US expat working in the UK reviewing tax documents with a US and UK tax advisor

Working in the UK? US Expat Tax Awareness Explained

Working in the UK can be an exciting opportunity for US citizens, green card holders and American expats. Whether you have moved to London for employment, business, family, education or a long-term career opportunity, the UK offers access to one of the world’s most established professional and financial markets.

However, one area that many US expats underestimate is tax. Living or working in the UK does not automatically remove your US tax responsibilities. At the same time, becoming UK tax resident may also bring HMRC reporting obligations. This means many Americans working in Britain need to consider both US and UK tax systems at the same time.

This is where proper US/UK tax awareness becomes essential. Mistakes can lead to missed filings, unnecessary stress, double taxation concerns, penalties, or confusion over which country has the right to tax certain types of income.

Why US Expats in the UK Need Tax Awareness

The United States has a different approach to taxation compared with many other countries. US citizens and resident aliens generally remain subject to US tax reporting requirements even when they live abroad. This can come as a surprise to Americans who assume that paying UK tax through employment or self-employment is enough.

For example, a US citizen working in London may pay UK income tax through PAYE. However, that does not automatically mean their US tax filing obligations disappear. Depending on their income level, filing status, bank accounts, investments and personal circumstances, they may still need to file a US federal tax return and possibly additional forms.

For UK purposes, tax residence is also important. HMRC uses the Statutory Residence Test to determine whether someone is UK tax resident for a particular tax year. Once you are UK tax resident, your UK tax position may be affected by your employment income, foreign income, gains, savings, investments and other sources of wealth.

The key point is simple: if you are American and working in the UK, your tax position should not be treated casually.

US Tax Responsibilities While Working in the UK

Many US expats working in the UK need to consider whether they are required to file a US tax return. This may apply even if they do not owe any US tax after reliefs, credits or exclusions are considered.

Common US tax matters for Americans in the UK may include:

US Federal Income Tax Returns

US citizens and certain US resident aliens living abroad may still need to file annual US tax returns. This can include reporting salary, self-employment income, rental income, investment income, dividends, capital gains and other income.

Many expats wrongly assume that if their income is earned in the UK and taxed in the UK, it does not need to be reported to the IRS. In many cases, that assumption is incorrect. Reporting and payment are not the same thing. You may have a filing requirement even if the final US tax due is reduced or eliminated by available tax relief.

Foreign Earned Income Exclusion

Some US expats may qualify for the Foreign Earned Income Exclusion, which can allow eligible individuals to exclude a portion of foreign earned income from US taxable income. However, this is not automatic. It must be claimed correctly, and eligibility depends on specific rules.

It is also important to understand that the Foreign Earned Income Exclusion does not cover every type of income. It generally relates to earned income, not investment income, rental profits, dividends, pension income or capital gains.

Foreign Tax Credit

The Foreign Tax Credit may also help reduce double taxation where tax has already been paid to the UK. For many US expats in the UK, this can be highly relevant because UK tax rates may be significant.

However, the correct approach depends on the individual’s circumstances. Choosing between claiming the Foreign Earned Income Exclusion and using Foreign Tax Credits requires care, especially where pensions, investments, future planning, capital gains or UK tax exposure are involved.

FBAR and Foreign Account Reporting

US expats in the UK may also need to consider foreign bank account reporting. If the combined value of certain non-US financial accounts exceeds the relevant reporting threshold at any point during the year, an FBAR filing may be required.

This can include UK bank accounts, savings accounts, investment accounts and certain other financial accounts. The FBAR is separate from the US tax return, and many expats only discover the requirement after they have already missed previous filings.

This is one of the most common areas where US expats need professional guidance because the rules can apply even where no additional tax is due.

UK Tax Responsibilities for US Expats

Working in the UK also brings UK tax considerations. Depending on your employment status, residence position and income sources, you may need to deal with HMRC as well as the IRS.

UK Employment Income

If you are employed in the UK, your employer may deduct income tax and National Insurance through PAYE. For some individuals, PAYE may deal with most UK employment tax obligations. However, it does not automatically cover every situation.

You may still need to file a UK Self Assessment tax return if you have additional income, are self-employed, have rental income, claim certain reliefs, receive foreign income, have capital gains, or fall into other HMRC reporting categories.

UK Tax Residence

Your UK tax residence position is highly important. The UK tax year runs from 6 April to 5 April, which is different from the US calendar tax year. HMRC’s Statutory Residence Test considers factors such as days spent in the UK, work patterns, accommodation, family ties and other connections.

This means that a person may need careful advice when arriving in the UK, leaving the UK, splitting time between countries, or working internationally.

