US Expat Tax in United Kingdom (2026)

For most UK-employed Americans earning above roughly £50,270 (top of 20% band), the Foreign Tax Credit (Form 1116) produces a lower or zero US tax because UK tax is higher than the US tax on the same income. The FEIE only eliminates US tax up to the exclusion limit, and the tax that falls above the limit is still taxed at your full marginal rate under the stacking rule. Run both methods before deciding — once you revoke an FEIE election, you cannot re-elect it for 5 tax years without IRS approval.

Usually no. The US-UK Totalization Agreement (in force since 1985) means that if you are covered by UK National Insurance as an employee or self-employed person, you generally are exempt from US Social Security and Medicare on the same earnings. Request a Certificate of Coverage from HMRC (for UK coverage) or the SSA (for US coverage) to document the exemption.

No. The US does not recognize UK ISAs as tax-advantaged. Interest, dividends, and capital gains inside an ISA are fully reportable on your US return. Stocks-and-shares ISAs holding non-US funds are almost always PFICs, which triggers punitive US tax rules (Form 8621). Most US expats in the UK avoid ISA funds and use direct US brokerage accounts.

The US-UK treaty (Article 18) gives employer pension schemes and most personal pensions (including SIPPs) favorable treatment: contributions may be deductible for US purposes, and growth is generally tax-deferred until distribution. Treaty-based positions must be disclosed on Form 8833. FBAR (FinCEN 114) and Form 8938 may still be required.

Yes. London is listed on the IRS annual high-cost city table (Notice 2025 series), which allows a higher housing exclusion limit than the default 30% of the FEIE cap. Use your actual qualifying rent, utilities (excluding phone/TV), and renter's insurance, subtract the base amount (16% of the FEIE limit), and cap at the London-specific limit from the current year's IRS notice.