This guide is for people living in the UK who inherit a US Individual Retirement Account (IRA) from a parent, relative or friend. In brief: most non-spouse beneficiaries must empty an inherited IRA within ten years. If the owner had already started required distributions, you must also take a minimum amount every year from 2025. Each withdrawal is normally taxable in the UK as pension income, and US citizens also report it to the IRS. When you take the money can make a large difference to what your family keeps after tax.
Which rules apply when I inherit an IRA?
The rules depend on two things: when the owner died, and which kind of beneficiary you are. For deaths from 2020 onwards, the SECURE Act sorts beneficiaries into three groups. Each group has its own timetable for emptying the account[2][3].
An eligible designated beneficiary (EDB) can still “stretch” withdrawals over their life expectancy. EDBs are the surviving spouse, the owner’s child under 21, a disabled or chronically ill person, and anyone not more than ten years younger than the owner[1]. A minor child’s stretch ends at 21. After that a ten-year period applies, so the account must be empty by the end of the year of their 31st birthday[1].
A designated beneficiary is a named individual who is not an EDB, such as an adult child, grandchild, nephew or friend. They are subject to the ten-year rule. A non-designated beneficiary is an estate, a charity or a trust that does not qualify for look-through treatment. It follows the pre-2020 rules. That means a five-year rule if the owner died before their required beginning date, or the owner’s remaining life expectancy if they died after it[2][3].
| Beneficiary | Owner died before required beginning date | Owner died on or after required beginning date |
|---|---|---|
| Surviving spouse | Treat as own IRA, roll over, or take life-expectancy payments (can delay until the owner would have reached RMD age), or ten-year rule | Treat as own IRA, roll over, or take life-expectancy payments |
| Other eligible designated beneficiary | Life-expectancy payments, or ten-year rule | Life-expectancy payments (longer of own or owner’s remaining life expectancy) |
| Minor child of owner | Life expectancy until 21, then ten years | Life expectancy until 21, then ten years |
| Designated beneficiary (not EDB) | Ten-year rule, no annual minimum | Ten-year rule plus annual minimums in years 1–9 (from 2025) |
| Estate or non-qualifying trust | Five-year rule | Owner’s remaining life expectancy |
The required beginning date (RBD) is 1 April of the year after the owner reaches the age at which required minimum distributions (RMDs) begin. That age is currently 73[8]. An owner who died at 80 had passed it.
Do I have to take money out of an inherited IRA every year?
Yes, if you are a non-spouse designated beneficiary and the owner died on or after their required beginning date. From 2025 you must take an annual minimum in years one to nine and empty the account in year ten[1]. If the owner died before their RBD, there is no annual minimum. You only have to empty the account by the ten-year deadline.
Many beneficiaries first read “ten-year rule” to mean they could wait until year ten. The final regulations (TD 10001, published 19 July 2024) settled the point: where the owner died on or after their RBD, distributions must continue “at least as rapidly” as before, and the ten-year deadline applies as well. They apply from the 2025 distribution year[1].
The annual minimum is the prior 31 December balance divided by a life-expectancy figure. That figure is the greater of the beneficiary’s remaining life expectancy and the owner’s remaining life expectancy. The beneficiary’s figure is taken from the IRS Single Life Table at their age in the year after the death, then reduced by one each year[6]. For example, a beneficiary aged 49 in the year after the death starts with a factor of 37.1 from the table. It falls to 36.1 the following year, and so on[7]. For a beneficiary in their late forties the required amounts are small, under 4% of the balance a year. That is why the final-year payment can be very large if nothing more is taken.
If the owner had not taken their own RMD for the year of death, the beneficiary must take it. The final regulations waive the excise tax automatically if it is taken by the beneficiary’s tax-return deadline, including extensions[1].
What if annual distributions were missed in 2021 to 2024?
The IRS will not assert the excise tax for those years. It waived the annual distributions otherwise due in 2021, 2022, 2023 and 2024 from inherited accounts where the owner died in 2020 to 2023 on or after their RBD[4]. The relief did not extend the ten-year deadline[1]. If the owner died in 2020, the account must still be empty by 31 December 2030. The unused years have simply been lost.
From 2025 the normal penalty applies. That is an excise tax of 25% of the shortfall, reduced to 10% if the missed amount is taken within the correction window of two years[5]. A beneficiary who has not yet taken a 2025 or 2026 minimum should ask a US tax preparer promptly.
What about an inherited Roth IRA?
An inherited Roth IRA follows the ten-year rule but has no annual minimum. The law treats a Roth owner as having died before their required beginning date, because Roth owners never have lifetime RMDs[1][5]. Eligible designated beneficiaries can still stretch payments over their life expectancy.
