UK Tax and Financial Considerations When Moving to the USA

A move from the United Kingdom to the United States is one of the most significant financial events in a person’s life, and not only because of the cost of the relocation itself. The act of leaving the UK triggers a series of tax obligations, reporting requirements, and planning decisions that interact across two complex tax systems simultaneously. Getting this right requires specialist advice. Getting it wrong can be genuinely costly, and in some cases the consequences take years to unwind.

This guide provides an honest overview of the key financial and tax considerations for British nationals planning a permanent move to the United States. It covers what you need to do on the UK side before and after departure, the implications of retaining UK assets and property, the US reporting obligations that will apply from the moment you arrive, and the significant changes to the UK’s tax treatment of internationally mobile individuals that came into effect in April 2025. It is not a substitute for professional advice, and we would always recommend engaging a cross-border tax specialist well before your departure date.

A note on professional advice: the interaction of the UK and US tax systems is genuinely complex, and this guide is intended to orientate rather than instruct. Every individual’s situation is different. Engaging a qualified cross-border tax adviser, familiar with both the UK and US systems, is not a discretionary step for those with meaningful assets, property, pensions, or financial complexity. It is an essential part of the move.

The most common and costly mistake in the financial planning of an international move is leaving it too late. The period before departure is the window in which the most important decisions can be made and the most useful restructuring can be carried out. Once you are a US tax resident, your options narrow considerably. Accounts that could have been consolidated or closed, investments that could have been restructured, property decisions that could have been made on more favourable terms: all of these are more straightforward to address before you leave than after you arrive.

The recommendation is simple. If you are planning a move to the United States in the next twelve to twenty-four months, engage a cross-border tax adviser at the same time as you engage your immigration lawyer, not afterwards. The two sets of advice interact in ways that matter to your planning, and beginning both early gives you the room to make informed decisions rather than reactive ones.

Completing Form P85

When leaving the UK permanently, or departing for full-time employment overseas for at least one complete tax year, you are required to complete HMRC Form P85. This closes off your UK Pay As You Earn record and ensures your tax affairs are correctly finalised for the year of departure. The form can be completed online via your HMRC personal tax account. If you are registered for Self Assessment, you should instead complete the SA109 residency supplementary pages alongside your final tax return rather than filing the P85 separately.

Those retaining UK rental property should apply for the Non-Resident Landlord Scheme using Form NRL1i. Without this, your letting agent or tenant is required to withhold 20% of rental income at source on HMRC’s behalf. Registering for the scheme allows rental income to be paid gross, with the tax position managed through your UK Self Assessment return instead.

The Statutory Residence Test

Your UK tax residency status after departure is determined each year by the Statutory Residence Test (SRT), which takes into account the number of days you spend in the UK during the tax year and the ties you retain here. The test applies year by year, and the consequences of being treated as UK resident in a year when you believed yourself to be non-resident can be significant.

The key thresholds to understand are these. Spending 183 days or more in the UK in any tax year makes you automatically UK resident for that year. Spending fewer than 16 days in the UK, having been UK resident in any of the preceding three tax years, makes you automatically non-resident. Between these anchors, the outcome depends on the combination of days spent in the UK and the number of connecting ties you retain: accommodation, family, work, or substantial historical presence.

For most people making a clean break to the United States, non-residence is achievable from the date of departure, but it requires care. Return visits to the UK for holidays, family, or business must be managed within the day-count thresholds. Those who travel back to the UK frequently, or who retain close family ties here, should take specific advice on how the SRT applies to their circumstances. Split-year treatment is available in the year of departure, dividing the tax year into a UK portion and an overseas portion: this must be claimed through your Self Assessment return.

For those retaining UK property after moving to the United States, two significant ongoing obligations apply, one on each side of the Atlantic.
On the UK side, rental income from UK property remains taxable in the United Kingdom regardless of where you are resident, and must be reported through UK Self Assessment. Capital gains tax applies to any disposal of UK residential property, at rates of 18% for basic rate taxpayers and 24% for higher rate taxpayers, with an annual exempt amount of just £3,000. A 60-day reporting and payment deadline applies from the date of completion: missing this window incurs automatic penalties. If you return to the UK within five full tax years of leaving, any gains realised on UK property while you were non-resident may become taxable in the UK on your return, under the temporary non-residence rules.

On the US side, rental income from your UK property must be reported on your US federal tax return on Schedule E, denominated in US dollars. Foreign Tax Credits are available to offset UK tax paid against the US liability on the same income, preventing double taxation in most cases. However, the currency conversion requirement introduces an additional layer of complexity: because the IRS requires all reporting in dollars, exchange rate movements can create or eliminate apparent gains and liabilities in ways that have no real-world equivalent in sterling terms.