Foreign Income and Gains

US expats in the UK may also need to consider how foreign income and gains are treated. This can include US investment income, rental income, pension income, business income or gains from selling assets.

The UK rules in this area can be complex, particularly for internationally mobile individuals. A tax position that appears simple at first may become more complicated when both HMRC and IRS reporting are considered together.

Common Mistakes US Expats Make

US expats working in the UK often make mistakes because they assume one tax system automatically recognises the other. Unfortunately, US and UK tax rules are not identical.

Common mistakes include assuming UK tax payment removes the need for US tax filing, failing to report UK bank accounts, forgetting about FBAR, misunderstanding the Foreign Earned Income Exclusion, ignoring US state tax issues, failing to plan before selling assets, overlooking pension treatment, and waiting until deadlines are close before seeking advice.

Another common mistake is using a tax adviser who only understands one side of the issue. A UK-only accountant may not understand IRS reporting. A US-only tax preparer may not understand HMRC rules. For US expats in the UK, the best approach is usually to seek advice from professionals who understand both systems.

Why Professional US/UK Tax Advice Matters

US and UK tax compliance is not simply about filling in forms. It is about understanding how both tax systems interact.

A US expat working in the UK may need to consider income tax, foreign tax credits, foreign earned income exclusion, FBAR, FATCA, pensions, investments, capital gains, property, self-employment, business ownership, state tax, UK Self Assessment and future relocation plans.

Professional advice can help reduce the risk of mistakes and provide clarity over what needs to be filed, when it needs to be filed, and how your affairs should be structured.

For many expats, the value of good advice is not only financial. It also provides peace of mind. Knowing that both your IRS and HMRC obligations have been considered properly allows you to focus on your work, family and life in the UK.

Contact Xerxes Associates LLP

If you are a US expat working in the UK and need help understanding your US and UK tax obligations, Xerxes Associates LLP can assist.

Xerxes Associates LLP is a London-based firm of specialist US and UK tax advisers. The team provides support for US citizens living in the UK, UK expats in the US, and individuals with cross-border tax requirements. Their services include US federal and state income tax returns, UK Self Assessment tax returns, personal tax planning, FBAR and ITIN assistance, consultations and expat tax support.

To discuss your circumstances, contact Xerxes Associates LLP using the details below:

Xerxes Associates LLP
Warnford Court
29 Throgmorton Street
London
EC2N 2AT
United Kingdom

Telephone: +44 (0)207 411 9026
Alternative Number: +44 (0)207 411 9051
Email: info@xerxesllp.com
Website: xerxesllp.com

If you are unsure whether you need to file in the US, the UK, or both, it is better to seek advice early rather than wait until a deadline or tax issue arises.

American expat in the UK discussing HMRC and IRS tax obligations with a US and UK tax adviser

American Expats and UK Tax Obligations

For American expats living in the UK, tax can quickly become more complicated than expected. Moving to Britain does not always mean leaving the US tax system behind. At the same time, living, working or investing in the UK may create obligations with HMRC.

This means many American expats need to think about two tax systems at once: the United States tax system and the United Kingdom tax system. Each has its own rules, filing requirements, deadlines, definitions and reporting obligations.

Whether you are employed in London, self-employed in the UK, running a business, receiving investment income, renting property, or planning a long-term move, it is important to understand your tax position properly.

Good tax awareness can help you avoid missed filings, unexpected penalties, double taxation concerns and unnecessary stress.

Why American Expats Need to Think About UK Tax

The UK tax system can apply to American expats in several ways. If you live in the UK, work in the UK, own UK property, earn UK-source income, or become UK tax resident, HMRC may expect you to report income, gains or other financial activity.

Some American expats assume that because they are US citizens, their main tax responsibility is only to the IRS. Others assume that if they pay UK tax, they no longer need to file anything in the United States. Both assumptions can be dangerous.

The reality is that your tax obligations depend on your personal circumstances. Your residence status, income sources, employment arrangement, bank accounts, investments, business interests, pension arrangements and family situation may all affect what needs to be reported.

For this reason, American expats in the UK should not rely on guesswork. The interaction between HMRC and IRS requirements needs careful attention.

UK Tax Residence

One of the most important starting points is UK tax residence. The UK has a specific system for deciding whether someone is resident for tax purposes. This is known as the Statutory Residence Test.

Your UK tax residence position can affect whether you pay UK tax on UK income only or whether foreign income and gains may also need to be considered. The number of days you spend in the UK is important, but it is not the only factor. Work, accommodation, family and other ties may also be relevant.

