US-UK Tax: A Cross-Border Guide for Americans in the UK and Brits in the US

In most cases no, Americans living in the UK do not pay full tax twice on the same income, because the US-UK tax treaty and foreign tax credits in both systems are designed to give relief for tax already paid in the other country. You are within the reach of both tax authorities at the same time, but relief mechanisms mean the income is generally taxed at roughly the higher of the two effective rates rather than the sum of both.

As a UK resident in 2026/27, you are taxed on your worldwide income under UK rules, with the personal allowance at £12,570, the basic rate (20%) running to £37,700 of taxable income, the higher rate (40%) to £125,140 and the additional rate (45%) above that. UK dividends are taxed at 10.75% (ordinary), 35.75% (upper) and 39.35% (additional) after a £500 dividend allowance. The US then taxes the same person on the same income because of citizenship-based taxation, and the credit system reconciles the two.

The practical risk is not classic double taxation so much as mismatches: income the UK taxes but the US treats differently, gains realised in one country's tax year but reported in the other, and US taxes that the UK will not credit because of how the income is sourced. Those gaps are where a cross-border adviser earns their fee.

The US-UK tax treaty (GOV.UK) and foreign tax credits are the two tools that stop the same income being taxed in full by both countries, working together to allocate taxing rights and then give credit for tax already paid. The treaty decides which country has the primary right to tax a given type of income, and foreign tax credits ensure the other country gives relief for the tax suffered.

For an American in the UK, the usual pattern is that the UK taxes UK-source and worldwide income as the country of residence, and the US then allows a foreign tax credit on Form 1116 for the UK tax paid, often reducing the US bill to nil on income that is taxed at the higher UK rates. The Foreign Earned Income Exclusion on Form 2555 (up to $132,900 of earned income for the 2026 tax year) is an alternative for employment income, but you cannot apply both the exclusion and a credit to the same dollar of income.

The treaty also contains a 'saving clause' that lets the US keep taxing its citizens almost as if the treaty did not exist, with specific exceptions. This is why treaty relief for US citizens is narrower than many expect, and why pensions, government service income and certain gains need to be read against the exceptions rather than assumed to be covered.

Getting the credit ordering right (which country taxes first, and whether the credit is claimed in the US or the UK) is the single biggest driver of whether a cross-border household pays a fair amount or overpays. It is decided income stream by income stream, not in one sweep.

Most Americans in the UK must file two annual returns: a US federal Form 1040 covering the 2026 calendar year and, where they have UK tax to account for, a UK Self Assessment return for the 2026/27 tax year. The two returns run on different calendars and different deadlines, which is the first thing to plan around.

The UK Self Assessment year runs 6 April 2026 to 5 April 2027. The online filing and payment deadline is 31 January 2028, with a 31 October 2027 deadline for paper returns. The US tax year is the calendar year 2026; the standard 1040 deadline is 15 April 2027, automatically extended to 15 June 2027 for Americans living abroad, with a further extension to 15 October 2027 available on request.

• File a UK Self Assessment return if you have untaxed UK income, foreign income to report as a UK resident, capital gains above the allowance, or HMRC has issued a notice to file.
• File US Form 1040 every year as a US citizen or green card holder, regardless of where you live or whether any US tax is ultimately due.
• Claim relief on the US return using Form 1116 (foreign tax credit) or Form 2555 (foreign earned income exclusion), chosen to fit your income mix.
• Keep the two filings consistent on numbers, exchange rates and timing, because mismatches are what trigger queries and lost credits.

Because the deadlines and tax years do not line up, a common mistake is to finalise one return before the other, then find the credits do not match. Preparing both together, with a single set of figures, is the reliable approach and is how a fixed-fee cross-border engagement is usually scoped.

FBAR and FATCA are US foreign-account reporting rules that apply on top of your tax return, and they catch far more people than expect to be caught. They are information reports, not tax charges, but the penalties for missing them are severe, so they matter as much as the 1040 itself.

The FBAR (FinCEN Form 114) is required if the total of all your non-US financial accounts exceeds $10,000 at any single moment during the year. That aggregate test means several modest UK accounts, a current account, a savings pot and a pension, can easily breach the threshold together. The FBAR is filed electronically with FinCEN, separately from your tax return, and the deadline tracks the 1040 with an automatic extension to 15 October.

FATCA reporting on Form 8938 is attached to your 1040 and has higher, residency-based thresholds. For US persons living abroad, single filers report if foreign assets exceed $200,000 at year end or $300,000 at any time, and married joint filers if they exceed $400,000 at year end or $600,000 at any time. The two regimes overlap but do not replace each other, so many people file both.

• FBAR: aggregate foreign accounts over $10,000 at any point in the year; filed with FinCEN, not the IRS.
• FATCA Form 8938: higher thresholds based on filing status and residency; filed with the 1040.
• UK banks and providers report account information to the US under the FATCA intergovernmental agreement, so non-filing is visible.
• Past non-filers can usually regularise through IRS streamlined procedures, but this needs careful handling.

The UK FIG (Foreign Income and Gains) regime can give eligible new UK arrivals four years of relief on their foreign income and gains, but it does not reduce a US citizen's US tax, so its value for Americans is real but partial. The FIG regime (GOV.UK guidance) replaced the old non-dom remittance basis (HS264, GOV.UK) on 6 April 2025 and is now in its second year of operation in 2026/27.

Under FIG, an individual who has been non-UK resident for the prior ten tax years can claim, for their first four years of UK residence, to exclude qualifying foreign income and gains from UK tax even if those amounts are brought into the UK. For a newly arrived non-American, this is a powerful four-year window. For a US citizen, the UK relief is only half the picture: the US still taxes that same foreign income under citizenship-based taxation.