One scenario that catches many British homeowners by surprise is the treatment of UK mortgage redemption. If you took out a sterling mortgage when the pound was stronger against the dollar and redeemed it when the pound had fallen, the IRS may treat the exchange rate difference as a taxable gain, even if the property itself generated no capital appreciation in sterling. This is not a common trap that general removal guides address, but it is one that a cross-border tax specialist will identify and plan around.

UK Individual Savings Accounts are one of the most misunderstood financial products in the context of an international move. ISAs are entirely tax-free in the United Kingdom: no income tax on interest or dividends, no capital gains tax on growth. The IRS does not recognise this tax-free status. From the moment you become a US tax resident, the income and gains within your ISA are taxable in the United States, and must be reported on your US federal return.

The additional complication is that many stocks and shares ISAs hold collective investment funds, including unit trusts and OEICs, that the IRS classifies as Passive Foreign Investment Companies (PFICs). The PFIC regime carries punitive US tax treatment and complex additional reporting requirements on Form 8621. The practical implication is that many British expats find it significantly simpler to close or restructure their ISA holdings before becoming US tax resident, rather than managing the ongoing US reporting burden from abroad. This is precisely the kind of decision that benefits from being made before departure, with specialist advice, not after arrival.

UK current accounts, savings accounts, and investment portfolios held in the UK must be reported to the US Treasury via the Foreign Bank Account Report (FBAR) if the aggregate balance of all non-US financial accounts exceeds $10,000 at any point during the calendar year. The FBAR is filed electronically and is separate from your tax return. The penalties for non-filing are significant: up to $16,000 per violation for non-willful failure. In addition, those with foreign financial assets above $200,000 (single filers) or $400,000 (married filing jointly) must file Form 8938 under FATCA. These are reporting requirements, not taxes: no additional liability arises simply from holding the accounts, but the reporting must be done correctly and on time.

UK pension arrangements, whether workplace defined benefit schemes, defined contribution plans, SIPPs, or personal pensions, interact with the US tax system in ways that require specific attention and, in most cases, specialist advice before departure.

The good news is that the UK-US double taxation treaty provides meaningful protection. Under its terms, contributions to a qualifying UK pension scheme may be deductible for US tax purposes, and the pension is generally treated similarly to a US-qualified retirement plan, allowing the fund to grow on a tax-deferred basis. Once you begin drawing the pension, it is taxable primarily in the country where you are resident, which for those living in the United States means the IRS will tax your UK pension income. Foreign Tax Credits are available to offset any UK tax withheld.

The more complex situation arises with SIPPs and certain other pension structures, which the IRS may classify as foreign trusts. This classification triggers additional reporting requirements on Forms 3520 and 3520-A. The penalties for failing to file these forms correctly are severe: $10,000 or more per year. If your pension arrangements include a SIPP or any structure with trust-like characteristics, this must be reviewed with a specialist adviser before departure. Restructuring or consolidating pension holdings before you leave may significantly simplify your US reporting obligations.

UK State Pension

Your UK State Pension remains payable in full while you live in the United States, and, importantly, it is uprated annually under the UK-US Social Security Totalization Agreement. This puts British expats in the United States in a considerably better position than those in countries such as Australia or Canada, where UK pensions are frozen at the rate at which they were first paid. The full new State Pension for 2025/26 is £230.25 per week, requiring 35 qualifying years of National Insurance contributions.

The most significant change to the UK’s international tax landscape in a generation came into effect on 6 April 2025. The remittance basis regime, under which non-domiciled UK residents could elect to pay UK tax only on income and gains brought to the United Kingdom, was abolished. In its place, the new Foreign Income and Gains (FIG) regime provides 100% tax relief on foreign income and gains for the first four years of UK residence, for individuals who have been non-UK tax resident for at least ten consecutive years before becoming UK resident.

For those who have historically claimed non-dom status and are now planning to leave the UK for the United States, the transition requires careful management. A Temporary Repatriation Facility allows unremitted foreign income and gains accumulated under the old regime to be brought to the UK at reduced tax rates: 12% in the 2025/26 and 2026/27 tax years, rising to 15% in 2027/28. After that, the standard rates apply. For those with significant unremitted foreign income, the decision of whether and when to use the Temporary Repatriation Facility before departure is a material financial planning question with a closing window.

Inheritance tax has also shifted to a residence-based system from April 2025. Long-term UK residents, broadly defined as those who have been resident for ten of the preceding twenty tax years, face IHT on worldwide assets. The liability does not cease immediately on departure: a tail of up to ten years applies, depending on the length of prior UK residence. For those leaving the UK for the United States after many years of residence, understanding the precise IHT tail that applies to their circumstances is an important element of the pre-departure planning process.

