Americans Living in the UK – Part 1: The Essentials
This is the first article in our new series, “Americans Living in the UK”, where we’ll walk through the tax issues that come up when you’re a US citizen making your life on this side of the Atlantic. Americans relocating to the United Kingdom face a complex web of tax rules that can differ significantly from what they know in the U.S.
In this first installment of our “Americans Living in the UK” series, we break down the essentials of UK tax residency, how and when you become a UK tax resident, and what that means for your tax bills. We’ll also explain recent major changes effective April 2025 – notably the end of the non-domiciled (“non-dom”) remittance basis regime and the introduction of a new Foreign Income & Gains (FIG) regime – and how these changes affect Americans abroad.
By understanding the UK’s Statutory Residence Test, split-year treatment, and the new residence-based tax system, U.S. expats can better navigate two tax systems without paying more than their fair share.
Why This Matters
The US and UK both want a piece of the same pie.
- The US taxes its citizens no matter where they live.
- The UK taxes its residents on worldwide income.
That means if you’re an American living in the UK, you’re always in the crosshairs of two tax systems. The good news: there are rules, treaties and credits designed to stop you paying twice. The bad news: if you don’t know the rules, you can easily get caught out.
Understanding UK Tax Residency
UK Tax Year: One key difference to note upfront is that the UK tax year runs from 6 April to 5 April of the following year, not the calendar year as in the U.S..
Your status as a UK tax resident is determined by the Statutory Residence Test (SRT). The SRT is a set of rules in UK law (in force since 2013) that conclusively determine if you are resident or non-resident in the UK for a given tax year. It primarily looks at:
- Days Spent in the UK: If you spend 183 days or more in the UK in a tax year, you are almost certainly a UK resident for that year. Conversely, spending fewer than 16 days in the UK (assuming you were a UK resident in the prior year) will make you non-resident. Most people will fall in between these extremes – and in that case, the SRT looks at a combination of days and “ties”.
- Ties to the UK: These include factors like having a UK home, a UK-based job, close family in the UK, or spending substantial time in the UK in recent years. The fewer days you spend in the UK, the more of these ties are required to be considered resident. For example, an American on a short-term assignment might avoid residency if they limit days in the UK and have minimal ties, whereas moving full-time and making the UK your home will make you resident.
UK tax residency matters because it dictates how much of your income the UK can tax. If you become a UK resident under the SRT, the default rule is that you’ll be taxed on your worldwide income and capital gains on an “arising basis,” meaning as they arise, regardless of where they’re earned.
If you’re not a UK resident, then generally the UK only taxes UK-source income or gains (for instance, earnings from UK work or UK property).
In short, passing the SRT and becoming UK-resident brings your global earnings into play for UK tax – a major consideration for Americans used to the U.S. taxing them no matter where they live.
Split Year Treatment – Arriving (or Leaving) Mid-Year
Technically, under UK law you are either resident or non-resident for an entire tax year – there’s no in-between. However, special split year rules apply when you actually move countries during a tax year. In other words, if you arrive in the UK partway through the tax year (or leave partway through), you might not be treated as UK-resident for the portion of the year before your arrival (or after your departure). Instead, the year can be split into an overseas part (when you were not UK-resident) and a UK part (from when you become resident). This is crucial for Americans who move to the UK in the middle of a year: you typically won’t be taxed in the UK on income you earned before you relocated.
There are specific conditions under which split year treatment is granted – HMRC outlines five sets of circumstances for the year of arrival. The most common scenarios include starting a full-time job in the UK or acquiring a home in the UK. In straightforward cases, your UK residency is considered to begin on the date you start working full-time in the UK or the date you set up a permanent home in the UK (whichever comes first). From that date to the end of the tax year would be the “UK part” of the year (taxable in the UK on worldwide income), while the earlier part of the year is the “overseas part” (when you were not yet a UK resident, so foreign income from that period is not taxed by the UK).
