Form 709 instructions for 2025 give $190,000 for 2025. The figure rises with inflation, so each year has its own limit. Notably, it counts gifts across the whole calendar year, not per gift.

The ordinary annual exclusion

The ordinary annual exclusion is the amount you can give anyone each year without reporting it. It is $19,000 for both 2025 and 2026. Gifts to your children, parents or friends use this smaller figure. Meanwhile, gifts to your spouse use the special figure instead, because that exclusion already includes the first $19,000.

Gifts above the limit and the lifetime exemption

A gift to a non-US spouse above the annual limit is a taxable gift. Usually, no tax is paid straight away. Instead, the excess reduces your basic exclusion amount, the lifetime allowance for gifts and estates. The IRS release puts it at $15,000,000 for 2026, up from $13,990,000 for 2025. Tax is only payable once that allowance is used up.

Which gifts count towards the limit?

Only gifts of a present interest qualify, and the gift must take a form that would qualify for the marital deduction if your spouse were a citizen. Gifts that fail either test are taxable gifts from the first dollar above $19,000.

The present-interest requirement

A present interest is an immediate right to use, possess or enjoy the property. The Form 709 instructions say a gift of a future interest cannot be excluded under the annual exclusion. For example, a cash gift to your non-US spouse, paid into their sole account, is a present interest. By contrast, a gift into a trust where your spouse benefits only later is usually a future interest.

The marital deduction test

The regulation at 26 CFR 25.2523(i)-1 adds a second test. The part of the gift above the ordinary exclusion must be in a form that would qualify for the marital deduction if your spouse were a citizen. Outright gifts normally pass this test. Gifts of a limited interest, such as a life interest that ends on remarriage, often do not.

Joint bank accounts in the UK

Many couples in Britain keep a joint current or savings account. Under the general rule in the Form 709 instructions, paying into a joint account is not a gift at once. Instead, the gift happens when the other spouse draws on the account for their own benefit. Therefore, joint accounts funded mainly by the American spouse need tracking, especially for large withdrawals. They also appear in full on your FBAR as an American in the UK.

A UK home in joint names

Special rules apply to real property held as joint tenants with a non-citizen spouse. Under 26 CFR 25.2523(i)-2, creating such a tenancy on or after 14 July 1988 is not itself a gift. However, a gift can arise when the tenancy ends, for example on a sale, if the proceeds do not follow each spouse's contributions. Notably, an English joint tenancy is not identical to a US one. Furthermore, a tenancy in common has no survivorship, so the ordinary gift rules apply to it. As a cautious approach, we read the title and any declaration of trust before deciding which rule applies.

When is Form 709 due?

Form 709 is due by 15 April of the year after the gift. For gifts made in 2026, that is 15 April 2027.

Who must file

Form 709 is the US gift tax return. The instructions say you do not file for gifts to a non-citizen spouse unless your present-interest gifts to them exceed the yearly limit. For 2026, that means more than $194,000. Equally, you must file for any gift of a future interest, whatever its size. A gift to your non-US spouse below the limit needs no return at all. Your spouse does not file a US gift tax return for gifts they receive from you.

The deadline and extensions

The instructions say an extension of your income tax return also extends Form 709. Alternatively, Form 8892 gives an automatic six-month extension for the gift tax return alone. Neither extends the time to pay any gift tax due. For gifts made in 2025, the return was due on 15 April 2026, or 15 October 2026 if extended.

No gift splitting with a non-US spouse

Gift splitting is an election that treats a gift by one spouse as made half by each. It lets a couple double the ordinary exclusion for gifts to children. However, section 2513 requires both spouses to be US citizens or residents. Consequently, a US citizen married to a non-resident British spouse cannot split gifts. Each of your gifts to others then uses your own $19,000 exclusion.

What are the UK rules on gifts between spouses?

Gifts between spouses are usually exempt from UK inheritance tax and are treated as no gain, no loss for capital gains tax. The main exception is a capped exemption where only the giver is a long-term UK resident.

The inheritance tax spouse exemption

Inheritance tax is the UK tax on estates and some lifetime gifts. The spouse exemption normally covers every transfer between spouses. However, section 18 of the Inheritance Tax Act 1984 caps it where the giver is a long-term UK resident and the spouse is not. The cap equals the nil-rate band, which is £325,000 for 2026-27 on the HMRC thresholds table.

Long-term residence since 6 April 2025

From 6 April 2025, UK inheritance tax follows long-term residence rather than domicile. HMRC's manual at IHTM47020 defines a long-term UK resident as someone resident for at least 10 of the previous 20 tax years. According to IHTM47030, the cap is cumulative. Earlier exempt gifts to a spouse reduce what is left. Any excess is a potentially exempt transfer, which falls out of the estate after seven years.