This is particularly important for American expats who travel regularly, move part-way through the year, retain a home in the United States, work remotely, or have income in more than one country.

The UK tax year runs from 6 April to 5 April. This is different from the US calendar tax year, which can make filing and tax planning more complicated for Americans.

UK Tax on Employment Income

Many American expats in the UK are employees. If you work for a UK employer, income tax and National Insurance may be deducted through PAYE. This can make the UK side of your employment tax position appear straightforward.

However, PAYE does not automatically deal with every tax requirement. You may still need to complete a UK Self Assessment tax return if you have additional income, foreign income, rental income, capital gains, self-employment income, directorship income or other reportable matters.

You should also remember that UK employment income may still need to be reported on your US tax return. The fact that your salary has been taxed in the UK does not automatically mean it can be ignored for US purposes.

UK Self Assessment

Self Assessment is HMRC’s system for collecting tax from individuals whose full tax position is not dealt with automatically through PAYE.

American expats may need to file a UK Self Assessment tax return if they are self-employed, a partner in a business partnership, a landlord, a company director, have capital gains, receive untaxed income, or have other circumstances that require reporting.

For American expats, UK Self Assessment should be considered alongside US tax filing. The same income may need to be reviewed under both systems, but the calculations and tax treatment may not be identical.

This is one reason why cross-border tax advice is so important. Filing in one country without considering the other can create inconsistencies or missed opportunities for tax relief.

UK Tax on Foreign Income and Gains

American expats often retain financial connections to the United States. These may include US bank accounts, brokerage accounts, pensions, retirement accounts, stock options, rental properties, business interests or family trusts.

If you are UK tax resident, foreign income and gains may need to be considered for UK tax purposes. This can include income from overseas employment, rental income, dividends, interest, pensions and capital gains.

The treatment will depend on your residence position, the source of income, the type of asset, the tax year involved and any relevant reliefs. This area can be especially complex for American expats because US tax treatment and UK tax treatment may differ.

For example, a US investment that appears tax-efficient from a US perspective may not be treated the same way in the UK. Similarly, the sale of an asset may produce different calculations under US and UK tax rules.

US Tax Obligations Do Not Automatically Disappear

American expats should also remember that the US generally continues to tax its citizens and resident aliens on worldwide income, even when they live abroad.

This means a US citizen living in the UK may still need to file a US federal tax return. Depending on their circumstances, they may also need to consider state tax, foreign account reporting, foreign asset reporting and other IRS forms.

This can surprise American expats who have lived in the UK for many years and assumed that they no longer had US filing obligations. In many cases, the obligation to file may remain even if no US tax is ultimately due after foreign tax credits or other reliefs are applied.

Foreign Tax Credits and Double Taxation

One of the biggest concerns for American expats is double taxation. Nobody wants to pay tax twice on the same income.

The US and UK systems include mechanisms that may reduce the risk of double taxation, including Foreign Tax Credits and treaty-based provisions. However, these mechanisms need to be used correctly.

The UK may tax income in one way, while the US may classify or calculate that same income differently. Timing differences, exchange rates, deductions, credits and reliefs can all affect the outcome.

This is why it is important to prepare US and UK tax filings in a coordinated way. The aim should be to comply with both systems while reducing unnecessary double taxation where lawful relief is available.

FBAR and Foreign Account Reporting

US expats in the UK should also be aware of foreign account reporting requirements. Ordinary UK bank accounts may be considered foreign accounts for US reporting purposes.

If the combined value of foreign financial accounts exceeds the relevant threshold at any point during the calendar year, an FBAR filing may be required. This can apply even if the accounts are not generating income and even if no additional US tax is owed.

Accounts that may need to be reviewed include UK current accounts, savings accounts, investment accounts and certain other financial accounts.

FBAR is one of the areas most commonly overlooked by American expats. The penalties for non-compliance can be serious, so it is important to take advice if you are unsure whether the rules apply to you.

Property, Investments and Pensions

American expats in the UK should also take care when dealing with property, investments and pensions.

Buying or selling UK property may create UK tax reporting requirements. Selling US property while living in the UK may also have UK tax implications. Investment portfolios can create income, gains and reporting issues in both countries.

Pensions and retirement accounts can be particularly complex. A pension arrangement that is familiar in the United States may need special consideration in the UK. Equally, UK pension contributions or withdrawals may have US tax consequences.

Before making major financial decisions, American expats should consider whether both HMRC and IRS rules have been reviewed.

Common Mistakes American Expats Make

Common mistakes include assuming that UK tax replaces US tax, ignoring US filing obligations, missing FBAR filings, failing to register for UK Self Assessment, misunderstanding UK tax residence, selling assets without tax advice, failing to report foreign income, and using an adviser who only understands one tax system.

