Expat Tax Planning: Relocating from the United Kingdom to the United States in 2025/2026

Moving from the United Kingdom to the United States is one of the most significant financial transitions an expat can make. Beyond the cultural adjustment and logistics, understanding the expat tax implications of relocating from the United Kingdom to the United States is critical to protecting your income, avoiding double taxation, and staying compliant with two of the world's most complex tax systems. Whether you're relocating for work, business, or family reasons, this guide walks you through everything you need to know about taxes when moving from the UK to the US in the 2025/2026 tax year.

The stakes are high: the United States taxes its residents (and citizens) on worldwide income, while the United Kingdom applies residency-based taxation with specific departure rules. Without proper relocation tax planning, you could face unexpected liabilities, penalties, or missed opportunities for relief. Let's break it all down.

Understanding UK Tax Residency and the Split-Year Treatment

Before you leave the UK, you need to understand how HM Revenue & Customs (HMRC) determines your tax residency status — and what happens in the year you depart.

The Statutory Residence Test (SRT)

The UK uses the Statutory Residence Test (SRT) to determine your tax residency. The SRT considers:

The Automatic Overseas Test: You are automatically non-resident if you were resident in one or more of the three preceding tax years and spend fewer than 16 days in the UK, or if you were not resident in any of the three preceding tax years and spend fewer than 46 days in the UK.
The Automatic UK Test: You are automatically UK-resident if you spend 183 or more days in the UK, or your only home is in the UK for a continuous period of at least 91 days.
The Sufficient Ties Test: If neither automatic test is conclusive, HMRC examines your ties to the UK (family, accommodation, work, 90-day presence, and country ties) alongside days spent in the UK.

Split-Year Treatment

In the tax year you leave the UK (the UK tax year runs from 6 April to 5 April), you may qualify for split-year treatment. This means:

For the UK part of the year, you are taxed as a UK resident on worldwide income.
For the overseas part of the year, you are only taxed on UK-source income.

There are eight possible cases for split-year treatment. The most common for expats moving abroad is Case 1 (starting full-time work overseas). You must meet strict conditions, including working full-time abroad and spending no more than a permitted number of days in the UK.

Tip: If you leave the UK after 5 April 2025, the 2025/2026 UK tax year applies. Plan your departure date carefully to maximize the split-year benefit.

Use our United Kingdom Income Tax Calculator to estimate your UK tax liability for the portion of the year you remain UK-resident.

US Tax Residency: When Do Your US Tax Obligations Begin?

The United States has its own rules for determining when you become a US tax resident — and those rules differ depending on your immigration status.

The Green Card Test

If you receive a US Green Card (lawful permanent resident status), you are considered a US tax resident from the date the status is granted. You are then subject to US federal income tax on your worldwide income from that date forward.

The Substantial Presence Test

If you do not hold a Green Card, you may still become a US tax resident under the Substantial Presence Test. You meet this test if you have been physically present in the US for:

At least 31 days during the current calendar year, AND
At least 183 days during a 3-year look-back period, calculated as:
- All days present in the current year, plus
- 1/3 of the days present in the prior year, plus
- 1/6 of the days present in the year before that.

The First-Year Election

If you arrive in the US partway through the year and do not meet the Substantial Presence Test, you may be able to make a first-year election to be treated as a US resident from your arrival date. This can be beneficial if you want to file a joint return with a US-citizen spouse or claim certain deductions.

Dual-Status Year

In the year of your move, you may be considered a dual-status alien — a non-resident alien for part of the year and a resident alien for the other part. This has important implications for how your income is taxed and which deductions and credits are available to you.

Use our United States Income Tax Calculator to estimate your federal income tax liability for the 2025 tax year.

Income Tax Rates: UK vs. US for 2025/2026

Understanding the tax rate structures in both countries is essential for relocation tax planning.

UK Income Tax Rates (2025/2026)

Band	Taxable Income	Rate
Personal Allowance	Up to £12,570	0%
Basic Rate	£12,571 – £50,270	20%
Higher Rate	£50,271 – £125,140	40%
Additional Rate	Over £125,140	45%

Note: The Personal Allowance is reduced by £1 for every £2 of income above £100,000, reaching zero at £125,140.

US Federal Income Tax Rates (2025 Tax Year — Single Filer)

Bracket	Taxable Income	Rate
1	Up to $11,925	10%
2	$11,926 – $48,475	12%
3	$48,476 – $103,350	22%
4	$103,351 – $197,300	24%
5	$197,301 – $250,525	32%
6	$250,526 – $626,350	35%
7	Over $626,350	37%

Note: These are federal rates only. Most US states impose additional state income taxes, ranging from 0% (e.g., Texas, Florida) to over 13% (California). Your choice of US state can dramatically affect your total tax burden.

