Figures relate to tax year 2026 (US) · 2026-27 (UK)
You are based at Heathrow, you live in Berkshire, and you spend half your working life over the Atlantic. Your roster looks simple enough.
Airline pilots run into a rule nobody else meets, because international airspace is not a foreign country for American tax purposes.
So part of your salary falls outside the main relief every other expat relies on.
Key takeaways
- Time over international waters is not foreign time.
- That part of the salary cannot use the exclusion.
- You apportion pay by flight hours, not by roster days.
- The foreign tax credit usually beats the exclusion here.
- The residence test treats aircrew as a special case.
- The treaty has its own article on international traffic.
- A federal law limits which state can tax you.
- Keep every roster, because the sums depend on them.
What is the international airspace problem?
Pay is sourced to where the work happens, and over the Atlantic the work happens nowhere. According to IRS guidance on the foreign earned income exclusion, only income earned in a foreign country qualifies. So hours over open water fall outside it.
Our guide to Form 2555 and the exclusion covers the claim.
The rule surprises almost all airline pilots who meet it.
How much of the salary does it affect?
On a long-haul roster it is often a third or more, which is a serious number. Short-haul around Europe loses very little, because most of that flying sits over land. Your fleet decides the damage more than your contract does.
Our guide to US filing thresholds for expats covers the figures.
Airline pilots should work this out before choosing a relief.
How do you apportion it?
By flight hours in each category, taken from your own records. Hours over a foreign country are foreign, hours over America are American, and hours over international waters are neither. So the roster becomes the working paper for the whole return.
Our guide to exchange rates on a US return covers conversion.
Keep the rosters, because nobody can rebuild them later.
Short-haul against long-haul
| Feature | Short-haul | Long-haul |
|---|---|---|
| Hours over open water | Small | Often a third |
| Exclusion covers the salary | Mostly | Partly |
| Foreign tax credit works | Yes | Yes |
| Apportionment needed | Light | Detailed |
| Nights away from base | Few | Many |
| Record keeping burden | Modest | Heavy |
Should airline pilots use the credit instead?
Usually yes, and it is the cleanest answer for most people based here. British tax on a captain's salary normally exceeds the American tax on the same money. So the credit wipes out the bill including the airspace portion.
Our guide to Form 1116 income baskets covers the credit.
For airline pilots the exclusion leaves a gap the credit does not.
Can you use both?
You can, on different slices of income, though it rarely helps. Mixing them creates an allocation exercise on top of the one you already have. Most crew we work with run the credit alone and keep it simple.
Our guide to the foreign tax credit covers the choice.
Revoking the exclusion later locks you out for five years.
A worked example
Take an illustrative case. A long-haul captain based in London, flying mostly transatlantic sectors through the year.
Roughly a third of the flight hours sit over the ocean, so a third of the salary is not foreign income.
The exclusion leaves that third exposed, and British tax at 45% comfortably covers it under the credit instead.
So the credit removes the whole bill while the exclusion would have left a balance owing.
Does the treaty cover flight crew?
It does, and the article on international traffic is worth reading. Pay for work aboard an aircraft operated in international traffic is generally taxable only where you are resident. That supports the position Britain already takes.
Our guide to the US-UK tax treaty covers the articles.
For an American the saving clause limits the benefit.
How does UK residence work for aircrew?
Differently from everybody else, because the rules carve out a relevant job aboard an aircraft. Crew cannot use the full-time work abroad route to become non-resident. So the usual escape hatch is closed to you.
Our guide to the UK statutory residence test covers the tests.
Day counting matters more for airline pilots than for anyone.
What counts as a UK day?
Broadly, being here at midnight, with transit allowances that rarely help working crew. A night stop at your own base counts against you. So a roster full of early starts can quietly make you resident.
Our guide to the substantial presence test covers counting.
Count the midnights, not the duty periods.
What about a base outside Britain?