The election to lift the cap

A spouse who is not a long-term UK resident can elect to be treated as one. HMRC's manual at IHTM47031 says the election cannot be revoked. It lapses only after 10 consecutive years of non-UK residence. Because it brings the spouse's worldwide estate into UK inheritance tax, we model both ways before anyone signs.

Capital gains tax: no gain, no loss

For capital gains tax, a transfer between spouses who live together is treated as giving rise to neither a gain nor a loss. HMRC's HS281 helpsheet says the recipient takes over the giver's cost. Couples living in different homes still count as living together unless separation is formal or likely to be permanent. Living in different countries does not, on its own, count as separation either. So a gift to a non-US spouse who lives with you is normally no gain, no loss, even if they are not UK resident.

Separation and the three-year window

Since 6 April 2023, separating couples have longer to make no gain, no loss transfers. HS281 allows them until the end of the third tax year after the year they stopped living together, or until a divorce is granted, if earlier. In addition, transfers under a formal divorce agreement or court order have no time limit. Later transfers are generally treated as made at market value.

How do the US and UK rules fit together?

The two systems look at different things: the US at citizenship, the UK at long-term residence. A couple can therefore face a limit in one country and none in the other.

The US-UK estate and gift tax treaty

The US and the UK have a separate treaty on estates and gifts, signed in 1978. The UK text is in the 1979 Order on taxes on estates and gifts. It decides which country has the first right to tax and gives credit for tax paid in the other. Article 8 includes reliefs for transfers to spouses, mainly on death. Our article on the US-UK estate tax treaty explains it, and how its domicile tests sit with the new UK residence rules.

Gifts the other way

A gift to a non-US spouse is only half the picture. If your British spouse gives you money, the US position changes. A US person who receives gifts from a nonresident alien above $100,000 in a year reports them on Form 3520, as the IRS page on gifts from foreign persons explains. The form reports the gift; it does not usually create tax. Furthermore, under section 1015, you generally take over the giver's cost for later gains.

Income tax on transfers between spouses

A gift is generally not a sale for US income tax. However, section 1041, which normally makes transfers between spouses tax-free, does not apply where the receiving spouse is a nonresident alien. Therefore, any transfer where something comes back, such as a part-sale of shares, needs checking. Our guide to the US-UK double taxation treaty covers how gains are then relieved.

The death rules at a glance

On death, the same citizenship test applies. Under section 2056(d), the estate tax marital deduction is not allowed for a non-citizen surviving spouse unless property passes to a qualified domestic trust. That is a will and estate question rather than a gift question. Even so, lifetime gifts and the will should be read together.

What does a gift to a non-US spouse look like in practice?

A worked example shows how the two systems apply to one transfer. It is an illustration, not a real client.

An example: shares moved into a spouse's name

Consider a typical case. Daniel is a US citizen who has lived in London for 14 years. His wife, Sophie, is a British citizen who has always lived in the UK. In 2026, Daniel moves shares worth $300,000 from his sole account into hers.

On the US side, the first $194,000 is covered by the special annual exclusion. The remaining $106,000 is a taxable gift. It uses part of Daniel's $15,000,000 basic exclusion amount, so no tax is payable. Nevertheless, he must file Form 709 by 15 April 2027.

The UK side of the example

Both Daniel and Sophie are long-term UK residents, so the full spouse exemption applies. Daniel's gift to his non-US spouse therefore meets no inheritance tax cap. For capital gains tax, the transfer is no gain, no loss, and Sophie takes over Daniel's cost. Additionally, Daniel's US income tax return reports no sale, because nothing came back to him.

What the example shows

Suppose instead that Sophie had moved to Britain only five years ago. She would then not be a long-term UK resident. Daniel's exempt gifts to her would be capped at £325,000 in total. Consequently, the same transfer could need its UK figures worked out twice, with and without an election. We model both ways and file the returns that follow.

How US UK Tax Experts can help

We prepare and file Form 709 for Americans in Britain who make a gift to a non-US spouse. First, we list the year's transfers, including withdrawals from joint accounts. Next, we apply the special exclusion and record any use of your lifetime exemption. Finally, we file the return and keep the working with your US federal return.

On the UK side, we work out the spouse exemption position and the cost your spouse takes over. We prepare both countries' returns from one file, so the figures agree. For larger estates, our article on US UK high net worth tax services explains what else we prepare.

Conclusion

In summary, a gift to a non-US spouse does not get the unlimited marital deduction. For 2026, you can give $194,000 of present-interest gifts tax-free. Above that, you file Form 709 by 15 April 2027 and use part of your lifetime exemption. In the UK, the spouse exemption is usually unlimited, unless only the giver is a long-term resident. Above all, record each gift in the year it happens.

Contact us

Would you like your Form 709 prepared, or the UK side of a gift worked out? Email us at hello@usuktaxexperts.com, or tell us about your situation through our contact page. We reply within one working day with what we would need from you.