An American who relocates to London, Manchester, or anywhere else in the United Kingdom does not leave the US tax system behind, and many find that out only after both HMRC and the IRS have already assessed tax on the same income. US expat taxes in the United Kingdom run on two parallel tracks: the UK taxes based on residence, while the United States taxes its citizens and green card holders on worldwide income regardless of where they live. Filing correctly means understanding how those two systems interact and using the right relief, most often the Foreign Tax Credit, to keep the same dollar of income from being taxed twice.
Do US Citizens Living in the UK Have to File a US Tax Return?
Yes. The United States is one of the few countries that taxes based on citizenship rather than residence, so a US citizen or green card holder owes US tax on worldwide income, and must file a Form 1040, no matter how long they have lived in the UK or where their income was earned.
This surprises new expats who assume that paying UK tax on their UK salary satisfies their entire obligation. It does not. The filing requirement kicks in at the same gross-income thresholds that apply domestically, and it applies even in years the Foreign Tax Credit or the Foreign Earned Income Exclusion wipes out the US tax bill entirely, because those are relief mechanisms claimed on a return, not exemptions from filing. Taxpayers physically abroad on the regular April deadline get an automatic extension to June 15, and a further extension to October 15 is available on request, though any tax owed still accrues interest from the original deadline.
How Does the UK Tax Americans Living There?
HMRC generally taxes UK residents on worldwide income, with residence determined under the UK's Statutory Residence Test, a separate framework from any US residency test. Once you count as UK resident, your salary, self-employment income, UK and non-UK investment income, and most foreign income become reportable to HMRC, typically through a Self Assessment return (form SA100), with an online filing and payment deadline of January 31 following the end of the UK tax year.
Two wrinkles matter for planning. First, the UK tax year runs from April 6 to April 5, not the calendar year, so UK and US tax years never line up and Foreign Tax Credit timing has to be tracked carefully. Second, the UK significantly reformed how it taxes foreign income and gains for new UK residents starting April 2025, replacing the old non-domiciled and remittance-basis regime with a residence-based system generally called the foreign income and gains, or FIG, regime. The details of who qualifies and for how long are genuinely evolving, so anyone recently arrived in the UK, or planning a move, should confirm the current rules directly with HMRC or a UK-qualified adviser rather than relying on older non-dom guidance.
Should UK-Based Expats Use the FEIE or the Foreign Tax Credit?
Either can prevent double tax on UK-earned income, but the Foreign Tax Credit is usually the stronger choice once you are actually paying UK tax, because it credits US tax dollar for dollar rather than excluding income up to a fixed cap. The Foreign Earned Income Exclusion, claimed on Form 2555 under IRC Section 911, lets a qualifying taxpayer exclude foreign earned income up to an annually indexed maximum, for example $130,000 for 2025, with the limit rising each year. The Foreign Tax Credit, claimed on Form 1116 under IRC Sections 901 and 904, instead credits the US tax owed on foreign income with the foreign tax already paid on that same income, computed separately by category, most commonly the general and passive baskets.
The credit tends to win for UK residents because UK income tax generally runs higher than US federal income tax across most income levels, so the credit generated by UK tax paid often exceeds the US tax otherwise due, wiping it out completely. Any credit left over does not vanish: under Form 1116 Schedule B, unused credit carries back one year and forward ten, so it can offset US tax in a different year, for instance one with US-source income or a return to the US. The exclusion has no such carryover, it simply expires unused, does not reach interest, dividends, or capital gains, and claiming it generally disqualifies the refundable Additional Child Tax Credit for that year, while the credit route preserves it for a qualifying child with a Social Security number. For a deeper side-by-side comparison, see our Foreign Tax Credit vs. FEIE guide.
Does the US-UK Tax Treaty Stop Double Taxation for US Citizens?
Only partly. A US-UK income tax treaty has been in force since 2003, and it resolves a number of cross-border issues, but like nearly every US tax treaty it contains a saving clause that lets the United States keep taxing its own citizens as though the treaty did not exist. In practice, that means a US citizen in the UK generally cannot lean on the treaty broadly to reduce US tax; the Foreign Tax Credit and the Foreign Earned Income Exclusion under domestic law are doing that work instead.
The treaty still matters in narrower ways. A handful of specific provisions, most notably the pension article and the social security article, are carved out of the saving clause and remain fully available to US citizens, which is why UK pension deferral and totalization relief (discussed below) actually function. The treaty also supplies residency tie-breaker rules and coordinates taxing rights over business profits and certain other income. A treaty-based position that reduces US tax generally must be disclosed on Form 8833 under IRC Section 6114, though narrow exceptions exist for smaller or routine positions. Because the saving clause does most of the work in limiting the treaty's reach for citizens, the practical planning almost always centers on the credit, the exclusion, and the specific carve-outs, not the treaty as a general double-tax shield.
Do US Citizens Working in the UK Owe Both National Insurance and US Social Security Tax?
