By Expat Tax Online
If you’ve lived in the UK for more than a few months, you’ve probably hit that moment every expat eventually faces:
Hold on… am I being taxed in both countries?
Maybe it happened while registering for a National number, or when your US bank sent you a FATCA-related notice, or when HMRC asked whether you’re “UK tax resident” under the Statutory Residence Test. Suddenly, tax gets very real.
The good news?
You’re not alone — and international tax rules are more navigable when you understand how the US–UK system works together.
Below is a clear, practical breakdown to help you stay compliant, avoid double taxation, and file with confidence for the 2026 season and beyond.
How International Tax Rules Work for US Citizens in the UK
1. The US Taxes Citizens No Matter Where They Live
The US is one of the only countries in the world that taxes based on citizenship rather than residence.
That means:
- If you hold a US passport
- Or a Green Card
- Or have US-source income
…you must file a US tax return every single year.
Even if you live full-time in the UK.
2. The UK Taxes Based on Residency
Under HMRC rules, whether you owe tax in the UK depends on the Statutory Residence Test (SRT).
You might be UK tax-resident if:
- You spend enough days in the UK
- You have a home here
- You work here
- Or you have strong ties (family, accommodation, etc.)
Once you meet the threshold, the UK becomes your primary taxing country.
3. The US–UK Tax Treaty Prevents Double Taxation
This treaty is your financial safety net. It helps determine:
- Which country taxes employment income first
- How pensions are taxed
- How foreign tax credits apply
- What happens with Social Security payments
Most expats rely on the Foreign Tax Credit (FTC) to eliminate double taxation, especially since UK tax rates are often higher than US rates.
4. FEIE vs. FTC — Which Is Better for UK-Based Expats?
Many UK residents earn salaries that exceed the Foreign Earned Income Exclusion (FEIE) limit.
This means most Americans in the UK will use:
✔ Foreign Tax Credit (FTC)
✘ Instead of FEIE
FTC typically wipes out your US tax liability when you’re already paying tax to HMRC.
International Tax Issues That Commonly Affect US Expats in the UK
Foreign Bank Accounts → FBAR & FATCA
You must report UK accounts if your combined foreign balances exceed:
- $10,000 any time during the year → FBAR
- $50,000+ (varies by filing status) → FATCA Form 893
Non-compliance penalties are steep, so this one matters.
UK Investments Can Trigger Unexpected US Tax
Some UK investments are considered PFICs by the IRS — including:
- Stocks & Shares ISA
- Mutual funds
- Certain ETFs
These can create painful US tax bills if not managed properly.
Pensions & Retirement Contributions
International rules affect:
- UK workplace pensions
- SIPPs
- US Social Security
- How treaty benefits apply
The US and UK often treat the same pension differently, so proper reporting matters.
How International Tax Expertise Helps
Because US and UK tax systems overlap, the right guidance helps you:
- Avoid double taxation
- Choose the correct tax strategy
- Handle FBAR/FATCA confidently
- Understand your residency status
- File stress-free every year
That’s where Expat Tax Online comes in.
Work With Trusted US–UK Tax Professionals
At Expat Tax Online, we specialise in tax rules for Americans living abroad — especially in the UK, one of the most complex jurisdictions due to treaty and pension nuances.
We provide:
- Fixed pricing
- Clear guidance
- A straightforward online process
- Experts who understand both US and UK tax law
Visit Expat Tax Online to download our free US-UK Tax Guide or book a consultation with our experts.
