The 2027 tax brackets, read from a London postcode

Figures relate to tax year 2027 (US) · 2027-28 (UK)

The IRS published its figures for the 2027 tax year on 5 November 2026, in Revenue Procedure 2026-35. They cover returns you will file in 2028.

Most coverage of the 2027 tax brackets assumes you live in America. This guide reads the same table from Britain, where the bracket you fall into often matters less than the exclusion, the credit and the British tax you pay first.

Every American figure below comes from the IRS release. Where a British figure for 2027-28 is not yet announced, we say so and give the current one.

Key takeaways

• The 2027 tax brackets keep seven rates, from 10% to 37%.
• The 37% rate starts above $661,375 for a single filer and $793,650 for a joint return.
• The standard deduction rises to $16,600 single and $33,200 joint.
• The foreign earned income exclusion rises to $137,300, up from $132,900.
• The annual gift exclusion rises to $20,000, and to $201,000 for a spouse who is not a citizen.
• The 0% capital gains band reaches $51,050 single, but British tax still applies to a UK resident.
• Britain's own 2027-28 property and savings rates rise to 22%, 42% and 47%.

What are the 2027 tax brackets?

For a single filer, 10% applies up to $12,800, then 12% to $52,025, 22% to $109,125, 24% to $208,325, 32% to $264,550, 35% to $661,375 and 37% above. A joint return roughly doubles each threshold, with 37% starting above $793,650. These figures apply to income earned in calendar year 2027.

According to the IRS release, the thresholds rose by roughly 3% to 3.5% across the table. The rates themselves did not change, because the 2025 law made the current rates permanent.

Why the exclusion matters more than the brackets

The foreign earned income exclusion rises to $137,300 for 2027, from $132,900 in 2026. For most Americans working in Britain, that single figure decides whether any American tax is due on salary at all.

At an exchange rate of $1.30, the 2027 exclusion covers a British salary of about £105,600. So an employee below that level, who qualifies for the exclusion, usually owes no American income tax on wages. Instead, the British tax stands on its own.

Above that level, the excess falls into the 2027 tax brackets. However, it falls in high, not at 10%, because of the stacking rule explained next.

How does the stacking rule push you up the brackets?

When you claim the exclusion, the IRS applies to your remaining income the rates that would apply if the excluded income were still there. So the first dollar above the exclusion is taxed in the bracket your full salary reaches, not at 10%. That is why a modest excess can carry a 24% or 32% rate.

For example, take a single filer with $150,000 of British salary in 2027. The exclusion removes $137,300, leaving $12,700. Without stacking, that would sit in the 10% band. With stacking, the IRS taxes it as the top slice of $150,000 less the deduction, which lands in the 24% bracket.

The same rule applies to interest, dividends and rent. So an excluded salary can drag modest investment income into a much higher American rate than you expect.

When is the foreign tax credit the better route?

Often, because British tax on salary is usually higher than American tax on the same amount. The foreign tax credit uses the British tax you paid to wipe out the American tax line by line. Any excess credit can carry forward for ten years, which the exclusion never gives you.

The credit also keeps the refundable part of the child tax credit available. The child tax credit rises to $2,300 per child for 2027, with up to $1,800 refundable. However, a filer who claims the exclusion cannot take the refundable part, so families often do better with the credit.

Our guide to Form 1116 and the foreign tax credit explains how the credit works.

How do the 2027 tax brackets treat a non-American spouse?

If your spouse is not an American and not resident there, you normally file as married filing separately, with thresholds half those of a joint return. However, you can elect to treat the spouse as resident and file jointly, which brings their income into the American return. Head of household is also possible with a qualifying child.

Head of household often suits a British family best. For 2027, it carries a $24,925 standard deduction and wider brackets than single status. Meanwhile, the spouse's British income stays off the American return entirely.

Joint filing can help where the spouse has little income and you want the wider joint bands. But it also brings their ISA, pension and fund income into American tax, so test both before choosing.

