Why Americans in the UK file taxes in both countries
Because the United States taxes on the basis of citizenship, not residence. Almost every other country taxes you according to where you live, but the US requires its citizens and green-card holders to file and report worldwide income wherever in the world they are. So if you are a US person living in the UK, you have two annual obligations: a US federal return and, in most cases, a UK Self Assessment return.
The UK side applies whenever you have UK income or are UK tax resident. The US side applies simply because you hold US citizenship or a green card. Neither obligation cancels the other out. The good news is that filing in both countries does not usually mean paying tax twice on the same income: the US-UK treaty and the foreign tax credit are designed to prevent that, as we explain below.
| Return | Country | Broadly covers |
|---|---|---|
| Form 1040 | United States | Your worldwide income as a US citizen or green-card holder |
| Self Assessment (SA100 with SA109) | United Kingdom | Your UK income and gains, and worldwide income if UK resident and not relying on the FIG regime |
Horizon prepares the UK return (SA100 and, where you are claiming a residence position or the FIG regime, the SA109 residence pages). We do not prepare your US 1040; that is for a qualified US preparer. The two sides need to talk to each other, which is the central theme of this guide.
How the UK decides whether you are resident: the Statutory Residence Test
Your UK tax residence is decided by the Statutory Residence Test (SRT), a set of objective rules based mainly on days spent in the UK and your connections here. It has nothing to do with your nationality or your immigration visa. You can be a US citizen on a UK work visa and still be either UK resident or non-resident depending on how the SRT applies to your year.
The SRT works through three stages: automatic overseas tests (which can make you non-resident), automatic UK tests (which can make you resident), and, if neither is conclusive, the sufficient ties test, which combines your UK day count with ties such as family, accommodation, work and time previously spent here. The more ties you have, the fewer days it takes to become resident.
Why it matters: if you are UK resident, the UK can generally tax your worldwide income and gains (subject to the FIG regime for recent arrivals). If you are non-resident, the UK normally taxes only your UK-source income. Most Americans who have moved here to live and work will be UK resident, so worldwide UK taxation is the starting point. Our Statutory Residence Test guide and SRT calculator walk through the day counts in detail.
How the treaty and foreign tax credits stop most double tax
Most double taxation is removed by the foreign tax credit: the country that taxes second gives you credit for tax already paid to the country that taxes first. For an American living and working in the UK, the UK usually taxes your employment income first (PAYE through your UK employer), and the US then gives you a credit for that UK tax on your Form 1040, using Form 1116. Because UK income tax rates are generally higher than US rates, the UK credit often wipes out the US tax on that same income.
There are two main US mechanisms. The foreign tax credit (Form 1116) credits foreign tax you have paid against your US tax. The Foreign Earned Income Exclusion or FEIE (Form 2555) instead excludes a capped amount of foreign earned income from US tax (the maximum exclusion is $130,000 for US tax year 2025, rising to $132,900 for 2026, plus a housing element). You generally cannot use both on the same income: you cannot claim a foreign tax credit on income you have already excluded under the FEIE. For most employed Americans in the UK the foreign tax credit is the better mechanism, because UK tax is high enough to cover the US liability and the FEIE only shelters earned income, not investment income. Which to choose, and how to elect, is a US-return decision for your US preparer.
On the UK side, the treaty also allocates taxing rights and the UK gives credit where it taxes second, for example on US-source income that the US taxes first. The combined effect is that the same pound or dollar of income is rarely taxed in full twice, although you may end up paying the higher of the two countries' rates.
The saving clause: why the treaty does not make everything tax-free
The single most important concept for a US person is the treaty saving clause. Tucked into Article 1(4) of the US-UK treaty, it reserves the right of the US to tax its own citizens and certain green-card holders largely as if the treaty did not exist, subject only to a short list of saved exceptions. In plain terms, you do not get the full benefit of the treaty against your US tax just because you live in the UK.
