US → UK: Complete Tax Guide for Americans Moving to Britain

Becoming UK Tax Resident: What Triggers the Switch

Your UK exposure begins the day HMRC's Statutory Residence Test (SRT) makes you a UK tax resident. The SRT is a sequence of automatic overseas tests, automatic UK tests, and the sufficient ties test, and it counts every midnight you are in the UK. Once you pass it, the UK taxes your worldwide income and gains from that point in the tax year (April 6 to April 5).

US citizenship does not insulate you. The US continues to tax you under IRC §1 the moment you set foot in Britain, and the saving clause of Article 1(4) of the US-UK Income Tax Treaty preserves that right. You are now a tax resident of two countries simultaneously, with two filing systems and two definitions of nearly every concept.

• The SRT counts midnights, not calendar days — partial days do not generally trigger residence.
• Split-year treatment can carve your arrival year into a non-resident portion and a resident portion if you meet specific cases.
• You file Self-Assessment with HMRC by January 31 (online) for the tax year ending the previous April 5.
• You file Form 1040 with the IRS by April 15, with an automatic expat extension to June 15 and an October 15 election.

The US-UK Tax Treaty and the Saving Clause

The US-UK Income Tax Treaty (signed 2001, in force since 2003) allocates taxing rights across employment income, business profits, dividends, interest, royalties, pensions, and capital gains. For most income types it would push primary taxing rights to the country of residence — meaning the UK once you live there — but the saving clause allows the US to tax its citizens as if most of those articles did not exist. A short list of carve-outs survives the saving clause: government pensions, child support, and certain student and teacher provisions.

In practice this means you cannot use the treaty to escape US tax on your UK salary. What you can do is use foreign tax credits to wipe out the US bill on income the UK already taxed, and rely on specific articles (especially Article 17 on pensions and Article 24 on relief from double taxation) to coordinate the two systems. Read WO-UC01 (How Tax Treaties Work) and WO-UC03 (Double Taxation) before you make a treaty-based claim on either return.

FEIE vs FTC: The Choice That Shapes Your Whole Return

Every American working abroad has to choose between the Foreign Earned Income Exclusion (Form 2555) and the Foreign Tax Credit (Form 1116). In the UK, the FTC almost always wins. UK marginal rates are 20%, 40%, and 45% — generally above US federal rates — so the credits the UK generates more than cover your US liability on the same wages, and the unused excess carries forward 10 years. FEIE caps out at $130,000 (2025) and discards the foreign tax you paid above the cap.

FTC also keeps your earned income on the return for IRA contributions, Child Tax Credit refundability, and ACA premium tax credit eligibility — three things FEIE quietly disqualifies you from. The corner case where FEIE wins in the UK is a low-earning first or last partial year where you paid almost no UK tax. See WO-US01 (FEIE Explained) for the full mechanics.

• Use FTC when UK tax on the same income exceeds your US tax — almost always for salaried Americans in London.
• Use FEIE only when you paid little or no UK tax (e.g., short stay, low income, contractor with limited UK source).
• Revoking FEIE locks you out of the election for 5 years without IRS consent.

Reporting: FBAR, FATCA, and the UK Account Trap

If your aggregate non-US financial accounts exceed $10,000 at any moment during the calendar year, you owe an FBAR (FinCEN Form 114) by April 15 with an automatic October 15 extension. FATCA Form 8938 has higher thresholds ($200,000 end-of-year or $300,000 any-time for single filers living abroad) and rides on Form 1040. Most Americans in the UK file both, because UK current accounts, ISAs, SIPPs, workplace pensions, and brokerage accounts count toward the FBAR aggregate.

The 2023 Supreme Court Bittner decision confirmed non-willful FBAR penalties apply per report, not per account, capping the most common exposure. Willful penalties remain the greater of $100,000 or 50% of the account balance per year per violation. FATCA penalties start at $10,000. Read WO-US02 (FBAR) and WO-US03 (FATCA), and if you are years behind, see WO-CS03 on the Streamlined Foreign Offshore Procedures.

Investing as an American in the UK: ISAs, PFICs, and Pensions

The single most expensive misunderstanding in this corridor is investing through UK retail products. Stocks and Shares ISAs, UK unit trusts, OEICs, and most exchange-traded funds domiciled in Ireland or Luxembourg are Passive Foreign Investment Companies (PFICs) under IRC §1297. PFICs trigger Form 8621, the punitive §1291 default regime, and effective tax rates that can exceed the gain itself once interest charges are added.

ISAs are tax-free to HMRC but fully taxable to the IRS — and if held in PFIC funds, taxed brutally. Workplace pensions and SIPPs are usually treated as foreign pension trusts and reportable on Form 8938 and FBAR. Most US-citizen expats in the UK end up holding cash ISAs and individual stocks or US-domiciled ETFs through a US brokerage rather than UK funds. WO-CS02 (ISA and PFIC Rules) walks the trap in detail.

• Stocks and Shares ISAs in funds = PFIC nightmare. Cash ISAs = taxable interest only.
• UK workplace pensions and SIPPs are reportable but usually tax-deferred under Treaty Article 17.
• US-domiciled ETFs avoid PFIC, but UK platforms rarely offer them post-MiFID II.

State Tax Hangover and the Domicile Question

Leaving the US does not automatically end your state tax obligations. California, New Mexico, South Carolina, and Virginia are notorious for sticky residency rules and look at intent, ties, and return. Florida, Texas, Washington, and a handful of other no-income-tax states are clean exits. The cleanest transition is to establish domicile in a no-tax state for 6-12 months before you leave the US, but most expats learn this after the FTB sends a letter. WO-CS19 walks through the concrete steps to cut the cord.

Year-One Action Plan

Order of operations matters in the first 12 months because deadlines do not align between the two systems. The UK tax year ends April 5, the US tax year ends December 31, and your first US return as a UK resident will pull income from both jurisdictions across overlapping windows.

• Confirm your SRT result and split-year position before April 5.
• Apply for a UK National Insurance number and register for Self-Assessment with HMRC.
• Decide FEIE vs FTC for the first US return and stay consistent.
• Open a US-friendly investment account before liquidating any US holdings — a UK move can trigger account closures.
• File FBAR for every year your aggregate UK accounts crossed $10,000.
• Read WO-US01, WO-US02, WO-US03 in that order, then the relevant US-UK spokes.