International Tax
US Tax Attorney for Americans in the United Kingdom
Hundreds of thousands of US citizens and Green Card holders live and work in the UK. They face a unique tax situation: the US taxes worldwide income based on citizenship, while the UK taxes residents on UK-source income. Without careful planning and proper annual compliance, US persons in the UK can face significant IRS penalties — often for accounts and investments they never knew were reportable.
Key US Tax Issues for United Kingdom
UK ISA Accounts
UK Individual Savings Accounts (ISAs) are entirely tax-free under UK law but are fully taxable to US persons. Income earned inside a Stocks & Shares ISA must be reported annually. Funds inside the ISA may be PFICs.
FBAR for UK Bank Accounts
US persons in the UK with UK bank accounts exceeding $10,000 in aggregate at any point during the year must file an FBAR. Willful non-filing penalties are severe.
UK Pension Reporting
US treatment of UK pensions (occupational, SIPP, NHS) is complex. The US-UK tax treaty provides some relief, but pension contributions and income require careful annual reporting.
UK Employer-Provided Benefits
Employer contributions to UK pension schemes may be taxable income for US purposes. Stock options, RSUs, and bonuses paid by UK employers all require US reporting.
Streamlined Disclosure
US citizens in the UK who have never filed US returns or reported their UK accounts can use the Streamlined Foreign Offshore Procedures to come into compliance with zero penalty if their non-compliance was non-willful.
Common Questions
Is my UK ISA taxable in the US?
Yes. The US-UK tax treaty does not protect ISA income from US tax. Interest, dividends, and capital gains earned inside an ISA must be reported on your US return each year. Funds held inside may also be PFICs requiring Form 8621.
Do I need to report my UK bank accounts to the IRS?
Yes — if the aggregate value of all foreign accounts exceeded $10,000 at any point during the year, you must file an FBAR (FinCEN Form 114) by April 15 each year.
How does the US-UK tax treaty affect my taxes?
The US-UK treaty provides relief from double taxation in several areas — including pension income, certain investment income, and income from employment. However, treaty benefits must be claimed; they are not automatic. An attorney can identify which treaty provisions apply to your situation.
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