The 8-of-15-year gateway comes first
Renouncing US citizenship always counts as expatriation, but abandoning a green card only does if you are a long-term resident: a lawful permanent resident in at least 8 of the last 15 tax years ending with the year the card status ends. A Brit who held a green card for six years and files Form I-407 faces no exit tax on abandonment, no matter how wealthy. Someone who held it for a decade must run the covered-expatriate tests. Watch two traps. A card held for even one day in a tax year uses up a full year of the count. And a long-term resident who starts claiming to be a non-US resident under the UK-US treaty and notifies the IRS without waiving the benefit can be treated as ending their resident status, starting the expatriation clock without meaning to.
Covered expatriate: three tests, one is enough
If you are a long-term resident, the exit tax only bites if you meet any one of three tests on the date you expatriate. The net-worth test is $2 million or more, a hard figure that is not inflation-adjusted and captures worldwide assets including UK property and pensions. The income-tax test is an average annual net US income tax liability over the prior five years above $206,000 for 2025, rising to $211,000 for 2026; that is tax paid, not income earned. The certification test is failing to certify on Form 8854, under penalty of perjury, five years of full US tax compliance. That last one is the sleeper: missed returns, unfiled FBARs or missing Forms 8938 make you covered by default, which is why the FBAR and FATCA clean-up usually has to start well before the card goes back.
What a covered expatriate actually pays
A covered expatriate is treated as having sold all worldwide property at fair market value the day before expatriation. The net deemed gain is then reduced by an exclusion of $890,000 for 2025 or $910,000 for 2026, so many technically covered expatriates pay little or nothing. Above the exclusion, the gain keeps its character and is taxed at the normal US rates on the final-year return. Pensions and retirement accounts sit outside the deemed sale and follow their own rules: IRAs and similar tax-deferred accounts are treated as fully distributed the day before expatriation, while eligible US employer plans suffer 30% withholding on later payments instead. The UK side then has to be layered on, including timing the expatriation date against UK arrival and the four-year FIG regime. Almost all of the tax is saved by planning before the date, not after. Horizon runs the UK side of that analysis on fixed fees agreed upfront, with the US filings handled by our US partners (Enrolled Agents and CPAs), whom we coordinate for you; book a free clarity call at /book before you set a date.