Not if they obtain a certificate of coverage. The United States and the United Kingdom have maintained a Social Security totalization agreement since 1985 specifically to prevent a worker from being taxed for social security twice on the same earnings. See our totalization agreements guide for how the certificate process works more generally.
For employees sent to the UK by a US employer, the agreement's assignment rules generally keep them under one system, often the home-country system for a limited assignment period, with a certificate of coverage from the issuing country proving the exemption to the other country's authorities. The self-employed are easy to get wrong: without a certificate of coverage establishing that UK National Insurance applies, a self-employed American in the UK can otherwise owe UK National Insurance and US self-employment tax under IRC Section 1401 on the same net earnings, since neither the Foreign Tax Credit nor the FEIE offset self-employment tax. Totalization agreements exist with roughly 30 countries, not with every destination, so this always has to be confirmed country by country.
Are UK ISAs Tax-Free for US Tax Purposes?
No. An Individual Savings Account is a UK tax wrapper only, and the US tax code gives it no special status, so interest, dividends, and capital gains generated inside a cash or stocks-and-shares ISA are generally currently taxable on the holder's US return, ISA or not.
The bigger problem sits inside stocks-and-shares ISAs specifically. Many hold UK-domiciled pooled investments such as OEICs and unit trusts, and a non-US pooled fund of that kind is typically a passive foreign investment company under IRC Sections 1291 and 1298. Absent a protective election, that classification triggers PFIC reporting on Form 8621 and exposes the holder to the punitive excess-distribution regime, where gains are spread across the holding period, taxed at the highest rate in effect for each year, plus an interest charge. Cash ISAs avoid the PFIC problem but still generate ordinary US-taxable interest income each year. Before funding an ISA as a US citizen, it is worth confirming what the fund actually holds, or accepting the PFIC compliance burden that comes with it.
How Are UK Workplace Pensions and SIPPs Taxed by the US?
It depends on the plan, and the US-UK treaty does real work here. As a general matter, income accruing inside a foreign retirement plan can be taxed currently for US purposes absent a treaty exception, but the pension article of the US-UK treaty generally allows growth inside a genuine UK pension scheme, including a workplace pension or a Self-Invested Personal Pension (SIPP), to be deferred until money is actually paid out, and that provision survives the saving clause for US citizens. Our foreign pension tax treatment guide walks through the full four-question framework for how any foreign pension is analyzed.
One UK-specific trap is worth flagging on its own: UK law allows retirees to take up to 25% of a pension as a tax-free lump sum, the pension commencement lump sum, but that UK exemption does not carry over to the US return. The relevant treaty provision covering that lump sum is not one of the ones carved out of the saving clause for US citizens, so the lump sum is generally still taxable for US purposes even though it arrives UK tax-free. Anyone approaching UK retirement age should model the US tax on that lump sum well before taking it.
What Else Must US Expats in the UK Report to the IRS?
Beyond the Form 1040 itself, most Americans living in the UK also owe one or more informational returns, and the penalties for missing them are frequently larger than any tax that was actually due.
The UK Expat Reporting Stack
Reference- FBAR (FinCEN Form 114). Required once all foreign financial accounts, including UK current accounts, savings accounts, and ISAs, exceed $10,000 in aggregate at any point in the year, under 31 CFR 1010.350. See our FBAR filing guide.
- Form 8938 (FATCA, IRC Section 6038D). A separate filing with higher, expat-specific thresholds, generally required once specified foreign financial assets exceed $200,000 on the last day of the year (or $300,000 at any point) for a single filer abroad, doubled for a married couple filing jointly abroad.
- Form 8621 (PFIC). Required for each PFIC held, which commonly includes UK stocks-and-shares ISAs, unit trusts, and OEICs, as discussed above.
These filings are independent of each other and of the income tax return itself, so a year with little or no US tax owed can still carry a full reporting obligation. They also do not go away just because UK tax was already paid on the same accounts; FBAR and FATCA are disclosure regimes, not tax regimes, and they apply regardless of source.
Bottom Line
Living in the UK does not end a US citizen's or green card holder's obligation to file with the IRS on worldwide income, and UK tax paid does not substitute for a US return. For most UK-based Americans, the Foreign Tax Credit outperforms the Foreign Earned Income Exclusion because UK rates generally run higher than US rates, the US-UK treaty's saving clause limits how much it can shield a citizen beyond specific carve-outs like pensions and social security, and accounts that feel routine at home, an ISA or a workplace pension, carry US reporting consequences that are easy to miss.
Have questions about US expat taxes in the United Kingdom? Contact TS CPA for a free consultation. We respond within the same day.
Official IRS and Government Sources
- IRS, Foreign Earned Income Exclusion
- IRS, Foreign Tax Credit
- IRS, About Form 1116
- IRS, US Citizens and Resident Aliens Abroad
- Social Security Administration, Totalization Agreement with the United Kingdom
- US Department of the Treasury, US-UK Income Tax Convention
- FinCEN, Report of Foreign Bank and Financial Accounts (FBAR)
- IRS, Summary of FATCA Reporting for US Taxpayers