A foreign base changes where the employment is exercised and often where social security sits. It does not by itself make you non-resident here. So people commuting from Britain to a European base still file here.
Our guide to split year treatment covers moves.
The base and your home can sit in different countries.
Which country takes social security?
The agreement between the two countries decides it, and aircrew have their own rules inside it. Generally you pay in one place rather than both. Getting a certificate from the right authority settles the argument.
Our guide to certificates of coverage covers the rules.
Never pay into both systems by accident.
Are allowances taxable?
Subsistence paid against actual costs away from base is usually fine in Britain within agreed rates. America looks at it differently and can treat part of it as pay. So an allowance that is clean here may not be clean there.
Our guide to benefits in kind covers allowances.
Check how each payment is reported.
Can airline pilots deduct expenses?
Britain allows flat rate deductions for uniform upkeep and certain professional costs. America removed the deduction for unreimbursed employee expenses some years ago. So the same expense gives relief on one return and nothing on the other.
Our guide to splitting employment income covers the claims.
Airline pilots claim here, because America gives nothing.
What about medicals and type ratings?
A type rating paid by you is a large cost with patchy relief in either country. Medicals required to keep your licence sometimes qualify here. Each item needs checking rather than assuming.
Our guide to self-employment here covers contractor crew.
Keep every invoice, because some of them count.
What if you fly as a contractor?
Then the picture changes completely and usually for the worse. Self-employment tax can apply on top of British contributions unless an agreement covers you. Many crew contracts in Europe sit in this awkward space.
Our guide to IR35 for US citizens covers the charge.
Get the contract reviewed before you sign.
Which US state can tax you?
A federal law limits states to taxing air carrier employees where they live, or where they earn more than half their pay. That protects crew from a dozen state returns. It does not protect you from your own home state.
Our guide to state tax for expats covers domicile.
So airline pilots face one state at most, and often none.
Does moving abroad break the state link?
Sometimes, and some states fight much harder than others. California and New York look at intent rather than days alone. So keep evidence of the move rather than relying on a mailing address.
Our guide to the treaty tie-breaker covers the switch.
Change the licence, the bank and the voter roll.
What about an airline pension?
A British scheme is generally protected by the treaty while the money stays inside it. An American plan carried over keeps its own treatment. Problems arise when somebody transfers one into the other without advice.
Our guide to US retirement accounts in the UK covers the schemes.
Never transfer a pension across borders unadvised.
Do you report your accounts?
Yes, on the usual terms, and crew often hold accounts in several currencies. Each one counts towards the threshold on the highest balance during the year. So a dormant euro account can still bring you into scope.
Our guide to FBAR signature authority covers the accounts.
Airline pilots should add up every account, including small ones.
What if you fly for a US carrier?
Then your pay is American source to start with and the apportionment runs the other way. Britain still taxes you on worldwide income while you live here. The credit normally does the work again.
Our guide to Form 1040NR for UK residents covers the nonresident return.
A British pilot on a US contract files in both.
What if you are British, not American?
Then you file here and only meet America for the part of the pay sourced there. Withholding on that slice is the usual argument with payroll. The treaty article on international traffic usually settles it.
Our guide to Form 8802 and residency certificates covers the proof.
Get the certificate before the first payrun.
What records should airline pilots keep?
Rosters, logbook hours split by sector, pay statements, allowance breakdowns and a note of every midnight spent here. Those five produce both returns without guesswork, and nothing else will do the job once the year has closed.
Our guide to US tax deadlines for expats covers the dates.
Download rosters monthly, because systems purge them.
How long does it take to prepare?
Longer than a normal expat return, mainly because of the apportionment. The flying data is the slow part and the rest is routine. Good records cut it to a couple of hours.
Our guide to choosing a US-UK tax accountant covers getting help.
Airline pilots with poor records can take a week instead.
Who gets this wrong most often?