Another common mistake is waiting until there is a problem. Cross-border tax issues are often easier to manage when advice is taken early. Once deadlines have passed or returns have been filed incorrectly, the process can become more stressful and expensive.

Why Specialist US/UK Tax Advice Matters

American expats in the UK need tax advice that understands both sides of the Atlantic. UK-only advice may miss IRS obligations. US-only advice may miss HMRC requirements.

A specialist US/UK tax adviser can help identify filing obligations, review residence status, prepare US federal and state tax returns, handle UK Self Assessment, advise on FBAR, consider Foreign Tax Credits, review foreign income and gains, and provide practical guidance for expats with cross-border financial lives.

Tax compliance should not be treated as an afterthought. For American expats, good advice can provide clarity, reduce risk and help ensure both HMRC and IRS obligations are properly managed.

Contact Xerxes Associates LLP

If you are an American expat living, working or investing in the UK, Xerxes Associates LLP can help you understand your tax obligations.

Xerxes Associates LLP is a London-based firm of specialist US and UK tax advisers. The firm provides tax advice and accountancy services for US and UK expats, including US federal and state income tax returns, UK Self Assessment tax returns, personal tax planning, consultations, FBAR assistance and ITIN support.

To discuss your circumstances, contact Xerxes Associates LLP using the details below:

Xerxes Associates LLP
Warnford Court
29 Throgmorton Street
London
EC2N 2AT
United Kingdom

Telephone: +44 (0)207 411 9026
Alternative Number: +44 (0)207 411 9051
Email: info@xerxesllp.com
Website: xerxesllp.com

If you are unsure whether you have UK tax obligations, US tax obligations, or both, it is better to seek specialist advice before a filing issue arises.

FBAR vs FATCA Explained Simply Common Mistakes and How US Expats Avoid Penalties

FBAR vs FATCA Explained Simply: Common Mistakes and How US Expats Avoid Penalties

Why FBAR and FATCA Are Constantly Confused

For US citizens living outside the United States, few compliance issues generate more confusion than FBAR and FATCA. Both reporting regimes focus on foreign financial assets, both carry significant penalties for non-compliance, and both apply regardless of whether any tax is ultimately owed.

The confusion is understandable. FBAR and FATCA overlap in scope but differ in legal authority, filing method, thresholds, and enforcement. Many US expats incorrectly assume that filing one satisfies the requirements of the other, which is one of the most common and costly mistakes made in international tax compliance.

Understanding the distinction between these two regimes is essential for staying compliant and avoiding unnecessary exposure to penalties.

What Is FBAR and Who Must File It

FBAR, formally known as the Report of Foreign Bank and Financial Accounts, is a disclosure requirement enforced by the US Treasury rather than the Internal Revenue Service. It applies when the combined value of a taxpayer’s foreign financial accounts exceeds the reporting threshold at any point during the year.

FBAR is not a tax return and does not calculate tax liability. Its purpose is purely informational, allowing authorities to monitor offshore financial activity. The filing is submitted electronically through a separate system and has its own deadlines and penalties.
US expats often underestimate the scope of FBAR, particularly when it comes to joint accounts, business accounts, or accounts over which they have signature authority.

What Is FATCA and How It Differs

FATCA, the Foreign Account Tax Compliance Act, is an IRS reporting requirement that forms part of the US tax return. FATCA focuses on specified foreign financial assets rather than accounts alone, which can include investments, pensions, and interests in foreign entities.

Unlike FBAR, FATCA reporting thresholds vary depending on filing status and residence. This creates additional complexity, as an individual may be required to file FBAR but not FATCA, or vice versa.

FATCA also operates internationally, requiring foreign financial institutions to report US account holders directly to the IRS, significantly increasing transparency.

Why Living in the UK Does Not Reduce Reporting Obligations

A common misconception among US expats in the UK is that compliance with UK tax law somehow offsets or replaces US reporting requirements. In reality, UK compliance has no bearing on FBAR or FATCA obligations.

UK bank accounts, ISAs, pensions, and investment platforms frequently trigger US reporting requirements even when they are fully compliant under UK law. This mismatch between systems is one of the primary reasons US expats unintentionally fall into non-compliance.

As information sharing between jurisdictions improves, undisclosed accounts are increasingly likely to be identified.

Common Mistakes That Lead to Penalties

Many FBAR and FATCA penalties arise not from deliberate evasion, but from misunderstanding and poor advice. US expats often rely on non-specialist accountants who are unfamiliar with international reporting requirements.

