**Renouncing US citizenship** now costs $450 in consular fees, down from $2,350, for appointments on or after 13 April 2026. The tax consequences are unchanged, and they are what actually determine the price. You will owe the section 877A exit tax only if you are a covered expatriate — meaning your net worth is $2 million or more, or your average annual net US income tax for the five years before expatriation exceeded $211,000 for a 2026 expatriation, or you cannot certify five years of full US tax compliance on Form 8854. If you are covered, all your worldwide assets are treated as sold the day before you expatriate, with the first $910,000 of net gain excluded for 2026.
Most people who renounce are not covered expatriates and pay no exit tax at all. The ones who do pay are usually caught by the compliance certification rather than by the wealth tests — and that is the failure mode that is entirely preventable.
The fee cut: what changed and when
The State Department published a final rule reducing the fee for administrative processing of a request for a Certificate of Loss of Nationality from $2,350 to $450, returning it to its 2010 level. The rule was published on 13 March 2026 and took effect on 13 April 2026, so appointments held from that date are charged at the lower rate.
The Certificate of Loss of Nationality is the document that matters. Renunciation is not legally complete until the CLN is approved, and the expatriation date for tax purposes is generally the date you appeared before a consular officer and took the oath of renunciation — not the date the certificate is eventually issued, which can be months later.
Why the fee cut has changed the calculus
An 80% reduction is not, in isolation, a reason to give up a citizenship. What it has done is remove the last practical barrier for a specific group: accidental Americans and long-departed dual citizens with modest assets, for whom the old fee was a meaningful share of the total exercise.
For a client with $6 million in assets, the difference between $2,350 and $450 is noise. For someone who left the United States as a child, has never filed, and holds a UK life built entirely outside the US system, it materially changes the arithmetic — and for that person the compliance work, not the fee, is the whole project.
The three covered expatriate tests
You are a covered expatriate if you meet any one of three tests on the date of expatriation. Meeting one is enough; the tests are not cumulative.
- Net worth test: your net worth is $2 million or more. This figure is fixed in the statute and has never been indexed for inflation, so it captures steadily more people each year — a London flat with equity and a pension pot will often reach it on its own.
- Average tax liability test: your average annual net US income tax for the five tax years ending before the year of expatriation exceeds $211,000 for expatriations in 2026. Note this is tax after foreign tax credits, so many Americans in the UK sit well below it despite high incomes.
- Certification test: you cannot certify under penalties of perjury on Form 8854 that you have complied with all US federal tax obligations for the five preceding tax years.
The certification test is the one that catches people
The wealth tests are arithmetic. The certification test is behavioural, and it is unforgiving: failing it makes you a covered expatriate regardless of how little you own. Someone with $150,000 to their name who has not filed for three of the last five years is a covered expatriate; someone with $1.9 million who has filed everything is not.
Worse, the certification covers all federal tax obligations, not just Form 1040. Missing FBARs, an unfiled Form 8938, an omitted Form 8621 for a UK fund holding, an unreported foreign gift on Form 3520 — each is a gap in the five-year record.
This is why almost every renunciation project we run starts as a compliance project. If there are missing years, the Streamlined Foreign Offshore Procedures are usually the route to a clean five-year record, and they need to be completed and seasoned before the consular appointment, not after.
How the exit tax is actually calculated
If you are a covered expatriate, section 877A treats all property you own as sold at fair market value on the day before your expatriation date. Gains and losses are netted. The first $910,000 of the resulting net gain is excluded for 2026, up from $890,000 for 2025, and the excess is taxed at the rates that would have applied to an actual sale.
That usually means long-term capital gains rates: 0% up to $49,450 of taxable income for a single filer in 2026, 15% up to $545,500 and 20% above that, with the 3.8% net investment income tax applying on top once modified AGI exceeds $200,000 for a single filer or $250,000 for a joint filer. Assets held short-term, or items such as depreciation recapture, are taxed at ordinary rates.
You can model the shape of this before committing to anything with our US exit tax calculator, which runs the three covered-expatriate tests and then applies the exclusion and the 2026 rate bands to the deemed gain.
The three categories that sit outside the mark-to-market
Not everything is deemed sold. Three asset classes have their own regimes, and for UK-based Americans they are often the largest numbers on the page:
- Eligible deferred compensation: not deemed sold, but future payments suffer 30% US withholding at source, and you must waive treaty benefits on those payments to qualify.
- Ineligible deferred compensation: treated as received on the day before expatriation at its present value, taxed as ordinary income immediately.
- Specified tax-deferred accounts, such as IRAs: treated as fully distributed the day before expatriation and taxed as ordinary income, though without the 10% early distribution penalty.
