Complete Tax Guide for US Expats 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.
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UK at a Glance
- Primary Tax Form for Residents: Self-Assessment Tax Return
- Tax Year: April 6–April 5
- Tax Deadline: October 31 if filing a paper return & January 31 if filing online
- Currency: Great British Pound (GBP)
- Population: 67 million
- Number of US Expats: Estimated 200,000
- Capital City: London
- Primary Language: English
- Tax Treaty: Yes
- Totalization Agreement: Yes
Understanding Britain’s Tax System
Federal Taxes
The UK tax system is much like the US. Tax is levied on salary, wages, business income, and investment income. Taxes withheld from your salary are known as Pay as You Earn (PAYE) taxes. PAYE includes your income tax and national insurance contributions. The tax rates are progressive, meaning the more you earn, the higher your tax rate for each additional dollar of income.
To navigate the complexity of taxes in the UK for Americans living abroad and avoid overlooking key factors, seeking the advice of an expat tax professional service like Greenback is highly recommended.
Residency and Taxation
The UK has a residence-based tax system, which means that if you are considered a tax resident in the UK, you will usually have to pay tax on all of your worldwide income. Residents pay tax on all worldwide income, including income from both the UK and abroad. (However, there are special rules for residents whose permanent home, or domicile, is abroad.) Non-residents pay tax on only UK-source income, while their foreign income is excluded.
Learn where the best tax havens are, common traps, and ways to save money on your US expat taxes.
UK PAYE Tax Rates and Thresholds, 2024-2025
The PAYE system in the UK automatically withholds income tax and National Insurance from employees’ wages. Here are the key thresholds and rates for the 2024-2025 tax year:
UK Income Tax Rate in 2024 (For England, Northern Ireland, and 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% |
The income rates for Scotland are as follows. (All amounts are given in GBP.)
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% |
It’s important to note that these rates apply to taxable income above the Personal Allowance and vary by region. The Personal Allowance reduces by £1 for every £2 of income over £100,000 and can go down to zero.
In both cases, taxpayers can exclude up to GBP 12,500 of their income as a personal allowance. This is reduced by GBP 1 for every GBP 2 income over GBP 100,000.
Provincial Taxes
There are no provincial taxes in the UK.
Municipal Taxes
While some parts of the UK have municipal taxes, they are levied on businesses at a fixed rate, not personal income. In many cases, these taxes are deductible.
Council Taxes
Some property owners and renters in the UK are subject to a council tax. (This works similar to a property tax in the US.) The rate for a council tax is based on:
- The valuation of a home
- How much the local council charges for that valuation
- Whether the property owner or renter can get a discount or exemption from the total bill
UK vs. US Tax Rates
How does taxation in the UK compare to US tax rates? Below, you can find the rates for the US tax system. Compare that to the UK PAYE table above to find out what the difference might be for your income level.
US Income Tax Rates for Single Filers
| Tax Band | Income Range (USD) | Tax Rate (%) |
| 10% | Up to $11,000 | 10% |
| 12% | $11,001 – $44,725 | 12% |
| 22% | $44,726 – $95,375 | 22% |
| 24% | $95,376 – $182,100 | 24% |
| 32% | $182,101 – $231,250 | 32% |
| 35% | $231,251 – $578,125 | 35% |
| 37% | Over $578,125 | 37% |
US Income Taxes for Married Taxpayers Filing Jointly
| Tax Band | Income Range (USD) | Tax Rate (%) |
| 10% | Up to $22,000 | 10% |
| 12% | $22,001 – $89,450 | 12% |
| 22% | $89,451 – $190,750 | 22% |
| 24% | $190,751 – $364,200 | 24% |
| 32% | $364,201 – $462,500 | 32% |
| 35% | $462,501 – $693,750 | 35% |
| 37% | Over $693,750 | 37% |
US vs. UK Capital Gains Taxes
US Capital Gains Tax Rates
| Capital Gains | Tax Rate (%) |
| Short-term | Ordinary income rates |
| Long-term | 0%, 15%, or 20% depending on income |
UK Capital Gains Tax Rates
| Capital Gains | Tax Rate (%) |
| Basic Rate (up to £50,270) | 10% |
| Higher Rate (over £50,270) | 20% |
| Residential Property (Basic Rate) | 18% |
| Residential Property (Higher Rate) | 28% |
If you are a resident or ordinarily resident and domiciled in the UK, you will be taxed on your worldwide capital gains. If you are a non-resident and not domiciled, you will only be taxed on capital gains earned in the UK.
