Figures relate to tax year 2025-26 (UK) · 2025 (US)
You arrive at Lakenheath or Menwith Hill and nobody mentions British tax. For your own pay, that silence is correct.
The forces agreement keeps your service pay out of HMRC's reach for as long as you are posted here.
What it does not cover is everything else, and most families here have an everything else.
Key takeaways
- US military pay is not taxed by Britain while you are posted here.
- Your time on duty does not make you UK resident.
- The earnings exclusion never applies to government pay.
- Your home state keeps you as a resident under federal law.
- A spouse working locally is taxed in Britain on that job.
- Rent, interest and investments outside the posting can still be caught.
- FBAR and foreign asset reporting apply to you like anybody else.
- Leaving the forces while staying here changes everything at once.
Does Britain tax US military pay?
No, and this is the one clear piece of good news. The agreement between NATO members keeps the pay of a visiting force outside the host country's tax. So your basic pay, your housing allowance and your subsistence allowance all stay clear of HMRC while the posting lasts.
The relief covers the force and its civilian component.
It does not cover your family's own earnings.
Does the posting make you UK resident?
Not by itself. Time spent here only because you are a member of a visiting force does not count as residence for British purposes. According to GOV.UK guidance on the statutory residence test, day counting drives the usual rules, and this is one of the rare places where those days are set aside.
Our guide to the statutory residence test covers the normal day counts.
The exception applies to the service member, not to the whole household.
Who counts as US military for this?
Members of the force itself, plus the civilian component attached to it. Ministry-equivalent defence civilian employees posted here are generally inside the relief. Contractors are the grey area, because a technical representative may or may not count depending on the terms of the contract and the way it is documented.
Ask your command for written confirmation of your status.
Contractors should assume nothing until somebody checks.
Does the IRS tax US military pay?
Always. The United States taxes its citizens and its service members on worldwide income wherever they serve, so your pay goes on a federal return every year. Nothing about a foreign posting changes that, and withholding carries on through your leave and earnings statement as usual.
Our guide to US tax deadlines for expats covers the filing dates.
Being overseas buys you an automatic extension to June.
Can US military pay use the earnings exclusion?
No, and people ask this constantly. The foreign earned income exclusion shuts out pay from the United States government, so service pay can never qualify for it. Your tax home also stays American for this purpose, which closes the door a second time.
Our guide to Form 2555 and the exclusion covers who does qualify.
A spouse with a British employer may still claim it.
What about the housing exclusion?
Also closed to you, for the same reason. The housing exclusion sits inside the earnings exclusion rules, so pay that cannot use one cannot use the other. Your housing allowance is already free of federal tax under its own rule, which is the better outcome anyway.
Our guide to the housing exclusion in London covers civilian claims.
Allowances and the exclusion are two separate reliefs.
Which state taxes US military pay?
You keep the state you were resident in when you joined, and a posting does not change it. Federal law protects a service member from becoming resident in another place purely because the orders sent them there. That protection reaches across the Atlantic as readily as across a state line.
Our guide to state tax for expats covers the state rules.
A state with no income tax is worth keeping if you legitimately can.
Can your spouse keep that state too?
Usually yes, by choosing the service member's state of legal residence. The spouse relief rules let a husband or wife adopt the same state rather than picking up a new one on every move. That saves a great deal of annual argument with state revenue departments.
The choice is made on the state return each year.
Keep the driving licence and voter registration consistent with it.
Two sides of the same household
| Income | United Kingdom | United States |
|---|---|---|
| Service pay | Not taxed | Taxed |
| Housing allowance | Not taxed | Not taxed |
| Spouse's local job | Taxed | Taxed, with relief |
| UK bank interest | Taxed if resident | Taxed |
| Rent on a US home | Taxed if resident | Taxed |
| Military pension later | Depends on status | Taxed |
Is your spouse taxed in Britain?
On a local job, yes. The forces relief protects the member of the force, not the family, so a spouse teaching at a village school or working in a shop is taxed here like any other worker. Pay as you earn deducts the tax at source.
Our guide to a nonresident alien spouse covers mixed couples.
A spouse's own residence is tested under the ordinary rules.
Can your spouse avoid double tax?
Yes, through the earnings exclusion or a credit for the British tax paid. The exclusion is usually better on a modest salary and the credit is better where British tax runs high. Both need a return, and the choice is worth modelling once rather than guessing every April.
Our guide to the US-UK tax treaty covers the relief articles.
Switching between the two has consequences, so pick one and stay.
What about a side business?
Trading from the base or from quarters can create a British filing obligation, since the relief covers service pay rather than a separate trade. A photography business or an online shop run from here is your own activity. Britain will look at it on its own merits.
Our guide to online sellers and Form 1099-K covers small trading.
Keep the business income clearly apart from service pay.
Do US military families file FBAR?
If your foreign accounts cross the threshold, yes. Nothing in the forces relief touches the reporting rules, so a local current account opened for convenience counts towards the total like any other. Many families here hold a British account for rent and bills.
Our guide to FBAR signature authority covers the account rules.
The threshold is $10,000 across all accounts combined.
What about foreign asset reporting?
The same answer applies. Foreign financial assets above the relevant threshold go on a separate form with your return, and a posting gives no exemption from it. Service families often trip over this when they open an investment account locally for a child.
Our guide to Form 8938 reporting covers the asset form.
The two filings overlap, and you may need both.
Does national insurance apply to US military pay?