- Interests in non-grantor trusts: taxed on distributions, with 30% withheld, rather than under the deemed sale.
What UK assets do to the calculation
A UK-resident American's balance sheet is rarely US-shaped. A UK principal residence with a decade of appreciation, a defined-contribution pension, a defined-benefit entitlement, ISAs holding UK funds, and possibly shares in a UK trading company. Each behaves differently.
The UK home is within the deemed sale, though the section 121 exclusion of up to $250,000 of gain (or $500,000 jointly) can apply where the residence tests are met. UK pensions are, in most cases, foreign pensions rather than specified tax-deferred accounts, and their treatment depends on the plan's characteristics — an area covered in our note on US tax and UK pensions and SIPPs. ISAs holding UK-domiciled funds are almost always PFICs, and a deemed sale of a PFIC brings the section 1291 regime with it rather than a clean capital gain.
It is the PFIC point that most often turns a manageable exit tax into an unpleasant one, because the deferred interest charge can exceed the tax on the gain itself.
The two exceptions to covered expatriate status
Two narrow exceptions can spare you covered status even if you cross a wealth test. The dual-citizen-at-birth exception applies where you became a citizen of both the US and another country at birth, remain a citizen and tax resident of that other country, and have been a US resident for no more than 10 of the 15 tax years ending with the year of expatriation. The minors exception applies where you expatriate before age 18½ and were a US resident for no more than 10 tax years.
Both exceptions still require you to certify five years of tax compliance on Form 8854. There is no exception to the certification requirement — which returns us, again, to filing.
The tax that follows you afterwards: section 2801
A covered expatriate carries a long tail. Under section 2801, a US citizen or resident who receives a covered gift or bequest from a covered expatriate is liable for tax at the highest gift or estate tax rate — currently 40% — on the value received. The tax falls on the recipient, not the giver.
For a family with US-resident children, this can be the decisive point. A parent who renounces as a covered expatriate has effectively attached a 40% charge to future transfers to those children. Where the wealth tests are borderline, restructuring before expatriation to avoid covered status is frequently worth far more than the exit tax saved on the day.
Renouncing US citizenship: the process, step by step
- Get five years of US filings complete and correct, including all information returns. Use the Streamlined procedures if there are gaps.
- Value your worldwide assets at fair market value to test the $2 million threshold, and compute the five-year average net income tax against the $211,000 figure for 2026.
- Model the deemed sale, the $910,000 exclusion and the treatment of pensions and deferred compensation before booking anything.
- Book the consular appointment. Fees are $450 from 13 April 2026. Some posts require two appointments.
- Take the oath of renunciation. This date is your expatriation date for tax purposes.
- File a dual-status return for the year of expatriation, plus Form 8854 with the return and a copy to the address in the instructions, by the due date of that return.
- Keep the Certificate of Loss of Nationality permanently — banks, brokers and HMRC will all ask for it.
What renouncing does not do
It does not end US tax on US-source income. Dividends from US corporations, rent from US real estate and gains on US real property interests remain taxable to you as a non-resident alien, generally on Form 1040-NR or through withholding.
It does not remove US estate tax exposure on US-situs assets. A non-resident alien has an estate tax exemption of only $60,000 against US-situs property, against which the US–UK estate tax treaty may provide relief. Our comparison of US estate tax and UK inheritance tax sets out how the two systems interact.
And it does not simplify your UK position at all. Your UK residence, your UK domicile position and your exposure to the long-term resident inheritance tax rules are entirely unaffected by what passport you hold.
Should you actually do it?
For a permanently UK-based dual citizen with no intention of returning, the case is often about friction rather than tax: banking refusals under FATCA, PFIC treatment of ordinary UK investments, the inability to use ISAs efficiently, and the annual cost and anxiety of dual filing. Renunciation removes all of that.
Against it: the right to live and work in the United States, ease of travel, the ability to sponsor family, and the finality — renunciation is effectively irreversible. There is also a symbolic cost that clients consistently underestimate until they are in the room.
TaxStone does not advise anyone to renounce. What we do is make sure the decision is made with the actual numbers on the table, and that if it goes ahead, the five-year record is clean and the exit tax is the one you expected.
Where the official rules live
The statutory framework and the current thresholds are set out on the IRS's expatriation tax page, and the mechanics of the certification, the deemed sale and the deferred compensation elections are in the Instructions for Form 8854. Read both before you form a view — and if any of the five years behind you is incomplete, contact us before you do anything else, because that is the gap that turns a $450 exercise into a seven-figure one.