The 0% gains band that Britain ignores

For 2027, long-term gains and qualified dividends carry a 0% rate up to $51,050 of taxable income for a single filer and $102,100 for a joint return. The 15% rate then runs to $563,200 single and $633,600 joint. Above that, the rate is 20%.

In America this invites gain harvesting, where you sell and rebuy to reset your cost at no tax. However, a British resident pays British capital gains tax on the same sale, at 18% or 24% above the £3,000 annual exempt amount. So the American 0% band rarely helps someone living in Britain.

There is one useful case. Where British gains tax is already covered by the exempt amount, the American 0% band can mean a sale costs nothing in either country.

What changes for gifts and estates in 2027?

The annual gift exclusion rises to $20,000 per recipient in 2027, from $19,000. Gifts to a spouse who is not an American citizen can reach $201,000 a year without using lifetime exemption. The basic exclusion for estates and lifetime gifts rises to $15,480,000.

The spousal figure matters most for mixed couples in Britain. Moving assets into the non-American spouse's name can take future growth out of the American net, including ISA and fund income. Notably, British rules generally let spouses give to each other free of inheritance tax, subject to a cap where the recipient is not a long-term British resident.

Our guide to US gift tax for expats covers the reporting.

What does 2027 mean for anyone planning to renounce?

Two expatriation figures move. You become a covered expatriate in 2027 if your average annual net income tax for the five prior years exceeds $218,000, or if your net worth is $2 million or more. A covered expatriate's deemed gain is reduced by $940,000 in 2027.

The $2 million net worth test is not indexed. So rising house prices in Britain pull more people over it each year, even though the other figures rise with inflation.

Do the new figures apply to the return you file in 2027?

No. The return you file in 2027 covers the 2026 tax year, so it uses the 2026 figures: a $16,100 standard deduction for a single filer and a $132,900 exclusion. The new table only governs income you earn from 1 January 2027, reported in 2028.

This trips people up every autumn, when new figures appear months before the old year has even been filed. So keep the two tables apart. Use the 2026 table for the spring filing and the new one for planning what you earn next.

What has Britain set for 2027-28 so far?

Britain has already legislated separate property income rates of 22%, 42% and 47% from 6 April 2027, and savings income rates rise by the same two points. According to HMRC's technical note, the personal allowance and the property allowance are unchanged by those measures. Other 2027-28 figures follow Britain's own budget cycle.

Those rises feed straight into the American return. Higher British tax on rent and interest means more foreign tax credit available in the passive basket. So a landlord who had leftover American tax on British rent may find it wiped out from 2027.

Making Tax Digital also reaches more people. Sole traders and landlords with qualifying income over £30,000 in 2025-26 must use it from 6 April 2027, according to GOV.UK guidance.

A worked example

Take an illustrative example of a single American in London earning £120,000 in 2027, with £2,000 of bank interest. The exchange rate is set at $1.30 to £1 purely to keep the arithmetic simple.

1. Salary in dollars: £120,000 at $1.30 is $156,000.
2. Exclusion: $137,300 removed, leaving $18,700 of salary taxable.
3. Interest: £2,000 is $2,600, also taxable.
4. Stacking: the $21,300 left is taxed as the top slice of $156,000 plus $2,600, less the $16,600 deduction, so it sits in the 24% band of the 2027 tax brackets.
5. Tentative American tax: roughly 24% of $21,300, about $5,100.
6. British tax on the same salary is far higher, so the credit route would likely clear this bill instead.

In this example, the exclusion alone leaves about $5,100 to pay. By contrast, the foreign tax credit on British tax of over £39,000 would cover the salary and the interest in full. So the credit wins comfortably at this salary.

Planning moves before the 2027 tax year starts

The useful planning is about timing and choice of route, not about the rates. A few decisions are worth making before January 2027 rather than during the following filing season.

