The child tax credit abroad: how American parents in Britain claim the refund

Figures relate to tax year 2025 (US)

The child tax credit still works when you live in Britain. Better still, part of it can arrive as a cash refund. For 2025 that refundable part is worth up to $1,700 per child. Yet many American parents abroad never see a cent of it, because of one election on the return.

That election is the choice between excluding your salary and crediting your UK tax. So this guide explains how the credit works overseas and why the exclusion blocks the refund. It also covers what to check before you file.

Key takeaways

• For 2025 the credit is $2,200 per qualifying child, and up to $1,700 of that is refundable.
• The refundable part is the additional credit, and you lose it entirely if you file Form 2555.
• Claiming the foreign tax credit instead usually keeps the refund available to UK earners.
• Each child needs a valid Social Security number by the due date of the return.
• Children without an SSN may still qualify for a smaller $500 credit that never refunds.

What is the child tax credit?

The child tax credit is a US credit worth $2,200 for each qualifying child under 17 in 2025. Part of it reduces your tax bill. The rest, up to $1,700 per child, can be paid to you as a refund even when you owe nothing at all.

According to the IRS child tax credit guidance (opens in a new tab), the credit phases out above $200,000 of modified adjusted gross income. On a joint return, that threshold is $400,000. Most families in Britain sit well below those levels, so the phase-out rarely bites.

Living abroad does not change the basic tests. Your child must be under 17 at the end of the year. The child must also live with you for over half of it and be a US citizen, national or resident. A British home address makes no difference to any of them.

Why does Form 2555 cancel the refund?

Because the law says so directly. If you exclude foreign earned income on Form 2555, you cannot claim the refundable additional child tax credit for that year. The exclusion also wipes out the US tax the ordinary credit would have reduced, so the credit ends up worth nothing.

This is the single most expensive habit we see in expat returns. The exclusion feels like the obvious choice, because it makes the salary disappear from the return. But for a parent, it can quietly trade away a cash refund. The foreign tax credit would have delivered the same tax saving anyway.

The exclusion makes your income disappear. Unfortunately, it makes your refund disappear with it.

How does the foreign tax credit keep it alive?

UK income tax usually runs higher than the US tax on the same salary. So when you claim a credit for the British tax you paid, your US bill on those wages typically falls to zero. The child credit then has no tax left to reduce, and the unused part becomes refundable.

Put simply, the foreign tax credit clears the bill and the child credit turns into cash. The refund is capped at $1,700 per child for 2025, and also at 15% of your earned income above $2,500. For most working parents, the per-child cap is the one that actually applies.

Our guide to Form 1116 and the foreign tax credit explains the mechanics in more detail. Any excess UK tax you cannot use this year also carries forward for up to ten years, which the exclusion never offers.

What counts as earned income for the refund?

UK wages, bonuses and self-employment profits all count as earned income for the refundable part. Pensions, savings interest, dividends and rental income do not. So a parent living mainly on investment income may qualify for the ordinary credit but receive little or no refund.

Self-employed parents need extra care. Profits count as earned income, yet US self-employment tax may also apply. Under the US UK totalization agreement, a certificate of coverage from HMRC usually settles that question in favor of the British system.

Where only one spouse works, only that spouse’s wages matter on a separate return. On a joint return, both spouses’ earned income counts toward the 15% calculation. That difference can change the refund when one partner earns very little.

Does your child need a Social Security number?

Yes, and this is where many families born abroad come unstuck. The child must hold an SSN valid for employment, issued by the due date of the return including extensions. The 2025 rules also require an SSN for you, or for at least one spouse on a joint return.

For a baby born in Britain, the route usually runs through the US Embassy in London. You first register the birth with a Consular Report of Birth Abroad, then apply for a passport and the SSN together. The process takes months, so it pays to start soon after the birth.

A child with only an ITIN cannot unlock the full credit. Instead, that child may qualify for the $500 credit for other dependents, which reduces tax but never refunds. So the SSN application is worth real money, not just paperwork.

How do you claim it step by step?