In the US, withdrawals are generally tax-free once the Roth account has met the five-year holding requirement, which counts the original owner’s time[2]. For a UK resident, Article 17(1)(b) of the US–UK income tax treaty is the key provision. It says a payment from a pension scheme in the other country that would be exempt there, if received by a resident of that country, is also exempt in the country of residence[9]. The treaty’s technical explanation lists Roth IRAs among US pension schemes[10]. The saving clause expressly preserves Article 17(1)(b), so it protects UK residents who are US citizens as well[9].
How does the UK tax inherited IRA withdrawals?
For a UK resident, withdrawals from an inherited Traditional IRA are normally taxed as foreign pension income on their full sterling value at your marginal rates[13][15]. UK law defines a foreign “pension” to include payments to a beneficiary that would be dependants’ or nominees’ drawdown if the scheme were a UK registered scheme[14]. The 10% deduction that once applied to foreign pensions has been repealed. The taxable amount is now the full amount arising[15].
In 2026/27, income tax in England, Wales and Northern Ireland is 20% on the first £37,700 above the personal allowance, 40% up to £125,140 and 45% above that. The £12,570 personal allowance is withdrawn by £1 for every £2 of income over £100,000[16]. That produces an effective 60% rate on income between £100,000 and £125,140. An IRA withdrawal that pushes income into this band is expensive, and the bands are frozen until April 2031[17].
| Taxable income band | Rate | Effect on an IRA withdrawal |
|---|---|---|
| Up to £12,570 (personal allowance) | 0% | Available only if other income is low |
| £12,571 – £50,270 | 20% | Basic rate |
| £50,271 – £100,000 | 40% | Higher rate |
| £100,001 – £125,140 | 40% plus allowance withdrawal (about 60% effective) | The most costly band to fill |
| Over £125,140 | 45% | Additional rate |
Three further points matter:
- Lump sums. Article 17(2) of the treaty says a lump sum from a pension scheme in one country, paid to a resident of the other, is taxable only in the country where the scheme is established[9]. HMRC’s International Manual now takes the view that the saving clause in Article 1(4) overrides this for UK residents. Both countries can tax, with double taxation relief given in the usual way[11]. Whether a particular inherited IRA payment counts as a “pension” or a “lump sum” under the treaty is a technical question. Your tax adviser should confirm it before a large withdrawal.
- The owner’s age at death. UK law exempts some beneficiary drawdown payments from foreign schemes where the member died before age 75, subject to conditions including a two-year designation window[13]. Whether this can apply to an inherited IRA depends on how the IRA is treated under UK pension rules. This needs specialist analysis. It does not apply where the owner died at 75 or over.
- New arrivals. People in their first four tax years of UK residence after ten years abroad can claim the foreign income and gains (FIG) regime, which replaced the remittance basis from 6 April 2025. Foreign pension income is generally qualifying foreign income[18]. A claim costs the personal allowance and the capital gains tax annual exempt amount for that year[19]. This can change the best timing for a recent arrival.
What US tax and withholding applies to an inherited IRA?
The answer depends on whether you are a US person. A US citizen or green-card holder living in the UK pays US federal income tax on each distribution as ordinary income. UK tax paid on the same income is normally credited against it. A beneficiary who is not a US person is subject to 30% US withholding unless they claim treaty benefits on Form W-8BEN[23].
US citizens resident in the UK. Article 24(6) of the treaty sets the order: the UK taxes the income as the country of residence, and the US gives a foreign tax credit for the UK tax. For credit purposes the income is treated as arising in the UK[9][12]. UK rates are usually higher than the US rates on the same slice of income. In that case the US bill after credits is often nil, although the distribution must still be reported. IRA distributions are excluded from the 3.8% net investment income tax[22]. For 2026, the 22% US bracket for a married couple filing jointly runs from $100,800 to $211,400 of taxable income[21]. Custodians generally withhold 10% of a lump withdrawal. For payments delivered outside the United States, you generally cannot choose less than 10% on Form W-4R[24]. Withholding is a payment on account, not the final tax.
UK residents who are not US persons. The default is 30% US withholding on distributions to foreign persons. A lower treaty rate requires a valid Form W-8BEN[23]. Under Article 17(1)(a), pensions paid to a UK resident are taxable only in the UK[9]. The rate a custodian applies in practice depends on how it characterises the payment, and on the lump-sum point above.