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US vs. UK Corporate Taxes
US Corporate Taxes
Federal Corporate Tax Rate: 21%
UK Corporate Taxes
Corporate Tax Rate: 25% starting April 2023
US vs. UK VAT Rates
US VAT Rates
General Sales Tax: Varies by state (typically between 4% and 8%)
UK VAT Rates
- Standard Rate: 20%
- Reduced Rate: 5% (on certain goods and services)
- Zero Rate: 0% (on most food and children’s clothing)
US vs. UK Property Tax
US Property Tax
Varies significantly by state and locality, generally ranging from 0.2% to 2% of the property’s assessed value.
UK Property Tax
If you own property in England or Northern Ireland, you’ll need to be aware of the Stamp Duty Land Tax (SDLT). The amount you’ll pay in SDLT depends on the value of the property you’re buying. As of 2023-2024, the following rates apply:
- 0% on properties worth up to £250,000
- 5% on the next £675,000 (the portion from £250,001 to £925,000)
- 10% on the next £575,000 (the portion from £925,001 to £1.5 million)
- 12% on the remaining amount (the portion above £1.5 million)
However, if you’re a first-time homebuyer, you may be eligible for a reduced tax rate on properties worth £625,000 or less:
- 0% on properties worth up to £425,000
- 5% on the next £200,000 (the portion from £425,001 to £625,000)
If you’re buying property in Scotland or Wales, you won’t be subject to SDLT. In Scotland, you’ll pay the Land & Buildings Transaction Tax (LBTT) to Revenue Scotland, while in Wales, you’ll pay the Land Transaction Tax (LTT) to the Welsh Revenue Authority.
Key Issues for Americans in the UK
Double Taxation
Because of the US-UK tax treaty, some Americans living in the UK are already exempt from double taxation. However, the IRS also provides several other potential tax credits and deductions for expats. (More below!)
Social Security
Like the US, the UK maintains a social security system funded by contributions from the earnings of employers and employees. Fortunately, the US-UK totalization agreement establishes rules for social security contributions to avoid double taxation.
Tax Residency
You will generally be considered a resident of the UK if any of the following apply:
- You expect to stay in the UK for two years or more
- You spend more than 183 days in the UK
- You have spent an average of 91 days or more per year in the UK over the past four years
You can also be considered “ordinarily resident” and “not ordinarily resident.”
- If you come to the UK and expect to stay for three years or more, you are considered “ordinarily resident.”
- If you intend to stay in the UK for two years but not three, you are considered “not ordinarily resident.”
Domicile
The concept of domicile is fundamental in UK tax law. It can help determine whether you owe taxes on your worldwide income and assets or only UK-sourced income and assets.
Your domicile, or origin, is the same as your father’s at birth. If your father had changed domicile while you were still a dependent, your domicile would also have changed. Otherwise, you have your domicile of origin unless you acquire a different domicile.
Most expats in the UK are considered non-UK domiciled. However, the UK constantly makes changes to UK residence and domicile regulations.
Key Tax Breaks and Reporting Requirements for Americans Living in the UK
Foreign Earned Income Exclusion
The Foreign Earned Income Exclusion allows US expats to exclude a certain amount of foreign-earned income from US taxation. For the 2024 tax year, this exclusion is up to $126,500.
To qualify, you must pass either the Bona Fide Residence Test or the Physical Presence Test.
- Bona Fide Residence Test: Requires you to be a bona fide resident of a foreign country for an uninterrupted period that includes an entire calendar year.
- Physical Presence Test: Requires you to be physically present in a foreign country for at least 330 full days during any 12-month period.
Foreign Tax Credit
The Foreign Tax Credit helps to avoid double taxation by allowing US taxpayers to claim a credit for taxes paid to a foreign government. This gives you a dollar-for-dollar credit for all foreign taxes.
When you live in the US, tax day is simple: April 15th! When you move abroad, it’s not so straightforward! Learn about all the expat deadlines and extensions you need to know to file.
Foreign Housing Exclusion/Deduction
US expats may also qualify for the Foreign Housing Exclusion or Deduction, which allows them to exclude or deduct certain housing expenses from their gross income. To claim this tax benefit, you must qualify for the FEIE.
Child Tax Credit
The Child Tax Credit allows eligible expats to claim a credit for each qualifying child under the age of 17. This credit is up to $2,000 per qualifying child, with $1,400 of that sum being refundable.
FATCA Report
If you own non-US financial assets valued above certain thresholds, you must file a FATCA report. The specific threshold for your finances will depend on your filing status and whether you qualify as a bona fide resident of the UK.
If you do have to file a FATCA report, fill it out, attach it to your Form 1040, and file it simultaneously.
Foreign Bank Account Report (FBAR)
If you have at least $10,000 in one or more non-US bank accounts, you must report it by filing FinCEN Form 114, also known as the FBAR.
Unlike the previous forms, you can’t file the FBAR by mail. You must file it electronically using the FinCEN BSA E-Filing System.
The FBAR is technically due on April 15th, but if you miss that deadline, it automatically extends to October 15. You won’t even have to file an extension request.
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.
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.
