Complete Tax Guide for US Expats in the UK
- UK Tax System Overview for US Expats
- Understanding UK Tax Residency & Its Impact on Expats
- UK Income Tax Rates for US Expats (2024-2025)
- How UK Taxes Compare to US Taxes for Expats
- How US Expats Can Avoid Double Taxation in the UK
- What Tax Forms Do US Expats in the UK Need?
- Need Help with Your US Expat Taxes in the UK?
The UK’s rich history, English-speaking culture, and long-standing position as a world power have made it a popular choice for American expats. However, if you’re hoping to make the UK your new home, it’s important to understand how living in the UK will impact your tax situation.
Read on to learn all about UK taxes for US expats, as well as how living in the UK will impact your US tax obligations.
UK Tax System Overview for US Expats
The UK operates a residency-based tax system, meaning you’re taxed based on where you live, not your citizenship. The US, on the other hand, taxes its citizens on worldwide income regardless of location. For US expats, this creates a dual tax obligation that can get tricky.
Here are some key taxes US expats in the UK need to know:
- Income tax is withheld from salaries and wages via the Pay As You Earn (PAYE) system, covering employment and self-employment income
- National Insurance Contributions (NICs) are mandatory contributions, typically 12% on earnings, that fund the NHS, state pensions, and other benefits—think of it as the UK’s version of Social Security.
- Value-added tax (VAT) is a 20% tax on most goods and services, from dining out to buying electronics, though some items like groceries are exempt or reduced.
- Capital gains tax (CGT) is applied to profits from selling assets like stocks, second homes, or cryptocurrency, with rates varying by income level.
- Council tax is a local tax on property owners or renters, based on your home’s value and the services your council provides, such as trash collection and schools.
The UK tax year runs from April 6 to April 5, which can trip up new expats who are used to the US calendar year.
Understanding UK Tax Residency & Its Impact on Expats
Who Pays UK Taxes?
Your UK tax liability hinges on your residency status, which is determined by the Statutory Residence Test (SRT):
- Tax residents pay UK tax on all worldwide income: UK wages, US dividends, and rental income from anywhere.
- Non-residents only pay tax on UK-sourced income. This includes income from a job in the UK or UK property rentals. Foreign income (e.g., US investments) is exempt from UK tax for non-residents.
If you arrive or leave mid-tax year, you might qualify for split-year status, taxing only the UK-resident portion of your income. For example, moving to the UK in September might limit your resident tax to seven months.
UK Residency Rules
The SRT considers multiple factors when determining residency: days in the UK, work ties (e.g., a UK employer), family (spouse or kids in the UK), and housing (owning or renting a UK property). Spending 183+ days in a tax year makes you a resident, no exceptions.
Even with fewer days, significant ties like a UK-based job or family can still tip the scales. For instance, if you spend 90 days in the UK but work for a London firm and rent a flat, you might still be considered a resident.
| Residency Factor | Tax Implication |
| Lived in the UK for 183+ days in a tax year | Automatically a UK tax resident |
| Spent <183 days, but have a UK home and other ties | Likely a tax resident, based on SRT |
| Spent <183 days with no UK home or other ties | Not a tax resident |
| Moved mid-year and meet split-year rules | May qualify for split-year treatment |
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UK Income Tax Rates for US Expats (2024-2025)
The PAYE system automatically withholds income tax and NICs from your wages if you’re employed in the UK. Self-employed expats file a Self-Assessment Tax Return instead. Below are the thresholds and rates for the 2024-2025 tax year.
UK Income Tax Rates (England, Northern Ireland, Wales)
| Earnings in GBP | Rate Applicable to Income Level (%) |
| £12,570 | Tax-free |
| £12,571 to £50,270 | 20% |
| £50,271 and £125,140 | 40% |
| Over £125,140 | 45% |
UK Income Tax Rate for Scotland
| Earnings in GBP | Rate Applicable to Income Level (%) |
| Up to £12,570 | Tax-free |
| £12,571 to £14,876 | 19% |
| £14,877 to £26,561 | 20% |
| £26,562 to £43,662 | 21% |
| £43,663 to £75,000 | 42% |
| £75,001 to £125,140 | 45% |
| Above £125,140 | 48% |
Note: The tax-free personal allowance (£12,570) shrinks by £1 for every £2 of income over £100,000, disappearing at £125,140. For example, earning £110,000 reduces your allowance to £7,570.
How UK Taxes Compare to US Taxes for Expats
The UK and US tax systems differ in some major ways, making it important for expats to understand both.
US vs. UK Tax Breakdown
| Tax Factor | UK | US |
| Tax System Type | Residency-based | Citizenship-based |
| Top Income Tax Rate | 45% (48% in Scotland) | 37% federal + state taxes |
| Social Security | NICs: 12% on earnings | Social Security & Medicare: 7.65% |
| VAT/Sales Tax | VAT: 20% | Sales tax: 0%–10% (varies by state) |
Based on this table, here are some key differences to keep in mind:
- UK rates are higher: A 45% top rate (48% in Scotland) vs. the US’s 37% federal max, though US state taxes (e.g., 13.3% in California) can push totals higher.
- Benefits included: UK taxes fund the NHS and robust public services; US taxes don’t guarantee healthcare.
- No provincial taxes in the UK: The US layers federal and state taxes, while the UK uses a central system (except Scotland, which has its own rules).
How US Expats Can Avoid Double Taxation in the UK
US citizens must file US tax returns even while living in the UK. This could lead to double taxation—being taxed twice on the same income. Fortunately, there are ways to avoid this.
- Foreign Earned Income Exclusion (FEIE): Excludes up to $130,000 of foreign-earned income in 2025. Qualify via:
- Bona Fide Residence Test: Live in the UK for a full tax year (e.g., January 1–December 31).
- Physical Presence Test: Spend 330+ days abroad in any 12-month period.
- Foreign Tax Credit (FTC): Gives a dollar-for-dollar credit for UK taxes paid. For example, if you pay £20,000 in UK tax, subtract that from your US bill.
- US-UK Tax Treaty: This covers pensions, dividends, and interest—e.g., UK pensions are taxed only in the UK for residents.
- The US-UK Totalization Agreement prevents double social security taxes. Working in the UK for under five years? Pay NICs only. Over five? You might switch to US contributions.
What Tax Forms Do US Expats in the UK Need?
Key forms for Americans living in the UK include:
- UK Self-Assessment Tax Return (SA100): For self-employed professionals, landlords, or high earners (£150,000+); due October 31 (paper) or January 31 (online).
- US Form 1040: Required for all US citizens, due April 15 (June 15 for expats with an automatic extension).
- FBAR (FinCEN Form 114): File electronically if foreign accounts exceed $10,000 anytime in the year—e.g., a UK savings account hitting £8,000 ($10,400); due April 15, auto-extended to October 15.
- FATCA (Form 8938): Report foreign assets (e.g., £150,000 in UK investments) if over thresholds ($200,000 single, $400,000 joint abroad); attaches to Form 1040.
Need Help with Your US Expat Taxes in the UK?
Filing UK taxes for US citizens doesn’t have to be a hassle! The US expat tax filing deadline is fast approaching, and it’s important that you make sure your taxes are in order. Fortunately, there are several steps you can take to make this task a little easier.
Recognizing that many of our American clients in the UK also require local tax preparation services, we have teamed up with a UK Chartered Accountant to bring this service in-house.
Contact us, and one of our customer champions will gladly help. If you need precise advice on your tax situation, you can also click below to get a consultation with one of our expat tax experts.
