US and UK tax explained for UK citizens living in the USA

Introduction

Moving from the UK to the US creates new financial opportunities, but it also raises complex tax challenges. As soon as you become resident in the US, you may be required to pay federal and state taxes while also needing to consider your ongoing UK tax obligations.

This article explains how the UK–US tax treaty works, how income, pensions and investments are treated, and what you should know about filing obligations in both countries. It uses updated figures for the 2024/25 UK tax year and the 2025 US tax year, but the principles remain the same each year.

Important disclaimer

This article is provided for general information only. It does not constitute tax advice and should not be relied upon when making financial or tax decisions. Tax rules change regularly and the contents of this article are currently under review. If you need help with your personal situation you should always seek advice from a qualified cross-border tax specialist.

US tax residency and federal tax rates

If you live in the US for more than 183 days in a year, or you meet the substantial presence test, you will generally be considered a US tax resident. As a resident you are taxed on worldwide income, not just money earned in the US.

For the 2025 tax year the US federal tax brackets for single filers are:

• 10% on income up to $12,400
• 12% on $12,401 to $47,150
• 22% on $47,151 to $100,525
• 24% on $100,526 to $191,950
• 32% on $191,951 to $243,725
• 35% on $243,726 to $609,350
• 37% on $609,351 and above

Married couples filing jointly receive wider brackets, while those filing separately often face less favourable thresholds. In addition, each US resident can claim the standard deduction of $16,100 in 2025 ($29,200 for married filing jointly).

Many states also levy their own income taxes which vary significantly. For example, Florida and Texas have no state income tax, while California and New York impose some of the highest.

UK tax residency and continuing obligations

Even after moving to the US you may still have UK tax obligations if you rent out property, sell assets, or receive certain types of income. The Statutory Residence Test determines whether you are UK tax resident in a given year.

UK income tax rates and allowances

UK capital gains tax allowance

If you remain UK resident for tax purposes you may still be liable to UK income tax on worldwide earnings. If you are non-resident you will normally only be taxed on UK-sourced income such as rental property or certain pensions.

The UK–US double tax treaty

The UK and US have a long-standing treaty that helps prevent double taxation. In practice this means:

• If income is taxed in the US it may not be taxed again in the UK, or you may be able to claim credit for tax already paid
• Employment income is generally taxed where the work is performed
• Pensions are usually taxable only in the country of residence, though specific rules vary depending on the type of pension
• Dividends, interest and royalties may have reduced withholding tax rates under the treaty

The treaty is not automatic. You need to claim benefits when filing returns in either country. Incorrect filing may result in paying tax twice unnecessarily.

Pensions and social security

UK pensions, including private and workplace pensions, are usually taxable in the US if you live there. The UK may still tax government service pensions, such as those from military or civil service, even if you are US resident.

The US–UK totalisation agreement helps protect your state pension or social security contributions. If you have paid into both systems, your contributions may be combined to help you qualify for benefits in either country. This is especially important if you have split your working life between the UK and US.

Investments and savings

ISAs are tax-free in the UK but are not recognised by the US. Any income or gains within an ISA are taxable on your US return. Certain UK funds may also be classed as Passive Foreign Investment Companies (PFICs) which attract punitive US tax treatment.

If you hold a UK rental property you will need to declare rental income both in the UK and the US. Double tax relief may apply but you must ensure reporting is done correctly in both countries.

Selling UK property while resident in the US will trigger a UK capital gains tax report within 60 days, and the gain will also need to be declared in the US.

Tax reporting requirements in the US

UK citizens living in the US must file an annual IRS Form 1040. If you hold non-US financial accounts with an aggregate balance above $10,000 at any point in the year, you must also file a Foreign Bank Account Report (FBAR).

If you hold assets above $50,000 (single filers) or $100,000 (joint filers), you may also need to file Form 8938 under FATCA rules. Penalties for non-compliance are severe, so it is critical to meet reporting deadlines.

