Prince Harry and Meghan Markle's reported return to Britain after more than five years abroad could carry an important tax benefit, potentially putting the couple outside U.K. rules designed to recapture certain income and capital gains realized during temporary periods of non-residence.
The Duke and Duchess of Sussex said they would return to the U.K. for an "extended period," with Prince Archie and Princess Lilibet enrolled in British schools. Their residence status could now have significant consequences for income, capital-gains and eventually inheritance taxes as they re-establish a base in Britain.
At issue are His Majesty's Revenue and Customs' temporary non-residence rules. They are intended in part to prevent taxpayers from leaving Britain for a relatively short period, realizing certain gains or income while abroad and then returning without facing U.K. tax that otherwise could have applied.
HMRC says the provisions generally can apply when a person was U.K. resident in at least four of the seven tax years before leaving and the period of non-residence lasted five years or less. In qualifying cases, certain gains or income generated during the absence can effectively be brought back into the U.K. tax system upon the person's return.
Harry and Meghan moved to North America in 2020 after stepping back as working members of the royal family. If their period of non-U.K. residence exceeds the five-year threshold under the applicable statutory tests, some gains realized during that period may fall outside the temporary non-residence provisions.
Rowan Morrow-McDade, tax director at Alexander & Co, told Hello! that the timing meant the Sussexes had effectively "avoided the anti-avoidance" rule. Financial expert Michele Tieghi similarly said their extended stay in the U.S. could prove important for capital-gains-tax purposes.
That doesn't mean gains from every investment or asset disposed of while the couple lived in the U.S. would automatically escape British taxation. The treatment would depend on their precise tax-residence history, the assets involved, when transactions occurred and which other U.K. tax provisions apply.
There is also no evidence that tax considerations determined when Harry and Meghan chose to return. Their move brings Harry geographically closer to King Charles, who is undergoing treatment for cancer, and follows a family gathering at the monarch's Gloucestershire residence.
The timing may actually leave the Sussexes between two potentially advantageous U.K. tax regimes. While their absence may have lasted long enough to escape temporary non-residence treatment in some circumstances, it wasn't long enough for them to satisfy the 10-year non-residence requirement attached to the newer Foreign Income and Gains, or FIG, regime.
"Whilst their return is welcome news, staying away a bit longer would have given them a much better tax result," Dhana Sabanathan, a partner in the tax, trusts and succession team at Michelmores, told Fortune.
Introduced in April 2025, the FIG regime can allow qualifying people who become U.K. residents after at least 10 consecutive tax years of non-residence to claim relief on eligible foreign income and gains during their first four years back. The relief must be claimed and is subject to statutory eligibility requirements.
Meghan's U.S. citizenship adds another layer. The U.S. generally taxes its citizens on worldwide income even when they live overseas, meaning moving to Britain wouldn't eliminate her American filing obligations.
Morrow-McDade described one potential interaction between the two systems: "If she was in the UK, which she will be, and she's earning money and paying here, if that's less than what she would have paid in the US, she's then gonna have to pay, top it up in the US as well."
The actual calculation is more complicated. Foreign tax credits and provisions of the U.S.-U.K. tax treaty can limit double taxation, while the treatment varies according to the source and type of income, taxes already paid and applicable reliefs.
Britain's own tax system has also changed substantially since the Sussexes left. HMRC says U.K. residents are generally subject to tax on worldwide income and gains from April 6, 2025, unless they qualify for a specific exemption or relief such as the FIG regime.