This is the mechanism behind the traps later in this guide. It is why a UK ISA, which is completely tax-free in the UK, is still taxable for US purposes: the US does not recognise the wrapper. It is also why some treaty pension reliefs that protect UK residents from UK tax do not protect a US citizen from US tax. Whenever you read that something is tax-free in the UK, a US person must always ask the second question: is it also free of US tax? Often the answer is no.
FBAR and FATCA: reporting your accounts
As a US person abroad you have two separate information-reporting duties on top of your tax returns, and they carry serious penalties if missed.
FBAR (the Report of Foreign Bank and Financial Accounts, FinCEN Form 114) must be filed if the total value of your foreign financial accounts exceeds $10,000 at any time during the calendar year. That is an aggregate test across all accounts, so several small UK accounts can trip it. It is filed electronically through the BSA E-Filing system, due 15 April with an automatic extension to 15 October. FBAR is a reporting form, not a tax, but the penalties for not filing are significant.
FATCA (Form 8938, Statement of Specified Foreign Financial Assets) is filed with your Form 1040 if your foreign assets exceed certain thresholds. Living abroad, the thresholds are higher than for those in the US: for an unmarried filer, more than $200,000 on the last day of the year or more than $300,000 at any time; for married filing jointly, more than $400,000 on the last day or more than $600,000 at any time. The two regimes overlap but are not identical, and you may need both.
These are US filings handled by your US preparer. We mention them because UK accounts, pensions and investments all count, and because they shape how you should structure your UK affairs. For the detail, see our dedicated FBAR and FATCA explained guide.
The UK 4-year FIG regime for recent arrivals
If you have recently become UK resident, you may be able to claim the 4-year foreign income and gains (FIG) regime. Introduced from 6 April 2025 to replace the old remittance basis, it lets a qualifying new resident keep their non-UK income and gains out of UK tax for the first four years of UK residence, provided they were non-UK resident for at least the previous ten consecutive tax years. It must be claimed each year on your Self Assessment return.
For an American who has just moved to the UK with overseas investments or rental income, FIG can be valuable on the UK side. But note two limits. First, foreign employment earnings are not FIG-eligible; recent arrivals may instead look at Overseas Workday Relief. Second, and crucially for US persons, FIG relieves UK tax only. It does nothing for your US return: the US still taxes your worldwide income regardless of any UK FIG claim. So FIG can reduce or remove UK tax on, say, US investment income during your first four years, but you will still report and may still pay US tax on it.
There is an important interaction to watch. If FIG removes UK tax on a slice of income, there is no UK tax to credit against the US tax on that income, so the US tax stands in full. Planning the FIG claim therefore has to be done with your US position in view, not in isolation. Our FIG regime guide covers the eligibility and claim mechanics.
The big traps: ISAs, non-US funds, pensions and Premium Bonds
Several everyday UK savings and investment products that are tax-efficient for ordinary UK residents are actively unhelpful, or worse, for a US person. The reason in almost every case traces back to the saving clause: the US does not recognise the UK wrapper or relief.
| Common trap | Why it bites a US person in the UK |
|---|---|
| A UK ISA | Not tax-free for US purposes; income and gains inside it are still reportable and taxable on your US return |
| Non-US funds such as OEICs and ETFs | Treated as PFICs, which means punitive US tax and a separate Form 8621 for each holding |
| A UK pension | Treatment is set by the treaty; take advice before drawing, as some lump sums may be US-taxable |
| Premium Bonds | Prizes are tax-free in the UK but are not tax-free for US purposes |
The PFIC point deserves emphasis. A Passive Foreign Investment Company (PFIC) is, broadly, a non-US pooled fund: UK unit trusts, OEICs and most UK or European ETFs. US shareholders must file Form 8621, one per fund, and the default section 1291 regime taxes distributions and gains at the highest rate with an interest charge unless a qualifying election (QEF or mark-to-market) is made and the fund supports it. A stocks-and-shares ISA is doubly bad because it usually holds PFICs and gives no US protection. Many Americans in the UK therefore hold investments through US-domiciled funds or directly in individual shares instead. How to hold and report them is a US-return matter for your preparer.
