Moving from the United Kingdom to the United States is an exciting life change — but it also introduces one of the most complex expat tax situations in the world. If you're planning a relocation from the UK to the US, understanding your tax obligations in both countries is essential to avoid double taxation, penalties, and costly surprises. This guide to moving from United Kingdom to United States taxes covers residency rules, income tax rates, the US-UK tax treaty, key filing deadlines, and practical strategies for the 2025/2026 tax year.

Whether you're relocating for work, starting a business, or joining family, expat tax United Kingdom United States planning should be at the top of your to-do list. Let's break down everything you need to know.

Understanding Tax Residency: When Do You Stop Being a UK Tax Resident?

The first — and arguably most important — question in any relocation tax planning exercise is: when does your tax residency shift from one country to another?

UK Tax Residency: The Statutory Residence Test (SRT)

The UK uses the Statutory Residence Test (SRT) to determine your tax residency status. You will generally become non-resident in the UK for a tax year (6 April to 5 April) if you meet one of the following:

  • The Automatic Overseas Test: You spend fewer than 16 days in the UK during the tax year (or fewer than 46 days if you were not UK resident in the previous three tax years).
  • The Sufficient Ties Test: You spend fewer than a specified number of days in the UK, depending on how many "ties" you maintain (such as family, accommodation, work, or 90-day presence in previous years).

The year you leave, you may qualify for split-year treatment, meaning you're only taxed as a UK resident for the portion of the year before your departure date. This can significantly reduce your UK tax liability for the departure year.

Key point: Even after becoming non-resident, you'll still owe UK tax on UK-source income such as rental income from UK property, UK pensions, and certain dividends from UK companies.

US Tax Residency: Citizenship-Based Taxation and the Substantial Presence Test

The United States is unusual in that it taxes based on both residency and citizenship. For non-US citizens moving to the US, you'll typically become a US tax resident through one of two routes:

  1. Green Card Test: You become a US tax resident on the date you receive lawful permanent resident status (a green card).
  2. Substantial Presence Test: You're treated as a US tax resident if you're physically present in the US for at least 31 days in the current year and 183 days over a three-year weighted period (current year days count fully, prior year days count one-third, and the year before that count one-sixth).

Once you become a US tax resident, you are taxed on your worldwide income — just like the UK taxes its residents.

US Federal Income Tax Rates for 2025/2026

The United States operates a progressive federal income tax system. For the 2025 tax year (returns filed in 2026), the federal income tax brackets for single filers are:

Taxable Income Federal Tax Rate
$0 – $11,925 10%
$11,926 – $48,475 12%
$48,476 – $103,350 22%
$103,351 – $197,300 24%
$197,301 – $250,525 32%
$250,526 – $626,350 35%
Over $626,350 37%

For married filing jointly, the brackets are generally doubled for the lower rates. Note that the US also imposes state income taxes in most states (ranging from 0% to over 13% in California), which can significantly increase your overall tax burden.

The standard deduction for 2025 is $15,000 for single filers and $30,000 for married filing jointly.

Use our United States Income Tax Calculator to estimate your US federal tax liability based on your expected income.

UK Income Tax Rates for 2025/2026

For the 2025/2026 UK tax year (6 April 2025 to 5 April 2026), the income tax rates for England, Wales, and Northern Ireland are:

Taxable Income (above Personal Allowance) Tax Rate Band
£0 – £37,700 20% Basic rate
£37,701 – £125,140 40% Higher rate
Over £125,140 45% Additional rate

The Personal Allowance remains at £12,570, though it is reduced by £1 for every £2 of income above £100,000, effectively disappearing entirely at £125,140.

Scotland has its own income tax bands with six rates ranging from 19% to 48%.

Even after leaving the UK, you may need to file a UK tax return for the departure year and for any ongoing UK-source income. Use our United Kingdom Income Tax Calculator to work out your UK tax position.