The most common FBAR and FATCA mistakes include: failing to aggregate account balances correctly, overlooking pensions or investment accounts, misunderstanding joint ownership rules, assuming small balances are exempt, and missing separate filing deadlines.

Even unintentional errors can result in significant penalties, particularly where failures occur over multiple years.

Penalties and Enforcement Trends

Penalties for FBAR violations can be severe, especially where authorities determine non-compliance was wilful. Even non-wilful violations can attract substantial fines, often calculated on a per-account, per-year basis.

In recent years, enforcement activity has increased as data matching improves. FATCA reporting by foreign financial institutions has made it easier for the IRS to identify discrepancies between declared income and reported assets.

This shift means that historic non-compliance is far more likely to come to light than in the past.

Correcting Past Non-Compliance Safely

For US expats who discover past FBAR or FATCA failures, taking corrective action promptly is critical. Voluntary disclosure options exist, but they must be approached carefully.

Entering disclosure programmes without professional guidance can result in unnecessary penalties or increased scrutiny. The correct approach depends on the taxpayer’s history, intent, and financial circumstances.

Specialist advice ensures disclosures are made accurately, defensively, and in a way that minimises risk.

Why Specialist US–UK Tax Advice Is Essential

FBAR and FATCA do not operate in isolation. They interact with US tax filings, UK tax returns, treaty positions, and long-term financial planning. Mistakes in one area often create problems elsewhere.

Specialist advisers understand how these systems overlap and how to structure compliance in a way that is both accurate and sustainable. This integrated approach reduces stress and protects against future enforcement action.

In Summary

FBAR and FATCA are among the most misunderstood aspects of US expat tax compliance. While the rules appear similar on the surface, they are fundamentally different regimes with distinct obligations and penalties.

By understanding the differences, avoiding common mistakes, and seeking specialist advice, US expats can remain compliant, reduce risk, and avoid the costly consequences of incorrect reporting.

What the 2025 US Election Could Mean for Expat Tax Rules in the UK

What the 2025 US Election Could Mean for Expat Tax Rules in the UK

Every US election brings policy shifts that ripple far beyond American borders, and 2025 is shaping up to be no exception. For US citizens living abroad, particularly those based in the United Kingdom, changes in tax law are among the most closely watched outcomes. With both major parties discussing new approaches to global taxation, foreign income reporting, and IRS enforcement, expatriates are right to ask how the results might affect them.

At Xerxes Associates LLP, our team of dual-qualified advisers monitors these developments closely to help clients anticipate and adapt. While election campaigns often focus on domestic policies, expat taxation has quietly become a topic of growing interest in Washington. With more than nine million Americans living outside the United States, both the Treasury and Congress are increasingly aware of the financial and compliance implications of overseas citizenship.

One of the most significant areas under discussion is the citizenship-based taxation model, which requires all US citizens, regardless of residence, to report and pay tax on worldwide income. Some policymakers are exploring the idea of transitioning to a residency-based system, similar to the one used in nearly every other developed country. If introduced, this shift could free many US expats from the complex dual-reporting obligations that currently apply under the Foreign Account Tax Compliance Act (FATCA) and the Bank Secrecy Act (FBAR) requirements.

While such a change would represent a major simplification, it is important to remain realistic. A move away from citizenship-based taxation would require substantial legislative reform and international coordination, which means any transition would likely take years. In the meantime, expatriates in the UK remain bound by existing IRS rules, including annual reporting of income, capital gains, and foreign financial accounts.

Another area drawing attention is the Foreign Earned Income Exclusion (FEIE), which currently allows US expats to exclude a portion of their overseas earnings from federal taxation. Depending on the outcome of the 2025 election, adjustments to this threshold or its qualification criteria could impact how much relief US citizens abroad can claim. Similarly, the Foreign Tax Credit (FTC), which prevents double taxation by offsetting UK taxes paid against US liabilities, could see modifications that change the balance between the two systems.

Tax enforcement is also likely to evolve. In recent years, the IRS has expanded its use of data analytics and cross-border information sharing with HMRC. Under the FATCA framework, financial institutions in the UK are required to disclose details of US account holders, allowing the IRS to identify non-compliance more effectively. Regardless of who wins the election, this trend toward increased transparency is expected to continue. The political conversation may influence how aggressively the IRS prioritises overseas audits and how it allocates funding to global tax compliance programs.

For American entrepreneurs and high-net-worth individuals living in the UK, potential changes to corporate and estate tax are also worth watching. Adjustments to controlled foreign corporation (CFC) rules or inheritance exemptions could affect those holding investments or family trusts abroad. Early planning and structural review can help mitigate exposure before new laws take effect.