No, because your pay carries American social security instead. The agreement between the two countries stops the same earnings bearing contributions twice, and your service pay stays inside the American system throughout. A spouse with a British job does pay national insurance on that job.
Our guide to a certificate of coverage covers the paperwork.
Your American credits keep building while you serve here.
Can US military families buy a house here?
Plenty of service families do, and the tax rules treat you as any other buyer. Stamp duty applies, including the surcharge for anybody who fails the residence test for that charge, which catches many posted buyers. Work the surcharge into the budget from the start.
Our guide to the SDLT surcharge covers the extra 2% charge.
Selling later brings an American gain even where Britain exempts it.
What if you rent out a home back home?
The rent is American income, reported on your federal return in the usual way. Britain only reaches it if you are resident here, which the forces relief generally prevents for you. A spouse who is resident here may face a different answer on their share.
Our guide to US property for UK residents covers the letting rules.
Joint ownership splits the problem between two different positions.
A worked example
Take an illustrative family. A sergeant posted to Suffolk earns service pay, and his wife works part time at a local nursery.
His pay escapes British tax entirely and goes on a federal return.
Her nursery wage is taxed through British payroll and reported to the IRS as well.
She claims the earnings exclusion on her own wage, and the household ends up paying tax once on each income.
What happens when you leave the US military?
Everything changes on the day the relief stops. If you stay in Britain after separation, you become resident under the ordinary rules and your worldwide income comes into British tax. That shift catches people who settle here with a British spouse and never revisit the position.
Our guide to split year treatment covers the year of change.
Take advice in the months before separation, not after.
How is a US military pension taxed?
The United States taxes it, and the treaty generally leaves government service pensions to the paying country. So a retired service member living in Britain usually sees the pension taxed in America rather than here. Becoming a British national can change that answer.
Our guide to retiring to the UK covers the retirement position.
Check the treaty article rather than assuming the general rule.
What about a Thrift Savings Plan?
It works like any other American workplace plan, and Britain recognises it as a pension scheme under the treaty. Growth inside it is left alone while you serve. Drawing on it later while resident here needs its own look, because the treaty splits the taxing rights.
Our guide to US retirement accounts in the UK covers the drawdown rules.
Do not move it into a British scheme without advice.
Does a combat deployment help?
It can remove a large slice of pay from federal tax, and the rule is generous for enlisted members. Deploying from a British posting does not change the British answer, which was already nil on your service pay. So the benefit shows up entirely on the American side.
The exclusion applies month by month rather than by the day.
Your leave and earnings statement should show it clearly.
Do US military members need a British return?
Only if something outside the relief brings you into the system, such as a trade, British bank interest at scale or rental profit here. Many posted members never file at all. A spouse with local earnings may need one even where you do not.
Our guide to registering for Self Assessment covers signing up.
Do not register without a reason, because deregistering is tiresome.
What records should you keep?
Your orders, your leave and earnings statements, proof of your status in the civilian component if that applies, and anything showing your state of legal residence. Those four answer almost every question anybody later asks. Keep them for the whole posting and afterwards.
Our guide to a tax transcript request covers American records.
Scan the paper copies before a move damages them.
How many US military members are in Britain?
Roughly 10,000 American service members were stationed in the United Kingdom in 2025, together with their families and the civilian staff alongside them. Most sit at a handful of bases in East Anglia and Yorkshire. So the community is small enough that the same tax questions come round every year.
Lakenheath, Mildenhall, Croughton and Menwith Hill carry most of it.
That concentration means the local advice is better than you might expect.
Does US military rank change the tax?
Not the British answer, which is nil on service pay whatever your grade. Rank matters on the American side, because the combat zone relief is unlimited for enlisted members and capped for officers. So two people on the same deployment can end up with very different bills.
The officer cap tracks the most senior enlisted pay rate.
Check your statement rather than working it out yourself.
Can you get tax help on base?
Often, through a volunteer tax centre that handles federal and state returns free of charge. Those centres are good on American filings and rarely cover the British side at all. So a family with local earnings or a let property usually needs somebody outside as well.
Ask what the centre will and will not look at.
Bring your orders and both countries' paperwork either way.
How to handle UK tax in the US military
- Confirm in writing whether you are in the force or its civilian component.
- Keep your state of legal residence and the paperwork that supports it.
- File a federal return every year on your worldwide income.
- Do not claim the earnings exclusion on service pay.
- Help your spouse decide between the exclusion and a credit.
- Count your foreign accounts and file FBAR if you cross the threshold.
- Treat any side trade as a separate British question.
- Take advice several months before you separate or move on.
Mistakes and penalties we see with US military families
The first is claiming the earnings exclusion on service pay, which never qualifies and brings an amended return.
The second is ignoring a spouse's local wage on the American side, where it still has to be reported.
The third is picking up a new state of residence by accident through a driving licence or a voter registration.
The fourth is settling here after separation without noticing that the relief has ended.
How US UK Tax Accountants helps
We separate the household into the parts the relief covers and the parts it does not, because almost every real problem here sits in the second group.
Then we take the spouse's position and the side income on their own merits. Our US federal returns service covers the filing.
If you are posted here and the family has income of its own, get in touch.
Last reviewed 26 October 2026. This article is general information and not personal tax advice, and status under the forces agreement turns on your own documents.
For the neighbouring question, Posted to Grosvenor Square, taxed like you never left walks through it in detail.
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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.