The US-UK Double Tax Treaty: Avoiding Being Taxed Twice

One of the most critical elements of expat tax United Kingdom United States planning is the US-UK Double Taxation Convention (tax treaty). This treaty prevents you from being taxed on the same income by both countries and provides mechanisms for relief.

Key Provisions of the Treaty

  • Employment Income: Generally taxed in the country where the work is performed. If you move to the US and work there, your US employment income will typically be taxed only by the US.
  • Pensions: UK pensions (including the State Pension) may be taxable in both countries, but the treaty provides credit mechanisms. UK government pensions are generally only taxable in the UK unless you're a US citizen.
  • Dividends: The treaty reduces withholding tax on dividends. UK dividends paid to US residents are generally subject to a reduced withholding rate of 15% (or 0% for certain pension funds).
  • Interest and Royalties: The treaty provides for reduced or zero withholding rates on cross-border interest and royalty payments.
  • Capital Gains: Generally taxed by the country of residence, with exceptions for real property (taxed where the property is located).
  • Foreign Tax Credit: The treaty preserves your right to claim a Foreign Tax Credit (FTC) in the US for taxes paid to the UK, and vice versa, ensuring income isn't taxed twice.

How the Foreign Tax Credit Works in Practice

Suppose you earn £20,000 in UK rental income during the 2025/2026 tax year while you're a US tax resident. You'll pay UK income tax on that rental income (as it's UK-source). When you file your US tax return, you can claim a Foreign Tax Credit (Form 1116) for the UK tax paid, which reduces your US tax on that same income dollar-for-dollar (up to the US tax rate).

Example:

  • UK rental income: £20,000 (approximately $25,000 at assumed exchange rates)
  • UK tax paid: £4,000 (20% basic rate)
  • US tax on same income: approximately $5,500 (at the 22% bracket)
  • Foreign Tax Credit claimed: $5,060 (the dollar equivalent of £4,000)
  • Additional US tax due: approximately $440

This ensures you're not paying full tax to both countries on the same income.

Key Tax Planning Strategies for UK-to-US Expats

Effective relocation tax planning can save you thousands. Here are the most important strategies to consider:

1. Time Your Move Strategically

The UK tax year runs from 6 April to 5 April, while the US tax year follows the calendar year (1 January to 31 December). Timing your move can help you:

  • Qualify for split-year treatment in the UK, limiting UK taxation to only the pre-departure portion of the year
  • Minimize your US tax liability in your first year by arriving later in the calendar year
  • Ensure you don't accidentally remain UK tax resident for the full year by spending too many days in the UK after your move

2. Understand ISAs and US Tax Treatment

UK Individual Savings Accounts (ISAs) are tax-free in the UK but are not recognized as tax-advantaged by the US. Once you become a US tax resident:

  • Interest, dividends, and capital gains within your ISA become taxable in the US
  • If your ISA holds non-US funds, they may be classified as Passive Foreign Investment Companies (PFICs), triggering punitive US tax treatment and complex reporting requirements (Form 8621)

Action step: Consider liquidating ISA holdings before becoming a US tax resident, or restructuring investments into US-compliant accounts.

3. Report Foreign Financial Accounts (FBAR and FATCA)

US tax residents must report foreign financial accounts:

  • FBAR (FinCEN Form 114): Required if the aggregate value of all foreign financial accounts exceeds $10,000 at any time during the year. Filing deadline: 15 April (automatic extension to 15 October).
  • FATCA (Form 8938): Required if foreign financial assets exceed $50,000 on the last day of the tax year or $75,000 at any time during the year (thresholds are higher for married filing jointly and those residing abroad).

Failure to file these forms can result in penalties of $10,000 or more per violation. This is one of the most common and costly mistakes expats make.

4. Plan Around UK Pension Transfers

If you have a UK workplace or personal pension, you have several options:

  • Leave it in the UK: Withdrawals will be taxable in the US (and possibly the UK, with treaty relief).
  • Transfer to a QROPS: Qualified Recognised Overseas Pension Schemes may offer some flexibility, but US-resident transfers can trigger complex tax issues.
  • Take the 25% tax-free lump sum before leaving: The UK allows a 25% tax-free pension commencement lump sum. The US, however, may still tax this amount. Under the US-UK treaty, there is some protection, but the rules are nuanced.