US estate tax. If the owner’s estate paid US estate tax, a US-taxpaying beneficiary may be able to deduct the part attributable to the IRA (the income in respect of a decedent deduction)[25]. The 2026 basic exclusion is $15 million[21].
| US citizen or green-card holder | Not a US person | |
|---|---|---|
| UK income tax | Yes, full sterling amount at marginal rates | Yes, full sterling amount at marginal rates |
| US income tax | Yes, credit given for UK tax (Art. 24(6)) | Periodic pensions generally UK-only (Art. 17(1)(a)); lump sums can also be taxed by the US |
| Default US withholding | 10% on lump withdrawals (minimum if paid abroad) | 30% unless W-8BEN treaty claim |
| US net investment income tax | Not applicable to IRA distributions | Not applicable |
| US filing | Form 1040 with Form 1116 | Depends on withholding and characterisation |
How do exchange rates affect the tax on an inherited IRA?
Each country measures the income in its own currency. HMRC converts foreign income at the exchange rate on the day it arose[20], while the IRS measures the same payment in dollars, so where sterling stands on the payment date changes the UK tax.
As illustrative arithmetic, $50,000 taken when the pound buys $1.35 is about £37,037 of UK income, or about £14,815 of tax at 40%. At $1.25 it would be £40,000 of income and £16,000 of tax. Exchange rates are one reason the most tax-efficient withdrawal schedule changes from year to year; see our guide to currency risk in retirement.
How should inherited IRA withdrawals be timed?
Take the legal minimum each year. Beyond that, the right timing depends on how much tax each extra withdrawal would cost in each year of the window. The aim is to fill the cheapest tax bands first, avoid the £100,000 to £125,140 taper zone, and weigh the value of tax-deferred growth. There is no single rule. Taking only the minimum and a large final payment can be the right answer for one household and the wrong one for another.
The factors that usually decide it are:
- Other income over the ten years. Salary, pensions, rent and dividends set your marginal rate. Years after retirement often have spare basic-rate band.
- The £100,000 threshold. Any withdrawal that falls between £100,000 and £125,140 of total income is taxed at about 60%. Spreading withdrawals so that each year crosses this zone can cost more than crossing it once.
- Tax-deferred growth. Money left in the IRA grows without annual tax. Money withdrawn and reinvested in a taxable account does not, unless it goes into an ISA or pension. For US persons, an ISA is not tax-free in the US; see our guide to ISAs, UK funds and PFIC rules.
- Other allowances. Some households use distributions to fund UK pension contributions, within the annual allowance and relevant earnings; see UK pensions for US persons.
- Estate planning. From 6 April 2027, unused pension funds and death benefits come within UK inheritance tax[26]. How this applies to an inherited IRA held by a UK resident is a specialist question. Our guide to UK inheritance tax and US estate tax covers the wider picture.
Whether any particular schedule suits you depends on your circumstances, and tax rules change. Take advice before making large withdrawals.
Worked example: timing a $600,000 inherited IRA (computed in Edale’s planner)
Fictional household, for illustration only. Alex (50, US citizen, salary about £94,000) and Sam (48, salary about £38,000) live in England. Alex inherits a $600,000 Traditional IRA from a parent who died in 2024 aged 80, after their required beginning date. Annual minimum distributions therefore apply from 2025, and the account must be empty by 31 December 2034. Results, including the withdrawal amounts quoted, are sterling figures in today’s money, after UK and US tax, and were computed on the planner’s stated growth, inflation and tax assumptions. Two cases are shown: both working to 60, and both retiring at 52 and spending 20% less. Results are not guaranteed and are not a recommendation.
Case 1: working to 60. Taking only the statutory minimum, with a large final payment in 2034, left household after-tax wealth of about £1.917 million. The planner’s Inherited IRA optimiser found essentially the same schedule and result. Spreading evenly to the deadline left about £1.797 million, clearing the account in three years about £1.736 million, and filling income to the top of the higher-rate band about £1.870 million.
The driver is Alex’s salary, which continues throughout the ten-year window: Alex is still working, aged 58, when the account must be emptied in 2034. At about £94,000, almost any extra withdrawal in any year lands in the 40% band or the 60% taper zone, so there is no cheaper year to aim for. Spreading crosses the taper zone every year; one large payment in 2034 crosses it once and is otherwise taxed mostly at 45%, while the balance grows tax-deferred in the meantime. Clearing the account early produced slightly less lifetime tax (about £786,000 against £794,000), but lost more in growth than it saved.