Practical challenges and risks

The biggest risks for UK citizens in the US are:

• Being taxed twice because reliefs were not claimed properly
• Unexpected taxation of UK savings and investments
• Failing to report foreign accounts and facing penalties
• Misunderstanding residency rules and falling into UK taxation unexpectedly

What if I want to leave the USA in the future

Many UK citizens eventually return to the UK or move on to another country. Your tax situation will change again when you leave the US and it is important to prepare.

When you give up US tax residency you will normally stop being liable for US tax on worldwide income. However, you may still have ongoing obligations:

• Exit year filing: You must file a final US return covering the period up to the date you left. If you had significant assets or were a long-term resident or green card holder you may also be subject to expatriation rules.
• IRS expatriation tax: If you are considered a “covered expatriate” the IRS may treat your assets as if sold on the day before you gave up residency, potentially triggering an exit tax. This is rare but can apply to long-term green card holders and those with high income or wealth.
• Ongoing US-source income: If you continue to hold investments, property or pensions in the US, those remain taxable in the US. You will normally pay US withholding tax and may need to file returns as a non-resident.
• Re-establishing UK tax residency: On returning to the UK you may become UK resident under the Statutory Residence Test. This means worldwide income will again be taxable in the UK. Relief for US tax paid may still apply under the treaty, but careful timing can reduce overlap.
• Planning ahead: Before leaving the US, consider how your assets are structured. Closing certain accounts, restructuring investments or taking pension advice may reduce future complications.

Tax obligations can become even more complex when moving between multiple countries, so forward planning with professional help is essential.

Do I automatically become an accidental American when I leave?

No. Leaving the US does not automatically make you an accidental American. That term applies only to people who already have US citizenship, often because they were born in the US or to a US parent, even if they have never lived there as an adult.

For UK citizens who lived in the US:

• On a visa: Once you leave and no longer meet the substantial presence test, your US tax residency ends. You may still need to file a final US return, but you do not carry lifelong US tax obligations.
• With a green card: You remain a US tax resident until you formally surrender it. If you held it for 8 out of the last 15 years, expatriation rules may apply when you give it up.
• As a US citizen: If you became naturalised, you remain a US citizen until you formally renounce. US citizens are always taxed on worldwide income regardless of residence.

Simply living in the US on a temporary or work visa does not automatically create US citizenship or accidental American status.

Checklist for British expats in the USA

• Confirm your tax residency
  Use the substantial presence test for the US and the Statutory Residence Test for the UK.
• Check your filing obligations
  US residents must file Form 1040 each year. UK non-residents still need to report UK rental income, pensions or property sales.
• Claim treaty benefits
  Make sure you use the UK–US double tax treaty to avoid being taxed twice.
• Declare foreign accounts
  File FBAR if your non-US accounts exceed $10,000, and Form 8938 if your foreign assets pass the FATCA thresholds.
• Review pensions and savings
  Understand how your UK pensions, ISAs and investments are taxed in the US. Consider restructuring if needed.
• Plan for capital gains
  Remember the UK’s reduced CGT allowance and the need to report UK property sales within 60 days.
• Stay on top of state taxes
  Check the rules in your state of residence, as they vary widely.
• Think ahead if you may leave the US
  Plan for exit filing, green card surrender or potential expatriation tax if applicable.
• Get professional advice early
  Speak with a cross-border tax specialist before making big financial decisions.

Other articles on Experts for Expats you may find useful

• Learn more about how the UK Statutory Residence Test works and how it affects your tax position when living abroad.
• Understand the US tax filing requirements for Americans in the UK, which can help you see how the reverse situation is handled.
• Discover the implications of selling UK property as a non-resident, including reporting deadlines and capital gains tax.
• Read our guide to tax considerations for British expats abroad, covering common pitfalls and planning tips.

Next steps and seeking help

Tax planning as a UK citizen in the US is complex and depends on your income sources, assets and residency status. The safest step is to speak with a specialist who understands both UK and US rules.

We can connect you with trusted tax advisers who can help you comply with both HMRC and IRS requirements, minimise double taxation and plan effectively for the future.