Tax Experts Reveal Prince Harry and Meghan Markle Successfully 'Avoided the Anti-Avoidance' With UK Return

Prince Harry and Meghan Markle may have secured a favourable UK tax position with their return to Britain, after spending long enough abroad to potentially fall outside rules designed to tax certain gains realised during shorter periods of non-residence.

The couple's more than five-year period outside the UK could place them beyond the scope of Britain's temporary non-residence rules for some income and capital gains, depending on their precise residence history and the nature of any transactions made while abroad.

HMRC says those rules generally apply where a person returns after a non-resident period of five years or less.

To recall, the Duke and Duchess of Sussex announced last week they would be back in the UK for an 'extended period,' with Prince Archie and Princess Lilibet now enrolled in British schools.

Their homecoming also brings Harry closer to King Charles, who is still undergoing treatment for an undisclosed cancer diagnosis, and follows a rare family gathering at the monarch's Gloucestershire estate last month.

Capital Gains and the Five-Year Rule

Britain's temporary non-residence rules exist to prevent some taxpayers from leaving the UK briefly, realising certain income or gains while abroad, then returning without a UK tax charge that would otherwise have applied.

HMRC says the rules can apply where a returning taxpayer had been UK resident in at least four of the seven tax years before departure and their period of non-residence did not exceed five years.

Certain capital gains and other categories of income can then be treated as arising in the year of return.

If Harry and Meghan's period of non-UK residence exceeds five years for these purposes, the temporary non-residence provisions may no longer apply to qualifying gains made while they were abroad.

Rowan Morrow-McDade, Tax Director at Alexander & Co, reportedly told Hello! that the couple had effectively 'avoided the anti-avoidance' rule, meaning some gains realised while they were non-resident may escape a charge triggered specifically by the temporary non-residence provisions.

Financial expert Michele Tieghi similarly observed that the length of their stay in America could be significant for capital gains tax purposes.

That does not mean every asset sale made during their US years is automatically outside UK tax. The result would depend on the asset, the timing of the disposal, their residence status and other applicable UK tax rules.

Whether the couple actually realised any such gains while stateside or made any decision based on potential tax advantages remains unclear. There is no evidence that tax planning caused or materially influenced their return date.

Missed Opportunities and Meghan's US Tax Trap

Dhana Sabanathan, a partner in the tax, trusts and succession team at Michelmores, reportedly told Fortune: 'Whilst their return is welcome news, staying away a bit longer would have given them a much better tax result.'

Had the Sussexes remained abroad for at least 10 consecutive UK tax years before becoming UK resident again, they could potentially have qualified for the UK's four-year Foreign Income and Gains regime, introduced in April 2025.

That regime allows qualifying new residents to claim relief on eligible foreign income and gains during their first four years of UK residence.

The relief is not automatic. A claimant must meet the residence conditions and make the relevant claim for each tax year in which relief is sought.

Meghan's California roots present a further complication. The United States generally taxes US citizens on worldwide income regardless of where they live, meaning Meghan would remain subject to US filing obligations after moving to Britain.

Foreign tax credits and the US-UK tax treaty can reduce or prevent double taxation in many circumstances, but they do not necessarily eliminate US reporting requirements.

As Morrow-McDade explained: '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.'

That is a simplified explanation. Whether additional US tax is actually due would depend on the type of income, available credits, treaty provisions and the taxes already paid in Britain.

Inheritance tax may also affect longer-term planning, although the original wording is too definite. From April 2025, UK inheritance tax exposure is increasingly linked to long-term residence rather than the old domicile framework. Broadly, worldwide assets can come within scope once a person meets the long-term UK residence conditions, so Meghan's prior and future years of UK residence could matter.

However, calculating an exact 'roughly eight years' remaining would require a detailed review of her statutory residence history and the current long-term residence rules. It should not be stated as a settled fact without specialist confirmation.

For now, the clearest point is narrower. A return after more than five years abroad may place the Sussexes outside the temporary non-residence rules that can recapture certain gains made during shorter absences.

But they have not been abroad long enough to satisfy the 10-year non-residence condition for the newer four-year FIG regime.

Meghan would also continue to face US tax filing obligations because of her citizenship, while both she and Harry could become subject to UK tax on worldwide income and gains once UK resident, unless a specific relief applies.

HMRC says UK residents are generally taxed on worldwide income and gains from 6 April 2025, subject to reliefs such as the FIG regime for qualifying new residents.