On pensions: the treaty generally taxes private pensions in your country of residence, and UK workplace pensions are usually sensible for US persons. But the UK 25% tax-free lump sum is tax-free in the UK only. Because of the saving clause, and the unsettled treaty treatment of lump sums under Article 17, the US may be able to tax that lump sum even though the UK does not. This is a contested, fast-moving area: treat the 25% tax-free line as a UK fact, not a US one, and take US advice before drawing any lump sum. Separately, and on a different but related point, HMRC's March 2025 guidance now applies the saving clause so that the UK may tax UK residents on lump-sum distributions from US pension plans (with credit for any US tax), which is a UK-side change rather than anything bearing on the US treatment of the UK lump sum.
How the UK and US tax years differ
The two countries run on different calendars, which complicates credit claims. The UK tax year runs from 6 April to 5 April (so 2026/27 means 6 April 2026 to 5 April 2027). The US tax year is the calendar year, 1 January to 31 December. Your UK PAYE and Self Assessment figures therefore straddle two US tax years, and vice versa.
This matters for foreign tax credits. To credit UK tax against US tax on the same income, your US preparer has to align income and tax paid across mismatched periods, often using the accrued rather than the paid basis. Filing deadlines also differ: UK Self Assessment online is due by 31 January after the tax year, while the US return for citizens abroad has an automatic extension to 15 June with further extensions available. Keeping clean records by date, and coordinating the two advisers, is what keeps the credit working smoothly.
A worked example of credit relief
Here is a simplified illustration of how the foreign tax credit removes double tax on employment income. The figures are rounded and for illustration only; they are not a calculation of anyone's actual liability.
Suppose Sarah, a US citizen, lives and works in London and earns the equivalent of $100,000 in salary in a year. As a UK resident she is taxed in the UK first. Say her UK income tax on this comes to roughly $25,000 (UK rates on this level of income are higher than US rates). She also pays UK employee National Insurance, but that is not creditable for US foreign tax credit purposes; it is dealt with under the US-UK Totalization Agreement, not the foreign tax credit, so we leave it out of the credit calculation.
On her US Form 1040 she must still report the full $100,000 of worldwide income. Suppose her US federal tax on that, before any relief, would be about $15,000. She claims a foreign tax credit on Form 1116 for the UK income tax she paid. Because the roughly $25,000 of UK income tax exceeds the $15,000 of US tax on the same income, the credit reduces her US tax on that salary to $0. The leftover UK tax credit (the excess over the US liability) can generally be carried over for use against other foreign-source income, subject to the US rules.
The headline: Sarah files in both countries, but she does not pay tax twice on her salary. She effectively pays the higher UK rate and the US credit absorbs the rest. Note this clean result applies to earned income covered by UK income tax; passive income such as US dividends, or income sheltered from UK tax by FIG, can behave very differently, which is why coordinated advice matters.
How a UK adviser works alongside your US preparer
The practical setup for most Americans in the UK is two specialists who coordinate: a UK Chartered Tax Adviser for the UK return and a qualified US preparer (typically an Enrolled Agent or CPA experienced in expatriate returns) for the Form 1040, FBAR and FATCA filings. Neither can properly do the other's job, but the two need to share figures so the credits line up.
Horizon coordinates the UK side. We prepare your Self Assessment (SA100 and SA109 where relevant), advise on the SRT and any FIG claim, handle UK rental, gains and pension positions, and supply your US preparer with the UK income and tax-paid figures they need for your foreign tax credit. We will also flag UK products and decisions (ISAs, fund choices, pension drawdowns) that carry US consequences so you can take US advice before acting. Where you also pay UK tax on US-source income, we make sure the UK side claims the right treaty relief or credit.
We work on fixed fees agreed upfront, so you know the cost of the UK work before we start. If you do not yet have a US preparer, we can point you towards one. What we do not do is give US return advice: the FEIE-versus-credit choice, PFIC elections and pension lump-sum positions all sit with your US preparer, and we are careful to stay in our lane while keeping both sides joined up.