1. Compare the exclusion and the credit for 2026, then decide the route for the 2027 tax brackets.
2. Check whether a bonus paid in December or January lands in the better tax year.
3. Use the 2026 gift exclusions of $19,000 and $194,000 before they reset.
4. Review ISA and fund holdings for passive foreign investment company exposure.
5. Plan British rental and savings income around the April 2027 rate rise.
6. Record day counts if you rely on the physical presence test for the exclusion.

Do the 2027 tax brackets change your US filing threshold?

Yes, because the filing threshold for most people equals the standard deduction. For 2027 that means $16,600 of gross income for a single filer under 65. However, self-employed Americans must file once net earnings reach $400, and married people filing separately have a much lower threshold.

The exclusion does not raise the threshold. Gross income counts before any exclusion, so a British salary above $16,600 still needs a return even when no American tax is due. Our guide to US filing thresholds for expats covers each status.

How does the exchange rate move you between brackets?

Every British pound has to become a dollar before the brackets apply, so the rate you use changes the result. Most people use the IRS yearly average rate for income received through the year. A stronger pound pushes the same salary further up the table, and a weaker one pulls it down.

For example, a £100,000 salary is $125,000 at $1.25 but $135,000 at $1.35. The first sits under the $137,300 exclusion with room to spare. The second leaves almost no headroom for a bonus or a pay rise.

So check the average rate each year rather than assuming last year's figure. A few cents can decide whether part of your salary leaves the exclusion and enters the 24% band.

Which test lets you claim the 2027 exclusion?

You need either the bona fide residence test or the physical presence test. The first asks whether you live in Britain for a full calendar year with no fixed plan to leave. The second counts 330 full days outside America in any twelve month period, so long visits home can break it.

Most long-term residents use the bona fide test, because it does not depend on counting days. However, someone who arrived part way through 2026 often needs the physical presence test for the first year, then moves to the other test later.

Our guide to Form 2555 and the exclusion walks through both tests line by line.

Do the 2027 tax brackets change self-employment tax?

No, because self-employment tax runs on its own rate, separate from the income tax brackets. However, the agreement between the two countries on social security usually means a self-employed American living in Britain pays British national insurance only. You then claim the exemption on the American return with a British certificate.

Without that certificate, the IRS can charge self-employment tax of 15.3% on net profit, even when the exclusion removes the income tax. So the certificate is worth more than any change in the bracket table for a sole trader.

What about the kiddie tax for children in Britain?

For 2027, the parent's rate applies to a child's unearned income above $2,800, after two $1,400 slices that carry no tax or the child's rate. This catches Junior ISAs and children's savings held by American children. Britain treats the same accounts as tax free.

In practice, the amounts are usually small. But a large gift from grandparents invested in a child's name can cross the line within a few years.

Common mistakes with the 2027 tax brackets

The most common mistake is reading the bracket table and forgetting the stacking rule. The second is using the American 0% gains band without checking British gains tax. Both lead to surprises at filing time.

• Assuming income above the exclusion starts at 10%.
• Harvesting gains at 0% and forgetting British capital gains tax.
• Claiming the exclusion and losing the refundable child tax credit.
• Missing the $201,000 spousal gift limit for a non-citizen spouse.
• Ignoring the April 2027 rise in British rental and savings rates.
• Skipping a return because no tax is due under the 2027 tax brackets.

How US UK Tax Accountants helps

We model both routes, the exclusion and the credit, against your real British figures before the year begins. That way you make the choice once, with the stacking rule and the British rate rises built in. Our treaty relief service covers credits, treaty positions and the forms behind them.

In our practice, the people who benefit most from early planning are families with children and landlords with British rent. Both groups have choices that cannot easily be reversed after the year ends.

If you want your 2027 position worked out in advance, contact us and we will set out the numbers for your own income.

This article is general information, not personal tax advice. The figures are those published by the IRS and HMRC at the date of review.

Last reviewed: 11 November 2026.