Consult a cross-border pension specialist before making any transfers.

5. National Insurance and Social Security

The US-UK Totalization Agreement prevents you from paying social security contributions to both countries simultaneously. Generally:

  • If your employer sends you to the US temporarily (up to 5 years), you may continue paying UK National Insurance only
  • If you relocate permanently, you'll pay US Social Security and Medicare taxes (FICA) instead
  • Years of contributions in both countries can be combined to meet eligibility thresholds for retirement benefits

Common Mistakes When Moving from the UK to the US

Avoiding these pitfalls will save you time, money, and stress:

  1. Failing to file a US tax return: US tax residents must report worldwide income, even if all tax was paid abroad. Non-filing can lead to penalties and interest.
  2. Ignoring FBAR requirements: Keeping UK bank accounts, ISAs, or investment accounts without reporting them is a serious compliance failure.
  3. Assuming ISAs are tax-free in the US: They are not. This leads to underreporting of investment income.
  4. Not claiming Foreign Tax Credits: Many expats overpay by not properly claiming relief for taxes paid to the other country.
  5. Overlooking state taxes: Some US states (like California and New York) have high income taxes. Others (like Texas, Florida, and Nevada) have none. Your choice of state can dramatically affect your total tax burden.
  6. Missing deadlines: US tax returns are due 15 April (with an automatic extension to 15 June for those living abroad, and a further extension to 15 October upon request). UK self-assessment returns are due 31 January for online filing.

Frequently Asked Questions

Do I have to pay tax in both the UK and the US?

You may owe tax in both countries, but the US-UK tax treaty and the Foreign Tax Credit mechanism ensure you generally won't be double-taxed on the same income. You may still need to file returns in both countries.

Can I keep my UK bank accounts after moving to the US?

Yes, but you must report them on your FBAR (FinCEN Form 114) and potentially Form 8938 (FATCA). Some UK banks may also close or restrict accounts for US tax residents due to FATCA reporting requirements.

Will I still receive my UK State Pension if I move to the US?

Yes. The UK State Pension is payable worldwide, and it increases annually (due to the triple lock) for residents in the US because of the US-UK social security agreement. It will be taxable in the US.

How are stock options and RSUs taxed when I move?

Equity compensation is one of the most complex areas of expat taxation. Generally, the income is apportioned between countries based on where you worked during the vesting period. The US-UK treaty contains specific provisions for this.

What exchange rate should I use for US tax reporting?

The IRS requires you to convert foreign income to US dollars. You may use the yearly average exchange rate or the spot rate on the date of receipt, depending on the type of income. The IRS publishes annual average rates on its website.

Conclusion: Plan Early and Seek Professional Advice

Relocating from the United Kingdom to the United States creates a complex dual-country tax situation that requires careful planning. The key takeaways for the 2025/2026 tax year are:

  • Determine your UK departure date carefully to maximize split-year treatment and minimize overlapping residency.
  • Understand that the US taxes worldwide income — everything from UK pensions to ISA returns must be reported.
  • Leverage the US-UK tax treaty and Foreign Tax Credits to avoid double taxation.
  • Stay compliant with FBAR and FATCA reporting for your UK financial accounts.
  • Restructure UK investments (especially ISAs and UK-domiciled funds) to avoid PFIC complications.
  • Choose your US state wisely — state income taxes vary enormously and can significantly impact your total tax bill.

Use our United States Income Tax Calculator and United Kingdom Income Tax Calculator to model different scenarios and estimate your tax obligations in both countries.

The interaction between two of the world's most complex tax systems demands professional guidance. Start your planning early, ideally six to twelve months before your move, to ensure a smooth financial transition.

This article is for informational purposes only and does not constitute tax advice. Tax laws change frequently; consult a qualified tax professional for advice specific to your situation.