Practical Example

Suppose you earn a total of £80,000 (approximately $100,000 at current exchange rates) in the 2025/2026 tax year. If you qualify for split-year treatment and earn £40,000 in the UK portion and $50,000 in the US portion:

UK tax on £40,000: Approximately £5,486 after the Personal Allowance (£12,570 at 0%, remaining £27,430 at 20%).
US federal tax on $50,000 (single filer, standard deduction of $15,000): Approximately $4,190 on taxable income of $35,000.

The exact figures depend on your deductions, credits, and applicable treaty provisions. Use our United Kingdom Income Tax Calculator and United States Income Tax Calculator to model your specific scenario.

The US-UK Double Taxation Treaty

One of the most important tools for expat tax planning when moving from the United Kingdom to the United States is the US-UK Double Taxation Convention (the tax treaty). This treaty prevents you from being taxed twice on the same income by both countries.

Key Provisions of the Treaty

Employment Income (Article 14): Generally, employment income is taxable only in the country where the services are performed. If you work in the US, your salary is typically taxable in the US, not the UK (assuming split-year treatment applies).
Pension Income (Article 17): Pensions are generally taxable only in the country of residence. However, government pensions (e.g., UK civil service pensions) may be taxable only in the UK.
Interest and Dividends: The treaty reduces withholding tax rates on cross-border interest (0%) and dividends (generally 15%, or 0% for certain pension funds).
Capital Gains (Article 13): Gains on the sale of real property are taxable in the country where the property is located. Gains on other assets are generally taxable only in the country of residence.
Savings Clause: The US reserves the right to tax its citizens and residents as if the treaty did not exist, but provides foreign tax credits to offset double taxation.

Foreign Tax Credit vs. Tax Treaty Relief

As a US tax resident, you generally have two mechanisms to avoid double taxation:

Foreign Tax Credit (Form 1116): You can claim a credit against your US tax for income taxes paid to the UK. This is the most common method.
Treaty-based positions: In certain cases, the treaty may exempt specific types of income from US or UK taxation entirely.

Common Mistake: Many expats assume the tax treaty automatically applies. In reality, you must actively claim treaty benefits on your US tax return (typically using Form 8833) and ensure you file correctly with HMRC.

US Reporting Requirements You Cannot Ignore

Relocating to the United States triggers a range of reporting obligations that go beyond just filing a tax return. Failure to comply can result in severe penalties.

FBAR — Foreign Bank Account Reporting (FinCEN Form 114)

If the aggregate value of your foreign financial accounts (including UK bank accounts, ISAs, investment accounts, and pensions) exceeds $10,000 at any point during the calendar year, you must file an FBAR with the Financial Crimes Enforcement Network (FinCEN). Key points:

The FBAR is filed separately from your tax return, electronically through the BSA E-Filing System.
The deadline is April 15, with an automatic extension to October 15.
Penalties for non-filing can reach $10,000 per violation (non-willful) or the greater of $100,000 or 50% of the account balance (willful).

FATCA — Form 8938 (Statement of Specified Foreign Financial Assets)

Under the Foreign Account Tax Compliance Act (FATCA), you must report specified foreign financial assets on Form 8938 if their value exceeds:

$50,000 on the last day of the tax year, or $75,000 at any point during the year (single filers living in the US).
Higher thresholds apply for married couples filing jointly and for US taxpayers living abroad.

Other Key Forms

Form 3520 / 3520-A: Required if you are a beneficiary of or have transactions with a foreign trust (some UK pension schemes may qualify).
Form 8621: Required for ownership in Passive Foreign Investment Companies (PFICs). UK-based mutual funds, unit trusts, and OEICs are typically classified as PFICs, triggering complex and often punitive US tax treatment.

Warning: Many UK investments that are tax-efficient in the UK (such as ISAs and certain pension wrappers) lose their tax-advantaged status in the US. ISA income and gains are fully taxable in the US. UK funds held in ISAs may also trigger PFIC reporting. Review your investment portfolio before or shortly after your move.

Strategic Tax Planning Tips for UK-to-US Expats

Proper relocation tax planning can save you thousands of pounds (or dollars). Here are actionable strategies to consider:

1. Time Your Departure Carefully

Leaving the UK early in the tax year (shortly after 6 April) maximizes the overseas portion of the split year, reducing your UK tax exposure. Conversely, arriving in the US later in the calendar year can reduce your US tax obligations for that year.