Case 2: retiring at 52 and spending 20% less. This time the answer is different. Once Alex stops work in 2028, at 52, Alex’s taxable income falls and there is spare room below £100,000 in each remaining year. Taking only the minimum wastes those years and forces a heavily taxed payment of about £590,000 in 2034. The optimiser’s schedule takes the minimum while Alex is still working, in 2026 and 2027. It then takes about £51,000 in 2028, about £73,000 in 2029, and roughly £95,000 to £99,000 a year from 2030 to 2034, a pattern close to the simple “fill UK income to £100,000” schedule, which suggests the £100,000 taper point is what the optimiser was working around.
| Schedule | After-tax wealth | Lifetime tax | Largest single year |
|---|---|---|---|
| Statutory minimum only | about £1,176,000 | about £441,000 | about £590,000 (2034) |
| Spread evenly to the deadline | about £1,249,000 | about £370,000 | about £130,000 |
| Clear in the first three years | about £924,000 | about £444,000 | about £178,000 |
| Fill UK income to top of basic rate | about £1,318,000 | about £378,000 | about £378,000 (2034) |
| Fill UK income to £100,000 | about £1,325,000 | about £348,000 | about £97,000 |
| Fill UK income to top of higher rate | about £1,164,000 | about £391,000 | about £117,000 |
| Optimised for after-tax wealth | about £1,354,000 | about £346,000 | about £99,000 |
Show the figures
| Year | Legal minimum | Minimum only: taken | Optimised: taken |
|---|---|---|---|
| 2026 | £13,163 | £13,163 | £13,163 |
| 2027 | £13,953 | £13,953 | £13,953 |
| 2028 | £14,790 | £14,790 | £50,543 |
| 2029 | £15,678 | £15,678 | £72,712 |
| 2030 | £16,619 | £16,619 | £94,877 |
| 2031 | £17,616 | £17,616 | £96,926 |
| 2032 | £18,673 | £18,673 | £99,016 |
| 2033 | £19,793 | £19,793 | £96,517 |
| 2034 | £589,551 | £589,551 | £97,651 |
The optimised schedule left about £1.354 million of after-tax wealth. That is about £178,000 more than taking the minimum only and about £430,000 more than clearing the account in three years. Lifetime tax was about £346,000, against about £441,000 for the minimum-only schedule and about £444,000 for clearing it in three years. A simple rule of “fill income to £100,000” came close, at about £1.325 million. Filling to the top of the higher-rate band did worse than the minimum, because it pushed income into the taper zone.
The same inheritance, under the same tax rules, has a different most efficient schedule depending on the family’s other income. Deferral was right in Case 1 and wrong in Case 2. These figures are illustrative, rest on assumptions about growth, inflation, exchange rates and tax rules, and will not match any real household.
How the Edale Wealth Hub helps
An adviser using Edale’s planner with a client models an inherited IRA alongside the rest of the household’s US and UK finances. The planner applies the SECURE Act rules: the ten-year rule, annual minimums where the owner died after their required beginning date, eligible designated beneficiaries, spouses, pre-2020 deaths, inherited Roth IRAs and inherited annuities’ five-year rule. The legal minimum is shown for every year.
The Inherited IRA optimiser searches year-by-year withdrawal schedules for the one that leaves the most after-tax wealth. It can also search for the least lifetime tax or the most for heirs. It never goes below the legal minimum and stays within limits the adviser sets, such as keeping UK income under £100,000 or staying within the US 22% bracket. The chosen schedule can be applied to the current scenario, or saved as a new scenario and compared side by side with alternatives such as taking only the minimum.
Each result reflects UK income tax (including Scottish rates and the personal-allowance taper) and US federal income tax, and for US persons how the two interact through foreign tax credits and treaty treatment, so the plan shows what the family actually keeps. Rules can be held at today’s thresholds or applied year by year as legislated, and currency episodes can be applied to test exchange-rate moves.
Once withdrawals are made, advisers can record US pension withdrawals in Tax Records, which clients can view in their portal. For inherited IRAs held in linked Interactive Brokers accounts, My Investments shows withdrawals gross, tax withheld and amount paid out, and includes them separately in a US tax summary to share with your accountant or tax preparer. That summary is not a Form 1099 or a tax return. Edale does not prepare US tax returns.
The planner models UK inheritance tax but not US estate tax. Its results depend on assumptions about growth, inflation and tax rules, and they are not guaranteed. To talk through an inherited account, arrange a conversation or read more about the cashflow planner.
Frequently asked questions
Do I have to empty an inherited IRA within ten years?
Most non-spouse beneficiaries do, if the owner died in 2020 or later. The account must be empty by 31 December of the year containing the tenth anniversary of the death. Surviving spouses, minor children, disabled or chronically ill beneficiaries and people not more than ten years younger than the owner can use longer life-expectancy payments instead.