The claim sits on Schedule 8812, which you attach to your Form 1040. Per the IRS guidance on Schedule 8812 (opens in a new tab), the same schedule calculates both the ordinary credit and the refundable part. The order of work below keeps the election choice in front of everything else:

1. Confirm each child has an SSN, or start the embassy application if not.
2. Gather P60s, payslips and your UK tax calculation for the year.
3. Compare the return with Form 2555 and with Form 1116 before choosing.
4. Choose the foreign tax credit where it leaves the refund available.
5. Complete Schedule 8812 to calculate the ordinary and refundable parts.
6. File by 15 June, or by 15 October with an extension.
7. Keep evidence of where each child lived during the year.

Doing the comparison first matters because the election shapes everything after it. Once you file with the exclusion, changing course means an amended return, and revoking the exclusion has lasting consequences.

A worked example

Take an illustrative example. An American parent in Manchester earns the equivalent of $80,000 from a UK employer and has two children, both with SSNs. Her spouse is British and files nothing in the US.

Using the exclusion, her US tax falls to zero, and she receives no refund at all. Using the foreign tax credit instead, her UK tax still clears the US bill. But now both children qualify for the refundable part, worth $1,700 each.

The difference is a $3,400 refund for 2025, paid into her account. Over the years until her children turn 17, that election is worth tens of thousands of dollars. Nothing about her income changed, only the form she chose.

Can you claim for earlier years?

Often you can, within limits. A refund claim generally must reach the IRS within three years of filing the original return. So a family that used the exclusion recently can sometimes amend those returns. Switching to the credit can then recover refunds they missed.

The catch is that swapping the exclusion for the credit counts as revoking the exclusion. After a revocation, you generally cannot claim the exclusion again for five years without IRS consent. For most parents with steady UK wages, that trade still works in their favor.

Our guide to amending a US tax return covers the mechanics of Form 1040-X. We recommend running the numbers for every affected year first, because the right answer depends on all of them, not just one.

The mistakes and traps that cost families the refund

Most lost refunds come from habit rather than ineligibility. These are the patterns that appear again and again in returns we review:

• Using the exclusion by default, then wondering why no refund arrived.
• Filing before the child's SSN arrives, then losing the credit for that year.
• Assuming a British-born child cannot qualify, when US citizenship passes at birth.
• Forgetting that excluded income still counts toward the phase-out threshold.
• Missing the three-year window to claim refunds on earlier returns.
• Revoking the exclusion without checking the five-year consequence first.

None of these involve complex law. They involve doing the comparison before filing, and checking the family details every year as children are born or turn 17.

How does this sit alongside UK Child Benefit?

The two systems run separately, so claiming one does not stop you claiming the other. British Child Benefit comes from HMRC under UK rules, while the US credit comes through your American return. Many families in Britain can receive both each year.

The UK side has its own trap, though. Higher earners may owe the High Income Child Benefit Charge, which claws the benefit back through Self Assessment. Our guide to the High Income Child Benefit Charge explains the thresholds and when you need to register.

What if your spouse is not a US citizen?

You can still claim, and you do not need a joint return to do it. Many Americans married to British partners file as married filing separately. Others use head of household, where a qualifying child lives with them. Each route still allows the child credit when the tests are met.

Head of household status often helps further. It brings a larger standard deduction than filing separately, and it keeps your spouse entirely outside the US system. So the filing status question deserves the same attention as the election itself.

How US UK Tax Accountants helps

We prepare every parent's return both ways before filing, then choose the election that leaves the most in your pocket. Our US federal returns service covers the child credit, Schedule 8812, and the foreign tax credit calculation in one fixed fee.

In our practice we often find refunds in earlier years as well. Where that happens, we set out what an amendment would recover and what it would cost, in writing, before any work starts.

Check your refund

If you have children and file with the exclusion, your child tax credit may be sitting unclaimed. Tell us about your family and your income, and we will confirm what the credit is worth to you. You can book a consultation and hear back within one working day.

Last reviewed 10 September 2026 by the US UK Tax Accountants Tax Team. This article is general information, not personal tax advice — speak to a qualified US/UK tax adviser about your own position.

For the neighbouring question, Study abroad tax rules: what American and British students owe on either side walks through it in detail.