US Citizens Moving to the UK: A Complete Tax Guide for 2026

Relocating from the United States to the United Kingdom involves far more than just a change of address. For US citizens and green card holders, the UK move triggers a complex web of tax obligations that span two countries — and getting it wrong can be extremely costly.

Unlike most other nationalities, US citizens remain subject to US taxation regardless of where they live. This means that as a US expat living in London, you'll need to navigate both the UK tax system and your ongoing US filing obligations — simultaneously. This guide covers the essential tax considerations for Americans relocating to the UK.

The US-UK Double Tax Treaty: The Foundation

The Double Taxation Convention between the US and the UK is the cornerstone of tax planning for US expats. It determines which country has the right to tax different types of income and provides mechanisms to prevent the same income being taxed twice.

Key features include:

• Foreign Tax Credit: The US allows a credit for UK taxes paid on income that is also taxable in the US, preventing double taxation
• Tie-breaker rules for residence: The treaty provides a series of tests to determine your country of residence for treaty purposes, which can override domestic residence rules
• Pension provisions: Special rules govern the taxation of pension contributions and distributions across both countries
• Capital gains: The treaty allocates taxing rights on capital gains, with specific provisions for real property and business assets

Understanding how the treaty applies to your specific circumstances is essential — and this is where many expats go wrong, often by assuming that the US Foreign Earned Income Exclusion (FEIE) is the best option when the Foreign Tax Credit (FTC) may actually be more advantageous.

UK Tax Residence: The Statutory Residence Test

When you move to the UK, your UK tax residence status is determined by the Statutory Residence Test (SRT). The SRT considers:

• The number of days you spend in the UK in a tax year
• Whether you have a home in the UK
• Whether you work full-time in the UK
• Your connecting ties to the UK (family, accommodation, substantive work, etc.)

Even if you don't intend to be UK resident, you may become resident inadvertently if you spend too many days in the UK. Conversely, careful planning of your arrival date and UK presence can help manage your residence status, particularly in your year of arrival.

Split Year Treatment

If you arrive in the UK part-way through a UK tax year, you may be eligible for split year treatment, which means you're only taxed as a UK resident from the date of your arrival. This can significantly reduce your UK tax liability in your first year.

Key Tax Issues for US Expats in the UK

1. Ongoing US Filing Obligations

As a US citizen, you must continue to file US tax returns annually, regardless of where you live. This includes:

• Form 1040: Your annual US income tax return
• FBAR (FinCEN Form 114): If you have foreign bank accounts with an aggregate balance over $10,000 at any point in the year
• FATCA (Form 8938): If you have specified foreign financial assets above certain thresholds
• Form 5471: If you own or control a foreign corporation
• Form 3520: If you receive foreign gifts or distributions from foreign trusts

Failure to file these forms can result in severe penalties — even if no tax is owed.

2. Foreign Earned Income Exclusion vs. Foreign Tax Credit

US expats can choose between the Foreign Earned Income Exclusion (FEIE), which excludes a portion of foreign-earned income from US taxation, or the Foreign Tax Credit (FTC), which provides a credit for foreign taxes paid. For most US expats in the UK — where tax rates are typically higher than US rates — the FTC is the better option, as it can also generate carryforward credits.

Choosing the wrong option can be costly, and switching from the FEIE to the FTC is relatively easy, but switching back is much harder.

3. Pension and Retirement Planning

US expats in the UK face particular challenges with pension planning:

• UK ISAs: While tax-free in the UK, ISAs are generally taxable for US purposes and may require PFIC reporting
• UK SIPPs: UK pension contributions may or may not be deductible for US purposes, depending on the treaty position and your specific circumstances
• US 401(k)s and IRAs: These remain subject to US rules, and UK taxation of distributions needs careful planning
• PFIC rules: Many UK investment funds are classified as Passive Foreign Investment Companies (PFICs) for US purposes, triggering complex and punitive reporting requirements

4. Capital Gains Tax

The UK and US have different capital gains tax regimes, and the treaty allocates taxing rights differently depending on the type of asset. For US expats selling UK property or investments, both UK and US capital gains tax may apply — with a foreign tax credit available to prevent double taxation.

5. The Non-Dom Regime Changes

Historically, US expats moving to the UK could benefit from the non-domiciled (non-dom) remittance basis of taxation. However, from April 2025, the non-dom regime has been replaced with a residence-based system. This is a fundamental change that affects all US expats relocating to the UK.

Under the new rules, new arrivals can benefit from a 4-year Foreign Income and Gains (FIG) regime, which provides relief on foreign income and gains for the first four years of UK residence — provided you haven't been UK resident in the preceding 10 years.

Pre-Arrival Planning: What to Do Before You Move

Proper planning before you arrive in the UK can save significant tax. Key steps include:

1. Review your US investment portfolio — Consider realising gains before becoming UK resident, or restructuring PFIC holdings
2. Plan your arrival date — The timing of your arrival can affect your UK residence status and split year treatment
3. Review compensation and bonus structures — The timing of bonus payments can affect which country taxes them
4. Consider pension contributions — Pre-arrival pension planning can be advantageous
5. Review trust and estate structures — US trust structures may have UK tax implications

How Newshams Can Help

At Newshams Tax Advisers, we have extensive experience advising US citizens relocating to the UK. Our international tax team can:

• Advise on UK residence status and split year treatment
• Navigate the US-UK double tax treaty
• Coordinate with your US tax adviser to ensure both US and UK obligations are met
• Advise on pension and investment planning across both jurisdictions
• Help with pre-arrival planning to minimise tax
• Guide you through the new FIG regime

We're currently advising several US clients through their UK relocation, and we understand the unique challenges Americans face when moving to London. Book a consultation to discuss your move, or contact us for an informal discussion.

Frequently Asked Questions

Do US citizens moving to the UK pay tax in both countries? Yes, US citizens remain subject to US taxation regardless of where they live. However, the US-UK double tax treaty and the Foreign Tax Credit system prevent the same income being taxed twice. Most US expats in the UK pay UK tax at higher rates and use the Foreign Tax Credit to offset their US liability.

What is the statutory residence test? The Statutory Residence Test (SRT) is the set of rules used to determine whether you're UK resident for tax purposes. It considers the number of days spent in the UK, whether you have a UK home, your work patterns, and your connecting ties to the UK.

What is the FIG regime? The Foreign Income and Gains (FIG) regime, introduced in April 2025, replaces the old non-dom regime. New arrivals who haven't been UK resident in the previous 10 years can claim relief on foreign income and gains for their first four years of UK residence.

Do I need to file FBAR if I move to the UK? Yes. If you have UK bank accounts with an aggregate balance over $10,000 at any point in the calendar year, you must file an FBAR (FinCEN Form 114). FATCA reporting (Form 8938) may also be required depending on the value of your foreign assets.