That asymmetry can actually cost an American money if handled naively. If the UK gives up its tax under FIG, there may be little or no UK tax to credit against the US bill, so the income ends up taxed in the US with no offsetting relief, whereas leaving it within UK tax could have generated a credit. Whether to claim FIG is therefore a genuine optimisation question for US persons, decided figure by figure, not a default.

This is one of the clearest cases where cross-border planning pays for itself, and where a fixed-fee review before your first UK return is set up can change the four-year outcome materially.

Pensions and tax-advantaged savings rarely keep their home-country tax treatment when you cross the border, so a 401(k), IRA, ISA or SIPP each needs its own treaty analysis. The general rule is that the treaty protects recognised pensions reasonably well, while ordinary tax-free savings wrappers usually are not protected at all.

• 401(k) and traditional IRA: the treaty generally allows tax-deferred growth to be respected by both countries, with withdrawals taxed broadly in line with residence, but the saving clause and lump-sum rules need checking before any distribution.
• SIPP and other UK registered pensions: usually treated as pensions under the treaty, though some US practitioners take a cautious view on growth, so US reporting needs care.
• ISA: tax-free in the UK but fully taxable in the US, with no US recognition of the wrapper, so an American in the UK gets no US benefit and may face extra reporting.
• UK funds (OEICs, unit trusts, many ETFs): often classed as PFICs by the US, triggering punitive tax and Form 8621, which is why US persons in the UK usually avoid non-US-domiciled funds.

The PFIC trap is the one that surprises people most. A perfectly ordinary UK investment fund or stocks-and-shares ISA holding can create a disproportionate US tax and compliance burden for an American, so investment selection should be made with the US rules in mind from the outset rather than fixed afterwards.

As a hypothetical illustration, an American who moves to the UK in May 2026 and opens a stocks-and-shares ISA gets no UK tax (correctly) but must still report the underlying funds to the IRS, potentially as PFICs, turning a simple UK product into a complex US filing. Choosing US-compliant holdings instead avoids the problem entirely.

Capital gains are taxed by both countries with different rates, allowances and, crucially, different tax years, so timing a disposal badly can strand the foreign tax credit you were relying on. The mismatch between the UK year (6 April to 5 April) and the US calendar year is the core problem.

In 2026/27 the UK charges capital gains tax after a £3,000 annual exempt amount, with residential property gains taxed at 18% (within the basic rate band) and 24% (above it), and other gains at the main rates. The US taxes the same gain under its own long-term and short-term rules. Where both tax the gain, a credit should relieve the double charge, but only if the gain falls in matching periods and the credit can actually be used.

The classic trap is a disposal in, say, March 2027. It sits in the UK 2026/27 year but the US 2027 calendar year, so the UK tax is paid on one timetable and the US tax assessed on another, which can leave a credit unusable in the year it is needed. Selling a few weeks earlier or later, or planning the credit claim deliberately, can be the difference between full relief and a real double charge.

For someone holding a property or a concentrated shareholding, the year and even the month of disposal is a planning decision worth taking advice on before, not after, the sale completes.

Brits moving to the US need to plan the UK exit, the US entry and the treaty position together, because the date you become US tax resident and how you leave the UK shape the bill on both sides. A UK national does not have citizenship-based US tax, so the position is residence-driven, but it is still easy to be caught by both systems in the transition year.

On the UK side, leaving usually involves UK split-year treatment, the Statutory Residence Test and care over any ongoing UK income, such as rental property, which often remains UK-taxable under the Non-Resident Landlord Scheme (HMRC guidance on GOV.UK). If you intend to maintain a voluntary UK National Insurance record while in the US, note that voluntary Class 2 contributions for periods abroad ended on 6 April 2026, so Class 3 (£18.40 a week in 2026/27) is now the main voluntary route, with Class 2 (£3.65 a week) only for limited cases.

On the US side, your visa drives both immigration status and tax status: a green card makes you a US tax resident immediately under the green card test, while a temporary work visa engages the substantial presence test. Once US resident, you face the same worldwide US taxation, FBAR and FATCA obligations described above, just from the opposite direction.

As a hypothetical example, a Brit who moves to New York in September 2026 may claim UK split-year treatment (RDR3, GOV.UK) for 2026/27, keep a UK let property within the Non-Resident Landlord Scheme, and become US tax resident on arrival under the green card or substantial presence test, with the treaty used to allocate the overlap. Sequencing the move date around both tax years is where the savings sit.

The most common US-UK tax pitfalls come from treating each country's system in isolation, when almost every cross-border decision needs to be optimised across both at once. The errors below are the ones we see repeatedly, and they are nearly always avoidable with planning rather than correction.

• Holding ISAs or UK funds as a US person, creating PFIC exposure and US tax on products that are tax-free in the UK.
• Claiming the FIG regime without checking the US side, so the UK tax that would have generated a US credit is given up and the income is taxed in the US with no relief.
• Missing FBAR or FATCA filings because the accounts felt too small to matter, then facing penalties far larger than any tax.
• Finalising one country's return before the other and finding the foreign tax credits no longer match.
• Realising a capital gain near the UK year end and stranding the credit across mismatched tax years.
• Assuming the treaty fully protects US citizens, when the saving clause narrows that protection significantly.
• Forgetting that voluntary Class 2 NIC for periods abroad ended on 6 April 2026, and over- or under-paying UK National Insurance while overseas.

Cross-border tax is one area where a specialist, fixed-fee review genuinely pays for itself, because the cost of getting the interaction wrong, in double tax, penalties or lost reliefs, usually dwarfs the fee. Horizon UK Tax Solutions scopes these engagements on a fixed fee agreed up front so you can see the value before committing.