In every election cycle, speculation creates uncertainty. The best response for expatriates is to focus on preparedness rather than prediction. Ensuring accurate record-keeping, maintaining compliant filings, and staying informed through a professional adviser will always provide protection, no matter which policies emerge.

At Xerxes Associates LLP, we continuously monitor US and UK legislative changes to help clients understand how shifting political landscapes affect their tax obligations. Our advisers provide proactive strategies for both short-term planning and long-term wealth protection, ensuring that compliance remains seamless even as laws evolve.

To discuss how potential changes in US tax policy could affect your personal or business situation, visit www.xerxesassociatesllp.com and book a consultation with one of our dual-qualified US-UK tax specialists.

If you are a US expat living in London or elsewhere in the UK, get in touch with us to take advantage of the comprehensive, expert tax advice service that Xerxes Associates LLP provides to all our clients.

Cryptocurrency Taxation for US Expats in the UK Latest HMRC & IRS Updates

Cryptocurrency Taxation for US Expats in the UK: Latest HMRC & IRS Updates

As cryptocurrency continues to evolve from a niche investment to a mainstream financial asset, regulatory bodies across the world are tightening their grip on how it is reported and taxed. For US citizens living in the UK, understanding the rules around crypto taxation is particularly important, as they are subject to both HMRC and IRS reporting obligations. With tax authorities sharing more data than ever before, non-compliance is no longer an option. The team at Xerxes Associates LLP specialises in helping American expatriates navigate this complex cross-border tax environment, ensuring their crypto portfolios remain compliant on both sides of the Atlantic.

Cryptocurrency is treated differently in the US and UK, but both tax systems agree on one thing — it is not “currency” in the traditional sense. The HMRC classifies digital assets as property, meaning capital gains tax applies whenever you sell, trade, or otherwise dispose of your crypto. This includes converting tokens into fiat, swapping one coin for another, or even using cryptocurrency to pay for goods and services. Each of these events can trigger a taxable gain or loss based on the market value at the time of the transaction.

For US taxpayers, the situation is even more complex. Under IRS rules, American citizens must report their worldwide income and capital gains regardless of where they live. This means that crypto gains realised while residing in the UK must be reported both to HMRC and the IRS. The United States has a unique taxation model based on citizenship rather than residency, which can lead to dual reporting requirements for expats. However, relief mechanisms such as the Foreign Earned Income Exclusion (FEIE), Foreign Tax Credit (FTC), and the US-UK Double Taxation Treaty can help to offset or eliminate double taxation when managed correctly.

Recent updates from both tax authorities highlight the growing seriousness with which crypto is being treated. The IRS has included a dedicated question about digital assets on Form 1040, and exchanges are now required to issue information reports under expanded 1099-K regulations. Meanwhile, the UK has introduced enhanced compliance measures under the Cryptoasset Reporting Framework (CARF), aligning with the OECD’s global standards for tax transparency. Beginning in 2026, UK-based exchanges will be required to share user data automatically with tax authorities worldwide, including the United States.

Given these developments, it is crucial for US expats in the UK to maintain accurate records of all crypto transactions. This includes the date of purchase, sale value, exchange fees, and wallet addresses. HMRC expects clear documentation, and the IRS has made it clear that failure to disclose crypto activity could be treated as wilful tax evasion.

Xerxes Associates LLP advises clients to take a proactive approach by conducting an annual crypto tax review. By consolidating data across wallets and exchanges, calculating cost basis accurately, and applying available treaty reliefs, expats can stay compliant while minimising unnecessary tax liabilities. The firm’s dual-qualified tax professionals are experienced in preparing both US and UK returns, ensuring that every filing reflects consistent and defensible information.

In 2025, both HMRC and the IRS are investing in blockchain analytics tools to identify unreported assets. This marks a new phase of cross-border cooperation and enforcement. For Americans living in London or elsewhere in the UK, this means transparency is not optional — it is a legal necessity. Working with a firm that understands both systems is no longer just a convenience, but a compliance safeguard.

To learn more about how Xerxes Associates LLP assists US citizens in the UK with cryptocurrency taxation, visit www.xerxesassociatesllp.com and schedule a consultation with one of their cross-border tax specialists.

What US Expats in the UK Can Do to Stay Tax Efficient

What US Expats in the UK Can Do to Stay Tax Efficient

Staying tax efficient isn’t just about saving money — it’s about reducing stress and avoiding legal risk. With the right planning and expert advice, US expats in the UK can enjoy financial peace of mind, focus on building their lives abroad, and stay in good standing with both HMRC and the IRS.

