U.S. Taxes for American Expats Living in the UK – 2026 Complete Guide
Living in Britain does not end your relationship with the IRS. This guide explains how U.S. taxes work for Americans in the UK, from key forms and deadlines to choosing the right filing strategy.
Updated 17/01/2026
Moving to Britain can feel like stepping into a different rhythm of life: tea instead of coffee, trains instead of freeways, bank holidays that appear without warning. Yet one part of American life follows you faithfully across the Atlantic — the obligation to file U.S. taxes.
The United States is almost unique in taxing its citizens based on citizenship rather than residence. An American living in London, Leeds or Loch Lomond is still part of the IRS world, even if every pound they earn is taxed first by HM Revenue & Customs. For many newcomers this comes as a shock; for long-term expats it becomes a familiar, if occasionally irritating, annual ritual.
The good news is that the system is designed to prevent double taxation in most ordinary situations. Mechanisms such as the Foreign Earned Income Exclusion and the Foreign Tax Credit exist precisely so that life abroad does not become financially punitive. The challenge lies less in the rules themselves than in understanding how they fit together.
This 2026 guide walks through that landscape. It explains who must file, which strategies usually make sense in the UK, how British pensions and savings are viewed by the IRS, and the practical steps that make each year’s return smoother than the last.
- Who Must File U.S. Taxes from the UK
- Why Most American Expats in the UK Don’t Pay Tax Twice
- FEIE vs Foreign Tax Credit – A UK Example
- How UK Employment Income Appears to the IRS
- UK Pensions, ISAs and Savings
- Selling UK Property as a U.S. Citizen
- FBAR and FATCA in Everyday Terms
- Contractors, Side Work and Using Tax1099
- Planning Ahead for 2026 Income
- FAQ: U.S. Taxes in the UK
Who Must File U.S. Taxes from the UK
For Americans abroad the filing obligation follows citizenship rather than geography. If your income exceeds the standard thresholds — broadly similar to those for people living in the United States — the IRS expects a return even if you have not set foot in the country for years. Green card holders are treated in the same way.
This rule can feel abstract until a practical moment arises: a British bank asks for a U.S. tax identification number, or an employer queries why you need a W-9 form. The American system assumes that worldwide income is relevant, even when another country has already taken its share.
Yet the obligation to file is not the same as an obligation to pay. Many UK-based Americans discover that after applying the available reliefs they owe little or nothing. The paperwork exists mainly to show that income has been properly accounted for across borders.
Ignoring the requirement, however, can complicate life later — particularly if you return to the United States, inherit assets, or open American investment accounts. Filing each year is less a burden than a quiet form of housekeeping.
>> Work with the right professional to make your UK tax journey simpler, clearer, and stress-free.
Tax1099 is an IRS-authorised e-filing platform designed for individuals, expats, and businesses that need to file 1099s, W-2s, and other information returns securely and efficiently.
Why Most American Expats in the UK Don’t Pay Tax Twice
Britain’s tax rates are often higher than those in the United States, especially for middle incomes. Paradoxically this works in favour of American residents in the UK. Because HMRC usually takes the larger share first, the IRS frequently finds little or nothing left to collect.
The system contains built-in bridges to avoid double taxation. Credits can be claimed for tax already paid to the UK, and certain amounts of earned income can be excluded altogether. These mechanisms do not eliminate complexity, but they soften the financial impact.
The result is that many expats file U.S. returns each year as a matter of compliance rather than cost. The process becomes a formality, albeit one best handled with care.
FEIE vs Foreign Tax Credit – A UK Example
Most returns in Britain revolve around a gentle choice between two mechanisms. The Foreign Earned Income Exclusion (FEIE) allows a portion of salary to be excluded from U.S. taxation altogether. The Foreign Tax Credit (FTC) instead recognises the tax already paid to HMRC and offsets it against any U.S. liability.
Imagine an American earning £55,000 in Manchester. After UK tax and National Insurance, a substantial portion has already gone to HMRC. Using the FTC, those payments can often wipe out the U.S. bill entirely, sometimes leaving credits to carry forward. The FEIE, by contrast, simply removes part of the income from the U.S. calculation.
Which route feels calmer depends on life circumstances. The FEIE can be simpler for straightforward employment. The FTC may suit those with higher salaries, investment income or plans to return to the U.S., because it interacts more gently with pensions and future credits.
There is no universal winner, only the approach that fits a particular season of life.
How UK Employment Income Appears to the IRS
British pay slips speak a different language from American W-2 forms. PAYE deducts income tax before money reaches your bank account, and National Insurance sits alongside it like a close cousin. For IRS purposes these amounts must be translated into dollars using annual exchange rates.
