Living in the UK as a US Citizen: What Everyone Needs to Know About Tax​

Living in the UK as a US Citizen comes with more than just a change in scenery; it comes with a complex set of tax responsibilities on both sides of the Atlantic. 

It might seem like once you’ve settled into your new life, your American tax obligations would fade into the background. Unfortunately, that’s not how the IRS works.

The truth is, even if you’re fully tax-resident in the UK, the US still expects you to file a tax return each year and possibly pay tax

Add in UK tax laws, local residency rules, and a potential mix of income sources, and it can quickly become confusing. Many expats are caught off guard by double taxation, FATCA reporting, or foreign account disclosure requirements, often not realising until it’s too late.

But with the right information and proper planning, you can stay compliant in both countries and avoid unnecessary penalties or stress.

Do I Still Need to File US Taxes While Living in the UK?

Yes. Even while living in the UK, US citizens are still required to file a US tax return every year. This is because the United States uses a citizenship-based taxation system, meaning you’re taxed on your worldwide income no matter where you live.

So, whether your income is from a job in London, investments abroad, or self-employment, the IRS still expects a report. If you earn above the standard income threshold (which changes yearly), you must file IRS Form 1040.

But don’t panic, filing doesn’t always mean you’ll owe tax. Thanks to deductions like the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC), many expats don’t end up paying double. Still, the paperwork must be done right to avoid penalties or missed benefits.

You might also need to file additional forms like Form 8938 (for foreign financial assets) or FBAR (Report of Foreign Bank and Financial Accounts), especially if your UK accounts exceed certain thresholds.

In short, moving to the UK doesn’t cut your ties with the IRS. Filing remains a must, but there are ways to reduce your burden.

How the US-UK Tax Treaty Can Work in Your Favour

One of the biggest concerns for US citizens living in the UK is the risk of being taxed twice, once by the US and again by HMRC. That’s where the US-UK tax treaty comes in. 

It’s designed to clarify who gets to tax what, and in many cases, it helps prevent double taxation.

For example, the treaty outlines which country has taxing rights over different types of income, like pensions, dividends, and self-employment earnings. It also recognises credits and exemptions that can reduce your overall tax burden. That said, the treaty doesn’t cancel out your obligation to file a US tax return; it helps you apply the right reliefs and avoid being taxed unfairly.

Understanding how to apply the treaty properly can make a big difference. For more detailed guidance, the IRS offers a summary of the US-UK tax treaty, or you can speak to a tax advisor who handles cross-border filings.

Avoiding Double Taxation: Credits, Exclusions, and Reliefs

One of the biggest concerns for US citizens living in the UK is double taxation,  the fear of being taxed by both HMRC and the IRS on the same income. Thankfully, there are a few reliefs in place to help reduce that burden.

The Foreign Tax Credit (FTC) is the most common tool. If you’ve already paid income tax in the UK, the FTC allows you to claim a credit for that amount on your US tax return. This reduces your US tax bill, sometimes to zero, especially if you’re in full-time UK employment and paying UK taxes at standard rates.

Another option is the Foreign Earned Income Exclusion (FEIE). This allows you to exclude up to a certain amount of your foreign-earned income (just over $120,000 for 2024) from US tax entirely but only if you meet certain residency tests. It’s not always the best option, especially if you’re eligible for the FTC, but it’s helpful in lower-tax situations or for self-employed individuals.

There are also treaty reliefs, as mentioned earlier, which might reduce tax on certain types of income like pensions or dividends.

Keep in mind that using these reliefs often requires filing additional forms like Form 1116 (for the FTC) or Form 2555(for the FEIE). It’s paperwork-heavy, but it could save you thousands.

So while the rules can be complex, you do have options, and with the right strategy, you can avoid paying more tax than you need to.

What to Know About Reporting Foreign Accounts and Assets

With US citizens living in the UK, it’s not just your income you need to report, your bank accounts and assets abroad matter too. The US has strict rules on foreign financial reporting, even if you’re fully settled elsewhere.

The most common form is the FBAR (Foreign Bank Account Report). If the total of all your non-US bank accounts ever exceeds $10,000 at any point in the year,  you’re required to file an FBAR using FinCEN Form 114. This applies even if the account is joint or not in your name, but you have signing authority.

Then there’s FATCA (Foreign Account Tax Compliance Act). If your foreign financial assets are over a certain threshold (starting at $200,000 for individuals living abroad), you’ll also need to file Form 8938 with your tax return. This could include foreign pensions, investments, and even some insurance policies.

These forms are about transparency. But the penalties for non-compliance can be severe, even if no tax is owed. It’s one of the areas that catches expats off guard, especially if they’ve opened accounts in the UK and assumed they were outside the IRS’s view.

If you have any non-US accounts or assets, assume it needs reporting and get expert advice early.

Conclusion

Living in the UK as a US citizen brings new opportunities, but it also comes with complex tax responsibilities. From filing US returns each year to understanding tax treaties and reporting foreign accounts, it’s not something to leave to guesswork.

If you’re unsure what applies to you, it’s worth speaking to a tax advisor who understands both UK and US systems. With the right support, you can avoid double taxation, stay compliant, and focus on enjoying your life abroad without tax stress hanging over your head.