Living in the UK as a US expat brings exciting opportunities — but it also brings complex tax obligations. With both the IRS and HMRC expecting accurate reporting, staying tax efficient is essential if you want to avoid overpaying or triggering audits.

Fortunately, with the right strategy, US expats in the UK can reduce their tax burden and maximise their earnings legally and safely.

Understand Your Dual Tax Obligations

As a US citizen or Green Card holder, you’re required to file a US tax return no matter where you live — even if all your income is earned in the UK. At the same time, you may also be liable to pay UK tax.

The good news? There are several ways to avoid double taxation:

  • Foreign Earned Income Exclusion (FEIE)
     You may be able to exclude up to around $120,000 (adjusted annually) of foreign income from your US taxes if you meet either the Physical Presence Test or Bona Fide Residence Test. 
  • Foreign Tax Credit (FTC)
     This allows you to offset the tax you pay in the UK against your US tax liability, dollar for dollar. 
  • US–UK Tax Treaty
     The treaty helps resolve many overlaps between the two systems, especially for pensions, dividends, and social security.

Make Use of UK Tax Reliefs Too

UK tax laws come with their own set of reliefs and allowances that expats can use to stay tax efficient:

  • ISA accounts (tax-free in the UK, but not recognised by the IRS)
  • Capital gains tax exemptions
  • Marriage allowance and Personal Allowance for UK tax residents

Speak to a cross-border tax expert before using these, as some UK reliefs may still be taxable under US law.

Avoid Common Pitfalls

  • FBAR and FATCA non-compliance: You must report non-US bank accounts and financial assets if they exceed certain thresholds.
  • Overlooking reporting for pensions and ISAs: The IRS treats these differently than HMRC.
  • Ignoring state tax obligations: Some US states (e.g., California) tax former residents even after they move abroad.

Work With a Dual Tax Specialist

The best way to stay tax efficient is to work with a tax advisor who understands both US and UK systems. At Xerxes Associates LLP, we specialise in helping US expats optimise their finances, stay compliant, and avoid costly mistakes.

Get in Touch

For those seeking guidance on taxation or other expatriate tax matters, Xerxes Associates LLP offers consultations to discuss individual needs and circumstances. To learn more about their services or to schedule a consultation, visit their contact page.

Dual UK-US Tax in 2025 – New IRS and HMRC Changes Every American in Britain Needs to Understand

Dual UK-US Tax in 2025

Dual UK-US Tax in 2025 – New IRS and HMRC Changes Every American in Britain Needs to Understand

Living between two tax systems is no small task. For Americans in the UK — whether you’re a permanent resident, dual national, or just here on assignment — navigating dual UK-US tax obligations in 2025 is more complex than ever. Recent updates from both HMRC and the IRS have introduced small but critical shifts in filing expectations, credit claims, and income treatment, which could have major effects on your tax bill if not handled correctly.

At Xerxes Associates LLP, we specialise in helping US citizens, green card holders, and UK-resident dual nationals manage this balancing act. With the UK Spring Budget 2025 introducing changes to capital gains treatment and the US maintaining its global tax policy, many taxpayers are left confused about where to start and how to avoid double taxation.

One of the most common misconceptions among US expats in the UK is that filing taxes in the UK alone is enough. Unfortunately, the US is one of the only countries in the world that taxes its citizens on worldwide income, no matter where they live. This means that even if you pay UK tax on your earnings, dividends, or pensions, you still have to file with the IRS every year — and declare those same income sources.

The good news is that the US-UK tax treaty is designed to prevent double taxation. However, claiming foreign tax credits and the Foreign Earned Income Exclusion (FEIE) requires precision, correct elections, and up-to-date documentation. In 2025, the FEIE threshold has risen slightly due to inflation adjustments, but many Americans in London still earn above the exclusion limit — especially once housing and bonuses are factored in.

Changes to HMRC’s treatment of non-domiciled residents, particularly regarding remittance rules and overseas income, add another layer of complexity. Dual residents who previously enjoyed the remittance basis may now find themselves unexpectedly exposed to UK taxation on foreign income — which then needs to be reconciled on the US side to avoid duplicate payments.

Another emerging issue is how pension contributions and distributions are treated under each tax system. In the UK, certain employer pension contributions and ISAs are tax-advantaged, but in the eyes of the IRS, they may be fully taxable or require detailed reporting on Form 3520 and 3520-A. Mistakes in this area are increasingly flagged during audits.