This conversion is not merely clerical. The timing of bonuses, the value of employer benefits and even the purchase of extra holiday can shift figures slightly. Many expats keep a simple spreadsheet through the year so that April’s UK tax statements can be read comfortably in December’s U.S. forms.
The process is rarely dramatic, yet it rewards orderliness. Calm record-keeping — payslips saved, exchange rates noted — turns what could feel labyrinthine into something closer to routine.
UK Pensions, ISAs and Savings
Retirement planning is where the two systems look at each other with mild suspicion. A British workplace pension feels equivalent to a 401(k), but the IRS does not always treat it identically. Contributions, employer matches and future withdrawals may appear on U.S. forms in ways unfamiliar to UK advisers.
ISAs present a starker contrast. Celebrated in Britain for their tax-free growth, they do not carry the same privilege across the Atlantic. Interest and gains can still be reportable to the IRS, which surprises many new residents who assumed “tax-free” meant universally so.
None of this makes British saving impossible; it simply asks for awareness. Many expats choose a balanced approach, mixing UK pensions with U.S.-friendly investment accounts so that neither system feels offended.
Selling UK Property as a U.S. Citizen
Selling a British home is straightforward in HMRC terms: primary residences often enjoy relief from UK capital gains tax. The IRS, however, applies its own rules and may see a taxable event where Britain sees none.
Exchange rates add another layer. A modest gain in pounds can appear larger in dollars if currencies have moved. For families who bought years ago, this can be an unwelcome surprise.
Planning before a sale — sometimes with guidance from specialist services such as Tax1099 or MyExpatTaxes — allows choices about timing and exemptions to be considered gently rather than under pressure.
FBAR and FATCA in Everyday Terms
Alongside the tax return sit two disclosure regimes whose names sound more frightening than their purpose. FBAR reports the existence of foreign bank accounts above certain thresholds; FATCA asks for similar information on IRS forms.
These reports rarely generate tax. They are about transparency rather than revenue, ensuring that assets held abroad are visible to U.S. authorities. For a family with several UK accounts — current accounts, savings, a child’s account — the forms can feel fiddly but manageable.
Many expats find that once the first year is completed, subsequent filings become almost routine.
Contractors, Side Work and Using Tax1099
Britain, like the United States, has become a nation of side projects. An American graphic designer in Brighton may invoice UK clients through a small business while also taking occasional U.S. commissions. These cross-border earnings can introduce additional forms, particularly when issuing or receiving 1099-style reports.
Tools such as Tax1099 can help organise this corner of life, allowing freelancers to generate and track necessary statements from abroad without wrestling with unfamiliar software. The aim is not complexity but tidiness — keeping the IRS and HMRC stories aligned.
Tax1099 is an IRS-authorised e-filing platform designed for individuals, expats, and businesses that need to file 1099s, W-2s, and other information returns securely and efficiently.
Planning Ahead for 2026 Income
The calmest returns are written months before they are filed. Decisions made during 2026 — whether to accept a bonus in March or April, how to structure freelance work, which savings wrapper to use — ripple into the 2027 filing season.
A little anticipation softens those ripples. Keeping digital folders, noting exchange rates, and asking questions early turns the annual task into a predictable rhythm rather than a winter storm.
State Taxes: The Quiet Complication
Federal rules are only half the story for many Americans abroad. State taxes, though easily forgotten from a London flat or a Glasgow terrace, can linger like an echo from a previous life. Some states, such as California, New York and Virginia, are reluctant to let former residents drift quietly away; others release their grip as soon as you establish a new home overseas.
Whether you remain liable often depends on subtle questions: do you still own property in the state, keep a driving licence, vote, or return regularly? None of these alone determines residency, yet together they paint a picture that tax authorities may interpret differently from your own sense of belonging.
For families who moved years ago, this issue can feel almost philosophical. You may have built a life in Britain, yet a state return still waits each spring. Untangling that connection gently — sometimes by formally severing ties — can bring a surprising sense of closure.
Filing from the UK: A Gentle Walkthrough
Filing a U.S. return from Britain in 2026 is less a marathon than a series of small steps. The first is gathering familiar documents: UK P60s and P45s, bank interest statements, records of pension contributions, and any U.S. forms that still arrive by post.
Next comes translation. Income earned in pounds must be converted to dollars using recognised exchange rates. Many expats choose an annual average rate for salaries and daily rates for one-off events such as property sales. The arithmetic is rarely difficult; the discipline lies in consistency.
