US vs UK Tax — Side-by-Side Comparison for 2026 / 2026-27

Retirement: 401(k) vs UK pensions / ISAs

UK auto-enrolment is mandatory; US 401(k) is voluntary. A £100k UK salary auto-enrols 8% combined (3% employer + 5% employee from gross salary). A $100k US salary triggers $0 mandatory employer retirement; if the employer offers a typical 50% match on first 6%, the employee must contribute $6,000 to capture the $3,000 match. Net result: similar combined contributions in many companies, but the UK's mandatory floor protects employees who don't actively elect.

UK ISA has no clean US equivalent. £20,000/yr (2026-27), tax-free growth, tax-free withdrawal, no income limits. Roth IRA is the closest US analog but limited to $7,000/yr with phase-out (single MAGI $146k–$161k 2026 estimated). Roth 401(k) has no income limit but follows 401(k) deferral rules. UK Lifetime ISA adds a 25% government top-up on £4k/yr until age 50 — exclusive to first-home buyers and retirement.

Cross-border treaty. The US-UK treaty recognises 401(k)/IRA and UK pensions as 'pensions' (deferred until withdrawal for residents of either country). One-way 401(k)/IRA-to-QROPS transfers exist but trigger US tax + 25% UK Overseas Transfer Charge in most cases. ISAs are NOT treaty-protected — IRS treats holdings as foreign trusts (Form 3520/3520-A) and PFIC rules apply to most UK funds inside.

If you're moving US → UK

• Tax residency: UK residency triggers under the SRT — 183+ days in a UK tax year, or fewer with UK ties. US residency ends for resident aliens on departure, but US citizens remain taxed on worldwide income forever.
• US citizen trap: Continue filing US returns from the UK. Use Foreign Earned Income Exclusion (~$130k 2026) + Foreign Tax Credit. Renouncing requires Form 8854 and may trigger expatriation tax.
• 401(k) / IRA: Stays in the US until withdrawal. UK-resident withdrawal taxed at marginal rate, with US foreign tax credit. Don't transfer to QROPS unless a specialist confirms the math.
• ISA caution: US citizens shouldn't open ISAs — IRS requires Form 3520/3520-A annually, and PFIC rules on UK fund holdings inside kill any tax efficiency. Stick with UK pensions, US 401(k)/IRA, and taxable accounts.
• Healthcare: NHS replaces employer health insurance — no more $300+/mo premium deductions. Net-after-cost benefit not visible in pure tax tables.
• FBAR / FATCA: Report any UK account exceeding US$10k aggregate via FinCEN Form 114 (FBAR). Form 8938 (FATCA) thresholds start at US$50k.
• Lower take-home: Expect noticeably lower take-home in the UK on the same nominal salary, especially in the £100k–£125,140 PA-taper range where the marginal rate hits 60%.

If you're moving UK → US

• Tax residency: US residency triggers via Substantial Presence Test or green card. UK residency ends per the SRT — typically when you leave for full-time work overseas (the 'leaver' tests).
• UK pension: Stays in UK; treaty-recognized as US pension (no annual taxation on growth). Withdrawals in the US are taxed at marginal rate; UK 25% lump-sum is NOT tax-free under US rules — taxed as ordinary income on US return.
• ISA: Lose ISA tax efficiency on US residency — IRS taxes it as a regular taxable account plus PFIC rules on equity funds inside. Consider closing or moving to cash before US move.
• State choice matters: A move to TX/FL/NV/WA leaves you with US federal only — typically beats UK by $20k+ at $100k salary. CA/NY/NJ adds 9–13% on top, narrowing the gap.
• Capital gains: US deems no exit tax for non-citizens. Long-term gains (1+ yr) qualify for 0/15/20% rates — much better than UK 18%/24%.
• Property: No federal/state transfer tax in the US (closing costs ~2–5% of purchase). Property tax is local and ranges 0.3% (HI/AL) to 2.5%/yr (NJ/IL) of assessed value.