FOR US CITIZENS LIVING IN THE UK

An American in the UK? A service engineered for clarity

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Fully independent advice

Independent

Fully independent advice

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Navigating the complexities where others fear to tread

With over 25 years of experience between us advising US citizens resident in the UK, and others facing multi-jurisdictional challenges, there is a reason we are the go-to financial planners in this field. Our expertise in financial planning and comprehensive wealth management for US expats in the UK is reflected in the testimonials from our existing clients.

As a general rule, US citizens are assessed on their worldwide income, irrespective of where they live. Many double taxation conventions contain what is known as a "saving clause", which allows US citizens resident in other countries to be taxed on the basis of citizenship.

There are many challenges and complexities that US expats in the UK need to understand.

Passive Foreign Investment Company rules (PFICs)

Investing in non-US domiciled ETFs, unit trusts or other types of collective investment results in additional IRS reporting, which also costs you more through tax adviser fees, higher tax paid, and possible penalties if not reported in time. At N2 Asset Management, all portfolios, including those for personal pensions, are made up of non-PFIC investments.

Personal pension contributions

UK pensions can present additional complexities for US citizens, as the tax treatment of contributions, investment growth and withdrawals can differ between the UK and the US.

Although pension contributions may qualify for UK tax relief, the US tax treatment depends on the type of pension arrangement, the individual's circumstances and the provisions of the UK–US double taxation treaty. In certain circumstances, the treaty can provide valuable relief, including the deferral of US tax on investment growth within qualifying pension arrangements.

Careful consideration is therefore needed when making pension contributions, selecting investments and planning withdrawals to ensure the arrangements are appropriate from both a UK and US tax perspective.

US Social Security and the UK State Pension

The interaction is complex when people have earned benefits in both countries. You could be paid benefits from each country, or there may be cases where you use the social security agreement between the US and the UK, sometimes known as the "totalisation agreement", and receive benefits from only one country.

UK reporting funds

Most US domiciled ETFs and unit trusts are not reporting for HMRC purposes, and as a result realised gains are not subject to the lower capital gains tax rates but to the marginal income tax rate, which is a lot higher at 40% and 45%. Portfolios made up of US domiciled ETFs, held to meet the non-PFIC rules, therefore need to be constructed carefully from reporting ETFs.

Sale of a UK main residence

US citizens are taxed on the gains from selling their UK main residence, although an exemption of $250,000 may apply depending on eligibility and circumstances. For qualifying married couples filing jointly, this could be up to $500,000.

Claiming the arising basis or the FIG regime

The Foreign Income and Gains (FIG) regime enables qualifying new residents to claim UK tax relief on foreign income and gains arising during their first four years of UK residence.

Becoming a UK long-term resident and subject to UK Inheritance Tax

From 6 April 2025, the UK introduced a residence-based approach to Inheritance Tax, replacing the previous domicile-based rules for determining the treatment of overseas assets.

Broadly speaking, individuals who have been UK tax resident for at least 10 of the previous 20 tax years may become subject to UK Inheritance Tax on their worldwide estate. Depending on their period of UK residence, they may also remain within the scope of UK Inheritance Tax for several years after leaving the country.

These rules can have significant implications for US citizens with assets held overseas, particularly where trusts have been established as part of their US estate planning. Certain trusts may become subject to UK Inheritance Tax charges, including periodic and exit charges, depending on their structure and circumstances.

As UK and US estate tax rules differ considerably, reviewing existing arrangements and planning ahead is essential to avoid unintended tax consequences.

Other common issues

There are other issues, such as letting your US credit score lapse by not using US credit cards, assuming US trust and estate planning works in the UK, and neglecting to make UK National Insurance contributions.

This information should not be considered UK or US tax advice.

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What to expect when working with us

Financial planning with N2 follows a clear path — from an initial conversation to a written plan built around your life, and an ongoing relationship that keeps it on track as things change.

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Getting to know each other

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Understanding your situation

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Making sense of where you stand

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Building your plan

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Reviewing life as it moves on

What our clients say

"Eugen delivered calm, professional guidance that gave me clarity and confidence. Eugen has a very good understanding of the US and UK legal and tax issues regarding international divorces and I now have a plan I trust and a much stronger sense of financial security."

— Verified client, Surrey

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"Eugen and team build a view on of our financial acumen and situation, and from there, provide guidance which is accessible (at our level) to us, practical, and considered in context of macro economic and political dynamics influencing long term investments."

— Verified client, London

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