Anyone who has claimed non-dom status, or who has significant offshore assets or trust structures, should treat the period before departure as a critical planning window and take comprehensive specialist advice without delay.

The United Kingdom and the United States have a comprehensive double taxation agreement, signed in 2001 and in force since 2003, which governs how income is taxed when a person has obligations in both countries. Its principal purpose is to prevent the same income being taxed twice, and it achieves this through a combination of jurisdictional rules and foreign tax credit provisions.

The key provisions most relevant to British nationals moving to the United States are these. Employment income is taxed in the country where the work is performed. Pensions are generally taxable in the country of residence, meaning that once you are a US resident your UK pension income is primarily taxable in the United States. Rental income from UK property is taxed in the UK, with Foreign Tax Credits available in the US to prevent double taxation. Dividends from UK companies face a maximum 15% withholding tax at source, and interest is generally exempt from withholding in the source country.

It is important to understand the limits of the treaty. The United States taxes its citizens on worldwide income regardless of where they live, and the treaty’s “saving clause” means the US retains this right even for treaty provisions that would otherwise allocate taxing rights elsewhere. For British nationals who are not US citizens, the treaty operates more straightforwardly. For those who become US citizens, the interaction becomes considerably more complex and requires specialist advice.

From the date you become a US tax resident, your obligation to file a US federal tax return begins. US tax residency is determined by the Substantial Presence Test: spending more than 31 days in the US in the current year and more than 183 days across the current and two preceding years triggers US tax residency. Once resident, all worldwide income must be reported on Form 1040.

US federal income tax is levied on a progressive scale with rates from 10% to 37%. In addition, most states levy their own income tax, with rates that vary significantly: Florida and Texas have no state income tax, while California and New York levy rates of up to 13.3% and 10.9% respectively. The state in which you choose to settle has a direct and material impact on your effective total tax rate.

Beyond income tax, the FBAR and FATCA reporting requirements described above apply from your first year of US residency. Engaging a US-qualified accountant, ideally one with experience in UK-US cross-border taxation, in your first year is strongly recommended. The consequences of late or incorrect filing in the US system, including penalties and interest, are considerably more severe than most British arrivals expect.

The following are the most time-sensitive financial and tax actions for anyone planning a move to the United States in the coming months.

• Engage a cross-border tax adviser immediately. The pre-departure window is your most valuable planning opportunity. Do not leave this until the weeks before you move.
• Address unremitted foreign income under the Temporary Repatriation Facility if you have historically claimed non-dom status. The 12% rate applies in 2025/26 and 2026/27 only.
• Review and consider restructuring ISA and OEIC holdings before becoming a US tax resident. PFIC treatment of UK collective funds creates ongoing reporting complexity that is much easier to avoid than to manage.
  Assess your pension arrangements, particularly SIPPs, for potential foreign trust classification under US rules. Restructuring before departure may significantly reduce your annual US reporting obligations.
• Complete Form P85 to notify HMRC of your departure, and apply for the Non-Resident Landlord Scheme if retaining UK rental property.
  Make property decisions with an understanding of the 60-day CGT reporting requirement and the temporary non-residence rules if there is any prospect of returning to the UK within five years.
• Understand your IHT tail if you have been UK resident for many years. The new residence-based IHT regime means your exposure does not end on the day you leave.

Williams and Yates does not provide tax or financial advice, and we would not want to position ourselves as a substitute for the qualified cross-border specialists your move genuinely requires. What we offer is something equally important: a logistics partner who understands the complexity of what you are managing, coordinates the physical aspects of the move around your planning timeline, and ensures that nothing in the relocation itself creates additional complications for your financial position.

From the moment you engage us, your dedicated move coordinator works around your confirmed timeline, including visa dates, UK property transactions, and any financial restructuring that affects when and how you depart. For those relocating with fine art, antiques, wine collections, or other high-value assets, our specialist logistics capability ensures that the physical handling of those assets meets the same standard as the financial care being taken around them. We build bespoke crates in-house, manage climate-controlled shipping for fragile or sensitive items, and oversee end-to-end customs documentation on both sides of the Atlantic.

We work regularly alongside trusted cross-border tax and financial advisers and are happy to make introductions where that would be helpful. The right team around a complex international relocation makes a material difference to how smoothly every stage unfolds.

To arrange a home survey and begin the planning process, please get in touch. The earlier you involve us, the more effectively we can build the physical move around your broader relocation plan.