Long-haul crew who claimed the exclusion for years without apportioning anything. In our practice that is the single most common crew problem we are asked to unpick. The fix is usually an amendment rather than a disaster.
Our guide to amending a US return covers corrections.
Three years of amendments is the usual remedy.
Is it worth fixing old years?
Often yes, because the credit frequently produces a refund where the exclusion produced a bill. So the correction can pay for itself. Check before assuming an amendment costs you money.
Our guide to claiming a US refund covers refunds.
Run the numbers both ways first.
Why do airline pilots get a special rule?
Not deliberately, but because the system assumes work happens somewhere. Crew spend hours in a place no country claims, so the usual sourcing rule has nothing to grip. The result is an accident rather than a policy.
Our guide to US expat tax basics covers the ground rules.
So the gap exists because nobody designed for it.
Does the airspace rule apply over Europe?
Hardly at all, because a European sector spends almost its whole duration over a country. The Channel and the North Sea cost you minutes rather than hours. So short-haul crew can often ignore the issue.
Our guide to the UK tax year difference covers the calendars.
Geography does the work here, not paperwork.
What about positioning flights?
Time spent travelling as a passenger to pick up an aircraft still counts as work. It follows the same sourcing rule as operating time. So include positioning sectors in the apportionment rather than ignoring them.
Our guide to Form 8938 reporting covers a related point.
Deadhead sectors belong in the sums too.
What about standby and training days?
Ground duties sit where you physically are, which is usually your base. So a standby day at Heathrow is plainly foreign income for an American. Simulator work abroad follows the same logic.
Our guide to moving to the UK covers the first year.
Ground time is the easy part of the split.
Does seniority change anything?
Only through the roster you end up flying, which is the whole point. A senior captain bidding transatlantic blocks takes on more of this problem. Meanwhile a first officer on short-haul barely touches it.
Our guide to the IRS online account covers a related point.
For airline pilots the bid sheet shapes the tax return.
What if you change fleet mid-year?
Then you apportion each part of the year separately, using the rosters from each fleet. A move from short-haul to long-haul in June changes everything after June. So do not average the year as a whole.
Our guide to requesting a tax transcript covers a related point.
Split the year at the fleet change.
Do airline pilots need to file in Britain?
Often not, because payroll collects the tax through the normal system. A return is needed where you have other income or claim certain reliefs. So many crew here never file a British return at all.
Our guide to registering for self assessment covers signing up.
Check whether any relief needs claiming first.
What about crew living outside the UK?
A pilot commuting in from Spain or Ireland faces a different question again, because the base and the home sit apart. Britain may still tax the duties performed here. So commuting crew need both positions checked.
Our guide to dual status returns covers dual residence.
Commuting across Europe doubles the questions.
How airline pilots should handle both returns
- Download and keep every roster as it is published.
- Split flight hours into foreign, American and open water.
- Model the credit against the exclusion before choosing.
- Expect the credit to win on a long-haul roster.
- Count your midnights in Britain through the year.
- Claim British employment expenses, since America gives none.
- Check which country takes your social security.
- Report every account you hold in any currency.
Mistakes and penalties we see with airline pilots
The first is excluding a whole long-haul salary, which quietly overstates the relief every single year.
The second is assuming the work abroad route makes crew non-resident here, when the rules specifically exclude it.
The third is paying social security in both countries because nobody asked for a certificate.
The fourth is throwing away rosters, which makes any later correction almost impossible to evidence.
How US UK Tax Accountants helps
We start with the flying data, because the apportionment drives everything else on the return.
Then we model both reliefs and pick the one that actually wins. Our US federal returns service covers the American filing.
If you fly between the two countries for a living, get in touch with a year of rosters.
Last reviewed 5 November 2026. This article is general information and not personal tax advice.
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Official guidance from the IRS, FinCEN and GOV.UK. Thresholds and rates on those pages are updated annually — check the current tax year before relying on a figure.