For example, suppose a U.S. citizen moves to London on September 1, 2025 to begin a new job. The UK 2025/26 tax year runs from April 6, 2025 to April 5, 2026. Under split year treatment, April 6–August 31, 2025 would likely be treated as a non-resident period (overseas part), and September 1, 2025–April 5, 2026 as the UK-resident period. The American would only pay UK tax on income arising from September onward (plus any UK-source income anytime in the year), while their pre-September foreign income remains outside UK taxation. Split year treatment ensures a fair outcome when moving between countries, so you’re not taxed in the UK for a time when you hadn’t even arrived yet. (You may still owe U.S. tax on that earlier income, but the UK won’t tax it once split year is applied.)
Taxation for UK Residents vs Non-Residents
Once you establish UK residency, the scope of your UK tax obligations expands significantly. A UK tax resident is generally taxed on the “arising basis” – meaning all income earned worldwide and all capital gains realized worldwide are subject to UK tax as they arise, whether or not the funds are brought into the UK. Before 2025, many non-UK domiciled residents (including numerous Americans) could opt to use the remittance basis instead – under which foreign income was only taxed if remitted (brought into) the UK. However, as we’ll detail below, that remittance option no longer exists from April 6, 2025 for individuals. Now virtually all UK residents must reckon with UK tax on their global income and gains each year.
By contrast, if you are not a UK resident, the UK will typically tax you only on UK-source earnings – for example, UK wages, profits from a UK business, rent from UK property, or gains from selling UK real estate or certain UK assets. Foreign income of a non-resident is outside the scope of UK taxation (though again, as an American citizen, that foreign income would still be reportable on your U.S. tax return). In other words, the UK’s system is residence-based: become a resident and the UK wants to tax your worldwide income; remain a non-resident and the UK generally limits itself to its source-income. This is a key difference from the U.S. tax system, which taxes citizens and green-card holders on worldwide income regardless of residence.
For example, a U.S. expat with UK salary income will pay UK tax (often at higher rates than U.S. tax), and then can usually claim a dollar-for-dollar foreign tax credit on their U.S. return to offset U.S. tax on that salary. The result is that, in most cases, you pay the higher of the two countries’ tax rates on each type of income, not both. Proper planning (and sometimes invoking treaty provisions) is still essential to avoid timing mismatches or categories of income that could otherwise be double taxed.
End of the Remittance Basis, FIG Regime Begins
Farewell, Non-Doms: The UK’s non-domiciled remittance basis rule – a cornerstone of expat tax planning for decades – ended on 5 April 2025. Until the 2024/25 tax year, a UK resident who was “non-domiciled” (not legally considered permanently settled in the UK) could elect to pay UK tax only on UK-source income and on foreign income or gains actually remitted to the UK, rather than on worldwide income. This often allowed well-advised Americans in the UK to keep investment income offshore without immediate UK tax, albeit sometimes at the cost of a hefty annual remittance basis charge after the first 7 years.
From 6 April 2025 onward, that remittance basis is gone – all UK tax residents must report and pay tax on worldwide income and gains as they arise, regardless of domicile. In other words, the concept of being a “non-dom” no longer shields your foreign income from UK tax.
To soften the blow of this change (and to keep the UK attractive to international talent), the government introduced a Foreign Income & Gains (FIG) regime effective from April 2025. The FIG regime is essentially a temporary tax exemption for new or returning UK residents on their foreign income and capital gains. To qualify, you must be a “qualifying new resident”: in practice, that means you haven’t been UK-resident in the 10 tax years prior to the year you arrive and become UK-resident. If you meet that condition, you can claim the FIG relief for up to four consecutive tax years, starting with the tax year you become UK-resident (or 2025/26, whichever is later).
During those years, any qualifying foreign income or gains you elect for the regime will be exempt from UK tax – and you are even free to remit those funds to the UK without losing the exemption. It’s a bit like a 4-year welcome period of tax leniency on overseas income.