2. Realize Capital Gains Before Departure

The UK offers an annual Capital Gains Tax (CGT) exempt amount (£3,000 for 2025/2026). Consider realizing gains on UK investments before departure to take advantage of this allowance and potentially lower UK CGT rates, rather than facing US tax treatment later.

3. Restructure UK Investments

As noted, UK funds are often classified as PFICs in the US, with punitive tax consequences. Before moving:

Sell UK-based mutual funds, unit trusts, and OEICs.
Consider reinvesting in US-domiciled index funds or ETFs after arrival.
Close or liquidate your Stocks & Shares ISA and consider US-equivalent tax-advantaged accounts (e.g., 401(k), IRA) once eligible.

4. Understand Your UK Pension Options

UK pensions (including workplace pensions and SIPPs) have complex US tax implications:

The US-UK tax treaty provides some protection for pension growth, but the rules are intricate.
Do not transfer a UK pension to a QROPS (Qualifying Recognised Overseas Pension Scheme) without professional advice — this can trigger significant US tax liabilities.
Contributions to UK pensions after becoming a US tax resident may not receive US tax relief.

5. Choose Your US State Wisely

If you have flexibility in where you live in the US, your state choice matters enormously:

No state income tax: Alaska, Florida, Nevada, New Hampshire (limited), South Dakota, Tennessee, Texas, Washington, Wyoming.
High state income tax: California (up to 13.3%), New York (up to 10.9%), New Jersey (up to 10.75%).

This decision alone can change your effective tax rate by 10+ percentage points.

6. File a Departure Tax Return in the UK

Ensure you file a Self-Assessment tax return with HMRC for the year of departure. Claim split-year treatment on the return and report all UK-source income. Notify HMRC that you are leaving the UK so they can update your tax records.

7. Keep Meticulous Records

Maintain records of:

Your exact departure and arrival dates.
Days spent in the UK and US throughout the transition year.
All income sources, in both currencies, with exchange rates used.
Taxes paid in each country (for foreign tax credit claims).

Frequently Asked Questions

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

Not on the same income, thanks to the US-UK Double Taxation Treaty and the foreign tax credit mechanism. However, you must file returns in both countries for the transition year and actively claim relief. Without proper planning, you could temporarily face double taxation before credits are applied.

What happens to my UK ISA when I move to the US?

Your ISA remains open, but you typically cannot make new contributions as a non-UK resident. More importantly, the US does not recognize the ISA's tax-free status. All interest, dividends, and capital gains within the ISA are taxable on your US return. Underlying funds may also be classified as PFICs.

Will I still receive the UK Personal Allowance as a non-resident?

As a US citizen or resident with no UK residency, you may still be entitled to the UK Personal Allowance if you are a national of an EEA state or if the US-UK treaty provides for it. Since the UK-US treaty does include provisions for personal allowances, most US-resident British citizens retain the allowance against UK-source income.

When do I need to file US taxes?

The US tax year is the calendar year (January 1 – December 31). The filing deadline is April 15 of the following year, with extensions available to October 15. Expats living abroad receive an automatic extension to June 15, but any tax owed is still due by April 15.

Should I use the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit?

The Foreign Earned Income Exclusion (FEIE) allows qualifying US taxpayers living abroad to exclude up to $130,000 (2025) of foreign earned income. However, since you are moving to the US (not living abroad), the FEIE generally does not apply to your US-source income. It may apply to UK earnings during the period before your arrival if you meet the bona fide residence or physical presence test. In most UK-to-US moves, the Foreign Tax Credit is the more relevant mechanism.

Conclusion: Plan Early, Save More

Relocating from the United Kingdom to the United States in 2025/2026 involves navigating two sophisticated tax systems simultaneously. The key takeaways for your expat tax planning are:

Determine your residency status in both countries for the transition year using the SRT and the Substantial Presence Test or Green Card Test.
Claim split-year treatment in the UK to limit your UK tax exposure to UK-source income only.
Leverage the US-UK Double Taxation Treaty and foreign tax credits to prevent being taxed twice.
Restructure UK investments (especially ISAs and fund-based holdings) before your move to avoid PFIC complications.
Stay compliant with FBAR, FATCA, and other US reporting requirements — penalties are severe.
Choose your US state carefully to minimize your combined federal and state tax burden.

Use our United Kingdom Income Tax Calculator and United States Income Tax Calculator to model your income and estimate your tax liabilities in both countries.

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.