Finally, the forms themselves ask for choices rather than confessions: whether to use the Foreign Earned Income Exclusion or the Foreign Tax Credit, how to treat savings interest, and whether additional disclosures such as FBAR are required. Modern platforms — MyExpatTaxes, Taxfyle or Greenback among them — guide users through these questions in plain language, while services like Tax1099 can help freelancers manage the paperwork that accompanies contractor income.
Deadlines offer breathing space. Americans abroad receive an automatic extension to June, with further extensions available to October, allowing the UK tax year to settle before the U.S. story is told.
The UK–US Tax Treaty in Human Terms
Treaties are usually written in the voice of diplomats, yet their effects are felt in kitchens and bank queues. The UK–US tax treaty aims to prevent double taxation and to smooth the treatment of pensions, dividends and certain savings vehicles.
In practice the treaty acts like a translator, explaining to the IRS that a British workplace pension is not quite the same creature as an ordinary investment account, or that social security contributions in one country deserve respect in the other. It does not remove every wrinkle, but it softens many.
Understanding the treaty is less about reading its dense articles than about recognising when it matters: retirement planning, cross-border inheritances, and the sale of significant assets. In those moments a little knowledge can save a great deal of anxiety.
When Professional Help Makes Sense
Many expats manage their returns alone, especially once the routine becomes familiar. Others prefer the reassurance of guidance, particularly in the first years after moving or when life grows complicated — a new business, a house sale, or a child with dual citizenship.
The ecosystem of support has matured. Firms such as Greenback or MyExpatTaxes specialise in the rhythm of cross-border lives; Taxfyle connects individuals with qualified preparers; and practical tools like Tax1099 assist contractors in keeping their paperwork aligned on both sides of the ocean. Mentioning these names is not to advertise them but to acknowledge that modern expat life rarely relies on a single path.
Choosing help is a matter of temperament as much as need. Some people value independence; others value a quiet evening without forms spread across the table.
Common Missteps to Avoid
The mistakes that trouble expats are usually gentle rather than dramatic. Forgetting to report a small UK savings account, assuming an ISA is invisible to the IRS, or overlooking state residency can all create ripples later. None of these are crimes of intent, merely misunderstandings born from living between systems.
Another frequent misstep is waiting too long to ask questions. Tax seasons arrive reliably; surprises do not need to. A brief conversation in the autumn often prevents a complicated spring.
Looking Toward 2027
The 2026 tax year will be reported in 2027, yet the story begins now. Each payslip, each interest payment, each decision about savings writes a line in that future return. Thinking of taxes as a slow narrative rather than a single event changes the mood entirely.
For most Americans in Britain the annual process becomes less frightening with time, settling into the background of life much like renewing a railcard or booking an MOT.
FAQ: U.S. Taxes in the UK (2026)
-
Yes. The obligation to file is separate from any tax due. Filing simply shows how reliefs such as the Foreign Tax Credit or FEIE apply to your circumstances.
-
You can generally choose, but switching methods has consequences. The credit often suits long-term residents in the UK, while the exclusion can be simpler for those with straightforward salaries.
-
Treatment varies by scheme and treaty interpretation. Contributions and growth may need to be reported even if not taxed immediately in Britain.
-
Not usually. Interest and gains inside an ISA can still be reportable to the IRS despite being free of UK tax.
-
If the combined balance of foreign accounts exceeds the threshold at any point in the year, an FBAR is required even when no tax is due.
-
Some states continue to treat you as a resident after you move. Formal steps may be needed to end that relationship.
-
General software often struggles with expat forms. Specialist platforms or advisers tend to handle the UK context more calmly.
-
Costs vary, but many expats find that occasional professional guidance saves more than it spends, particularly in the early years.
-
Usually not. UK tax rates and available credits often reduce U.S. liability to zero.
-
Keep organised records in pounds and dollars through the year; it turns filing from a storm into a breeze.
-
Keep organised records in pounds and dollars through the year; it turns filing from a storm into a breeze.
Living between two tax systems can sound like standing on a bridge in high wind, yet most Americans in the UK discover a calmer reality. The rules are detailed but humane, designed to prevent double taxation rather than impose it. With a little organisation and occasional guidance, the annual return becomes another piece of cross-Atlantic life, no more alarming than renewing a passport.
Britain will continue to feel like home: PAYE on your payslip, HMRC deadlines in April, the NHS waiting room down the road. The IRS, meanwhile, remains a distant correspondent asking for an annual letter. Writing that letter thoughtfully is simply part of belonging to two places at once.
