The American in the UK: what you actually have to file

Figures relate to tax year 2025 (US) · 2025-26 (UK)

The United States is one of only two countries that taxes its citizens wherever they live. Move to London and HMRC becomes your tax authority for UK purposes — but the IRS never stops being one too. What follows is the complete list of what that actually means each year, in the order it matters.

The return you always owe: Form 1040

Every US citizen and Green Card holder files a federal return annually if their income clears the threshold, and those thresholds are low — for married filing separately, which is the common position for someone married to a non-American, it is a few hundred dollars. In practice, almost everyone files.

The return reports worldwide income: your UK salary, UK rental profits, UK interest and dividends, all converted into dollars. That sounds alarming until you meet the two reliefs designed to stop double taxation — the foreign earned income exclusion, which removes a large slice of salary from US tax, and the foreign tax credit, which offsets US tax dollar for dollar with UK tax already paid. In a country that taxes as heavily as the UK, the credit usually wipes out the US bill entirely.

Most Americans in the UK owe the IRS nothing. They just have to file to prove it.

The one that catches people: the FBAR

If your foreign financial accounts added together exceeded $10,000 at any moment during the year, you file an FBAR. Not $10,000 of income — $10,000 of balance, aggregated across every account, counted at its highest point. A current account, a savings pot and a pension can clear it between them without any single one looking significant.

The FBAR is not a tax form. It goes to FinCEN rather than the IRS, it costs nothing, and it takes minutes once you have the numbers. Its penalties, however, are the harshest in this entire article — which is a strange combination, and exactly why it deserves attention.

The overlapping one: Form 8938

FATCA adds a second, similar-looking disclosure that attaches to the tax return itself. The thresholds are much higher for people genuinely living abroad — starting around $200,000 at year end for a single filer — and the asset list is broader, taking in pensions, funds and interests in foreign entities.

Many people owe both the FBAR and Form 8938, listing many of the same accounts on each. Neither substitutes for the other. It is duplicative, and it is the law.

The traps nobody warns you about

• ISAs are tax-free in the UK and fully taxable in the US — and the funds inside them are usually PFICs, taxed punitively.
• UK pensions need treaty positions to keep their growth sheltered on the US side.
• Selling your UK home can be UK tax-free and still trigger US capital gains tax, because the US exclusion is capped.
• Owning a UK limited company brings Form 5471 and potentially annual tax on undistributed profits.

If you have never filed

This is common, and it is fixable. The IRS Streamlined Foreign Offshore Procedures exist precisely for people whose failure to file was not wilful: three years of returns, six years of FBARs, a certification explaining why, and no penalties. It is a genuinely generous programme — but it is only available before the IRS contacts you first. Since UK banks already report American account holders under FATCA, the window is not indefinite.

The right first step is not filing anything. It is finding out how far the exposure actually runs, and choosing the route deliberately.