“Whilst their return is welcome news, staying away a bit longer would have given them a much better tax result,” Dhana Sabanathan, leading partner in the tax, trusts and succession team at national law firm Michelmores, tells Fortune. 

Under certain U.K. tax rules, the couple forgoes major benefits by returning home. Because Harry spent only six years away, he missed two key tax advantages tied to a 10-year non-residence period: four years of Foreign Income and Gains (FIG) relief, and the inheritance-tax advantages available to someone who has broken their long-term U.K. residency. For example, if their U.S.-based investments grew in value and they sold them after returning to England, they could have sold those investments and brought the money into the U.K. without owing U.K. tax on those qualifying foreign gains, under the FIG regime. Now, his qualifying foreign income or investment gains could be subject to U.K. tax. 

And because inheritance tax can be as high as 40%, that could mean millions of dollars of his overseas assets could be exposed, as estimates put Harry and Meghan’s collective fortune at $60 million. If they had waited 10 years before returning home, Harry’s non-U.K. assets—take his Montecito home and U.S. investments, for example—could potentially have stayed outside inheritance tax for years after his move. 

“If they had remained non-UK tax resident for 10 consecutive tax years before returning, they could have enjoyed relief on their non-UK income and gains for the first four years of their return,” Sabanathan explains. “Staying away for 10 years could have also enabled Harry to protect his non-UK assets from inheritance tax.”

There are also no public reports of Harry obtaining U.S. citizenship, so he is not subject to the country’s taxation upon leaving their Montecito home for the U.K. California-born Meghan will still have to deal with her home country’s tax affairs while living across the pond. Additionally, since stepping back in 2020, Harry hasn’t collected the public money working royals receive for official duties.

A potential tax upside: skirting the U.K.’s “temporary non-resident” tax hit

While they may miss out on some tax breaks by returning after six years rather than waiting 10, experts note that the timing of their move also offers advantages. 

The Michelmores partner points out that the couple hit six full years of non-U.K. residency, which allowed them to handle rules around “temporary non-resident” capital gains tax. 

The country’s rule—designed to keep people from moving abroad temporarily—means that if a resident leaves the U.K., makes profits on investments abroad, and returns within five years, the country can still potentially tax those gains as if the person hadn’t left for tax purposes. Their six-year timing puts them beyond the scope of this rule; the CEO of London tax and advisory firm Blick Rothenberg, Nimesh Shah, said that the “timing of their move back to the UK is immaculate” for that reason.

“They have saved some tax in that by staying outside the U.K. for more than 5 tax years,” Sabanathan says. “Any non-UK disposals they made or non-UK income earned (potentially from Netflix and Spotify deals and Meghan’s As Ever brand) during their time as non-residents should not be subject to UK tax on their return.”

The couple’s surprise move back from America to the U.K.

Harry and Meghan’s decision to move back to the U.K. came as a surprise for some.

Six years ago, the couple chose to step back from their roles as senior working royals, seeking greater privacy and independence while moving away from the pressures of life within the highly public family. They moved to California, where they have been earning money through various media ventures and commercial deals, including contracts with Netflix and Spotify. They have starred in and produced shows like the documentary series Harry & Meghan and the Netflix show With Love, Meghan, while Meghan has also launched her lifestyle and food brand, As Ever.

However, recently, Harry has said he wants to reconcile with his royal family. Additionally, his father, King Charles III, is currently grappling with an undisclosed cancer diagnosis. Some also speculate that the couple’s family catch-up with King Charles and Queen Camilla last month at the royal’s private Gloucestershire country residence may have helped drive the decision to return to the U.K.; it was the first time the monarch had been reunited with his grandchildren in four years. 

According to various sources, the couple’s children—7-year-old Prince Archie, and 5-year-old Princess Lilibet—have already been enrolled in British schools. It’s still unknown exactly which estate Harry and Meghan will settle down in, but it’s reported they’ll live in a non-royal residence right outside of London. The famous duo is also reportedly keeping their Montecito property as a U.S. home base.