However, the FIG regime comes with important caveats and trade-offs:
- No Personal Allowance or CGT Exemption: If you claim any FIG relief in a year, you lose your UK personal income tax allowance (currently £12,570) and your annual Capital Gains Tax exemption for that year. Essentially, you forfeit tax-free UK income bands for the privilege of sheltering foreign income. This means FIG is most valuable to those with large foreign income streams – but if your foreign income is small, giving up the tax-free allowances might outweigh the benefit.
- Claim Required: The FIG relief is not automatic; you must actively claim it in your self-assessment tax return and nominate which sources of foreign income or gains you want exempted. You can choose to apply it to foreign dividends, interest, business profits, etc., and you can opt out of claiming it if it isn’t beneficial. Any foreign income you don’t specifically claim for FIG will be taxed normally.
- Time-Limited: The regime lasts at most 4 years from the start of your UK residency. Once this period ends, you’ll be taxed on everything on an arising basis going forward. (If you became resident a year or two before April 2025, you can still use FIG for the remaining portion of your four-year window from 2025 onward.) After the FIG period, no further extension is available – at that point you are fully taxed like any other long-term resident.
- No Domicile Requirement: Unlike the old remittance system which only non-doms could use, FIG is based solely on prior non-residence. Even UK natives returning after a decade abroad can use it. Conversely, a non-domiciled person who doesn’t meet the 10-year absence rule cannot get FIG relief, even if under prior rules they might have used the remittance basis.
- Certain Income Excluded: Some types of income are explicitly excluded from FIG relief. Notably, gains from offshore insurance bonds (a common investment for expats) do not qualify and remain taxable in the UK as they arise. It’s important to check HMRC’s list of qualifying income to understand what can be exempted.
Overall, the 4-year FIG regime is a welcome (if temporary) break for those who plan well. For example, an American professional moving to the UK in 2025 can claim FIG and avoid UK tax on their U.S. investment income, business profits, or other foreign earnings until 2029 – potentially saving a lot of tax. But they would not get the personal allowance in the years they claim it, and after four years everything becomes taxable in the UK. FIG claims should be evaluated carefully – if your foreign income is moderate, sometimes it may be better not to claim FIG so that you keep your UK personal allowance and reliefs. Always run the numbers or consult a tax adviser to decide the optimal path.
The TRF only applies to money that was earned before 6 April 2025 and was kept abroad under the remittance basis. While primarily of interest to long-standing non-doms, it’s good for advisors of American expats to know this exists as a planning tool for the next few years.
Takeaway
Americans moving to or living in the UK must get to grips with the UK’s tax residence rules as a top priority. Your UK tax residency status under the SRT dictates whether the UK can tax your worldwide income or only UK sources, and split year treatment can provide relief when transitioning to or from the UK.
From 2025 onward, the UK has moved to a pure residence-based taxation system – the remittance basis is history, and a new limited FIG regime takes its place for recent arrivals.
The concept of domicile is no longer relevant for income, capital gains, or even inheritance tax in the long run, meaning American expats are now on an even footing with Brits in the eyes of HMRC. Everyone who is UK-resident is taxed on an arising basis after their initial years, so early planning is key: make the most of the FIG window if eligible, and prepare for full exposure thereafter.
The good news is that double taxation can be avoided – the U.S.-UK tax treaty, foreign tax credits, and exclusions like the FEIE ensure you won’t pay tax twice on the same income. But the compliance burden is real: U.S. taxpayers in the UK will be filing annual UK Self Assessment returns and U.S. returns, reporting worldwide income to both countries. Keeping proper documentation and possibly syncing strategies (for example, timing income or using retirement accounts in a treaty-beneficial way) can ease the load.
In upcoming parts of our “Americans Living in the UK” series, we’ll delve deeper into practical issues like filing requirements, tax-efficient investment options, and using the U.S.-UK tax treaty to your advantage. For now, with an understanding of UK residency and the new post-2025 landscape, you’re one step ahead in mastering life under two tax systems – with one very diligent taxpayer.
In part 2 of that series on American living in the UK, we talk about investing and the risks that some inappropriate investment vehicles make you take. Don't hesitate to check it out.