Cryptocurrency is also on the radar. Both HMRC and the IRS have clarified their stance on digital asset reporting, and new 2025 guidance suggests more aggressive enforcement. If you’ve held or traded crypto while living in the UK, both tax agencies now expect clear, transparent declarations — and inconsistencies between the two filings are increasingly leading to audits.

Perhaps the biggest risk in dual taxation is overlooking one system while focusing on the other. We’ve seen clients pay unnecessary penalties, lose out on tax credits, or miss out on treaty benefits simply because their accountants lacked cross-border expertise. This is where Xerxes Associates LLP makes a tangible difference. We don’t just file forms — we coordinate both your UK and US filings to ensure accuracy, reduce tax liability, and keep you fully compliant across jurisdictions.

Whether you’re a first-time filer, a long-time resident, or someone returning to the UK after years abroad, the dual tax landscape in 2025 demands clarity, strategy, and expertise. With new rules, changing thresholds, and increasing enforcement from both HMRC and the IRS, now is the time to get your international tax affairs in order.

At Xerxes Associates LLP, we help you turn confusion into confidence — and compliance into peace of mind.

Get in Touch

For those seeking guidance on taxation or other expatriate tax matters, Xerxes Associates LLP offers consultations to discuss individual needs and circumstances. To learn more about their services or to schedule a consultation, visit their contact page.

IRS Tightens the Screws on Foreign Account Reporting – What US Expats in the UK Must Know in 2025

IRS Tightens the Screws on Foreign Account Reporting

The US Internal Revenue Service (IRS) has significantly stepped up its enforcement around foreign bank account reporting in 2025, putting many unsuspecting US expats in the UK under increased scrutiny. With growing data-sharing agreements and more sophisticated audit tools, those who hold accounts in the UK or offshore jurisdictions must now tread carefully or risk severe financial penalties.

If you’re a US citizen or green card holder residing in the UK, the chances are high that you fall under the reporting obligations for FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act). Even if you haven’t lived in the US for years, your global financial footprint remains of interest to the IRS. In fact, many dual residents are unaware that holding more than $10,000 across one or multiple non-US accounts triggers a mandatory FBAR filing — a rule that hasn’t changed but is now being enforced more aggressively.

The penalties for failing to file FBARs can be staggering. In 2025, fines range from $10,000 per unreported account for non-willful violations, to up to 50% of the account balance for willful non-compliance. These are not theoretical risks — the IRS has already launched high-profile enforcement campaigns in partnership with HMRC and European tax authorities to identify underreporting.

At Xerxes Associates LLP, we’ve seen a notable uptick in enquiries from US-connected individuals caught off guard by these requirements. Many assumed that keeping money in UK ISAs, investment portfolios, or even basic current accounts didn’t fall under the FBAR or FATCA radar — but they do. The IRS requires detailed reporting, not only of bank balances but also of account ownership, access rights, and financial interests in trusts and foreign entities.

FATCA, meanwhile, brings a separate but related layer of complexity. Most US expats must file Form 8938, which covers broader financial assets than FBAR and has different thresholds depending on marital status and residence. While FBAR is submitted to FinCEN, Form 8938 is attached to your federal tax return — and failure to file can lead to an additional $10,000 penalty plus interest and potential audits.

2025 also marks a renewed focus by the IRS on compliance gaps in high-value jurisdictions like London, Zurich, and Singapore. Automated data exchanges under FATCA and CRS (Common Reporting Standard) mean that even previously undisclosed accounts are now easily traceable. Financial institutions are obliged to report directly to the IRS, leaving little room for error or omission.

If you’re unsure whether you’ve filed the correct forms or whether you’ve been compliant in recent years, it’s not too late. Xerxes Associates LLP offers confidential reviews and helps clients enter the IRS Streamlined Filing Compliance Procedures — a penalty-free amnesty program for non-willful offenders. We also assist in reconstructing past years’ reports, communicating with both the IRS and HMRC, and protecting clients from avoidable penalties.

The bottom line is simple: FBAR and FATCA compliance is no longer optional or low-risk. As an American abroad, your financial activities in the UK and beyond are reportable under US law, and 2025 is the year the IRS is proving it means business. Let Xerxes Associates LLP help you bring clarity and confidence to your compliance.

Get in Touch

For those seeking guidance on taxation or other expatriate tax matters, Xerxes Associates LLP offers consultations to discuss individual needs and circumstances. To learn more about their services or to schedule a consultation, visit their contact page.

ABOUT US

Xerxes Associates LLP was established by Naveed Lasi after having gained over a decade of industry experience with EY, Deloitte and PwC.

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US & UK Tax Advisors

US and UK Tax Advisors in London

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