Do I need to take a distribution every year from an inherited IRA?
Yes, if the owner died on or after their required beginning date and you are subject to the ten-year rule. Final regulations require annual minimums in years one to nine from 2025. If the owner died before that date, or the account is a Roth IRA, there is no annual minimum, but the ten-year deadline still applies.
Will I be penalised for missing distributions between 2021 and 2024?
No excise tax will be asserted for the annual distributions waived by the IRS for 2021 to 2024. The waiver did not extend the ten-year deadline. From 2025, a missed minimum can attract a 25% excise tax, reduced to 10% if corrected within two years. A US tax preparer can advise on reporting any shortfall.
Is an inherited IRA taxed in the UK?
Generally yes, for UK residents. Withdrawals from an inherited Traditional IRA are normally taxed as foreign pension income on their full sterling value at your marginal rate. Qualifying inherited Roth IRA withdrawals that are tax-free in the US are generally exempt in the UK under Article 17(1)(b) of the treaty. Individual circumstances vary, so take advice.
Do I pay tax twice if I am a US citizen living in the UK?
Usually not. The UK taxes the withdrawal as your country of residence, and the US gives a foreign tax credit for the UK tax under Article 24(6) of the treaty. Where UK rates are higher, US tax after credits is often nil. You must still report the distribution on your US return, and custodians generally withhold at least 10%.
Why do custodians withhold 30% from my inherited IRA?
US custodians must withhold 30% from distributions to foreign persons unless they hold a valid Form W-8BEN claiming a lower treaty rate. A UK-resident beneficiary who is not a US person can usually claim treaty benefits. The rate applied depends on how the payment is characterised under the treaty, so check it before large withdrawals.
Is it better to take everything at once or spread it out?
It depends on your other income each year. Spreading withdrawals to use lower tax bands, and avoiding the 60% zone between £100,000 and £125,140, often leaves more. For a high earner, deferring to one large final year can be better. Modelling each year’s tax in both countries shows which applies to you.
Sources
- Federal Register — Required Minimum Distributions, final regulations (TD 10001), 19 July 2024 (accessed September 2026)
- IRS — Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) (accessed September 2026)
- IRS — Retirement topics: Beneficiary (accessed September 2026)
- IRS — Notice 2024-35, Certain Required Minimum Distributions for 2024 (accessed September 2026)
- IRS — Retirement plan and IRA required minimum distributions FAQs (accessed September 2026)
- eCFR — 26 CFR 1.401(a)(9)-5, Required minimum distributions from defined contribution plans (accessed September 2026)
- eCFR — 26 CFR 1.401(a)(9)-9, Life expectancy and distribution period tables (accessed September 2026)
- IRS — Retirement topics: Required minimum distributions (RMDs) (accessed September 2026)
- US Treasury — Convention between the United States and the United Kingdom for the avoidance of double taxation (2001) (accessed September 2026)
- US Treasury — Technical Explanation of the US–UK Convention and Protocol (accessed September 2026)
- HMRC — International Manual INTM163160, Pensions: lump sums (accessed September 2026)
- HMRC — Double Taxation Relief Manual DT19853, USA (accessed September 2026)
- legislation.gov.uk — Income Tax (Earnings and Pensions) Act 2003, section 573 (accessed September 2026)
- legislation.gov.uk — Income Tax (Earnings and Pensions) Act 2003, section 574 (accessed September 2026)
- legislation.gov.uk — Income Tax (Earnings and Pensions) Act 2003, section 575 (accessed September 2026)
- GOV.UK — Income Tax rates and allowances for current and previous tax years (accessed September 2026)
- GOV.UK — Maintaining the Personal Allowance and basic rate limit until 5 April 2031 (accessed September 2026)
- HMRC — Residence and FIG Regime Manual RFIG45100, Qualifying foreign income (accessed September 2026)
- GOV.UK — Check if you can claim the 4-year foreign income and gains regime (accessed September 2026)
- HMRC — RDRM31190, Foreign income and gains: exchange rates (accessed September 2026)
- IRS — Tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill (accessed September 2026)
- IRS — Questions and answers on the net investment income tax (accessed September 2026)
- IRS — Plan distributions to foreign persons require withholding (accessed September 2026)
- IRS — Form W-4R (2026), Withholding certificate for nonperiodic payments (accessed September 2026)
- IRS — Publication 559, Survivors, Executors, and Administrators (accessed September 2026)
- HMRC — Inheritance Tax: unused pension funds and death benefits (policy paper, 26 November 2025) (accessed September 2026)