Tax Guide for US Expats in the UK

If you're a US citizen moving to the UK: or already living here: you face a unique tax burden that no other nationality deals with quite the same way. The United States taxes based on citizenship, not residency. That means you owe Uncle Sam a tax return every year, regardless of where you live or work.

Combine that with the UK's residency-based tax system, and you've got yourself a dual-tax minefield. But here's the good news: you won't actually pay tax twice on the same income. The UK-US tax treaty, foreign tax credits, and newer regimes like the Foreign Income and Gains (FIG) scheme can significantly reduce: or eliminate: your overall tax burden.

This guide walks you through how to navigate UK tax for US citizens without losing your mind in the process.

Why You're Filing in Two Countries

The US is one of only two countries in the world (the other being Eritrea) that taxes its citizens on worldwide income, no matter where they reside. If you hold a US passport or green card, you must file a US tax return annually: even if you've lived in London for decades.

The UK, meanwhile, taxes residents on their worldwide income. Once you become a UK tax resident under the Statutory Residence Test (SRT), you're subject to UK Income Tax, National Insurance Contributions (NICs), and Capital Gains Tax (CGT) on global earnings.

This creates the appearance of double taxation. But the UK-US tax treaty exists precisely to prevent you from being taxed twice on the same income. You simply need to know how to use the available reliefs correctly.
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Your UK Tax Obligations as a US Expat

As a UK tax resident, you'll be subject to the following:

Income Tax: If you're employed, tax is deducted at source through PAYE. If you're self-employed or have additional income streams, you'll file a Self Assessment return by January 31 each year. UK Income Tax rates range from 20% (basic rate) to 45% (additional rate) depending on your earnings.

National Insurance Contributions (NICs): These function similarly to US Social Security taxes. Providing that you work in the UK for under five years, you typically pay only UK NICs (not both US and UK). Beyond that, a Totalization Agreement between the two countries determines which system applies.
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Capital Gains Tax (CGT): You'll pay 18% or 24%. The annual exempt amount for 2025/26 is £3,000.

Your US Tax Obligations from the UK
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Even as a UK resident, you must continue filing US tax returns. Here's what you'll need:

• Form 1040: Your standard US individual income tax return
• Form 2555 or Form 1116: To claim either the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC)
• FinCEN Form 114 (FBAR): Required if your foreign financial accounts exceeded $10,000 in aggregate at any point during the year
• Form 8938 (FATCA): Required if your foreign assets exceed $200,000 (single) or $400,000 (married filing jointly, living abroad)

Failing to file the FBAR carries civil penalties up to $10,000 per violation. The IRS has extensive information-sharing agreements with HMRC, so non-compliance is easily detected.

How to Avoid Double Taxation
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The UK-US tax treaty provides two primary mechanisms to prevent double taxation:

1. Foreign Tax Credit (FTC): This allows you to credit the UK taxes you've paid against your US tax liability. For example, if you earn £100,000 in the UK and pay £32,951 in UK Income Tax and NICs, you can claim that amount as a credit on your US return. In most cases, this eliminates your US tax liability entirely, as UK tax rates are generally higher than US rates.

2. Foreign Earned Income Exclusion (FEIE): This allows you to exclude approximately $126,500 (2024 figure; indexed annually) of earned income from US taxation. Note that this applies only to earned income: salaries and self-employment income: not to investment income, capital gains, or dividends.

You must choose which strategy to use. For most US expats in the UK, the FTC is more advantageous, as UK tax rates tend to exceed US rates. However, if you have significant unearned income or complex investment structures, professional advice is essential.
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The 'Savings Clause' and Why It Matters
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Buried within the UK-US tax treaty is something called the "Savings Clause." This provision allows the US to tax its citizens as if the treaty didn't exist in certain circumstances. What does this mean in practice? Even though the treaty generally prevents double taxation, the US reserves the right to tax your worldwide income. You'll still get relief through the FTC or FEIE, but the Savings Clause ensures the US maintains its taxation rights over its citizens.

The FIG Scheme: A Game-Changer for Americans Moving to the UK

If you're moving to the UK as a new resident: and you haven't been UK tax resident in any of the previous 10 tax years: you may qualify for the Foreign Income and Gains (FIG) regime. The FIG regime enables you to exempt foreign incomes adn gains for up to four tax years.

Providing that you qualify, the FIG regime can reduce your overall tax burden substantially during your first few years in the UK. However, you must still file US returns and report worldwide income to the IRS: the FIG scheme doesn't affect your US obligations.
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Critical Deadlines You Must Know
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Missing deadlines creates penalties and interest on both sides of the Atlantic. Mark these dates in your calendar:

January 31, 2026: UK Self-Assessment tax returns for the 2024/25 tax year are due. This also marks the deadline for your final payment on account for 2024/25.

April 15, 2026: US FBAR (FinCEN Form 114) filing deadline. This is separate from your tax return and filed directly with FinCEN, not the IRS.

June 15, 2026: US federal tax return deadline for expats. US citizens living abroad receive an automatic two-month extension to June 15, but any tax owed is still due by April 15 (interest accrues if you pay late).

July 31, 2026: Second UK payment on account for the 2025/26 tax year is due (if applicable).

If you're self-employed or have UK rental income exceeding £50,000, note that Making Tax Digital (MTD) requirements begin April 6, 2026. You'll need to file quarterly updates using MTD-compatible software, with a final declaration due by January 31 of the following year.

Key Planning Considerations

Pension Contributions: UK pension contributions can reduce your UK tax liability but may not reduce your US tax liability in the same way. US tax treatment of UK pensions is complex, particularly with respect to Roth conversions and distributions.

Investment Structures: Certain UK investment vehicles (such as ISAs) are not recognized by the IRS. Similarly, US investment structures like US-domiciled ETFs or mutual funds may trigger Passive Foreign Investment Company (PFIC) reporting requirements and punitive US tax treatment.

Timing of Income: If you qualify for the FIG regime, consider timing the receipt of foreign income to maximize the benefit of the first-year exemption.

National Insurance vs. Social Security: The Totalization Agreement between the UK and US prevents double social security taxation, but you must apply for a Certificate of Coverage to avoid paying into both systems.