US Expat Tax in the UK & UAE | Xerxes Associates LLP

US Expats Working in the UK and UAE: Understanding Your Tax Requirements

Moving abroad can bring a new role, a different lifestyle and the chance to build an international career. However, for American citizens, leaving the United States does not automatically end their US tax responsibilities. Whether you work in London, Dubai or Abu Dhabi, your overseas earnings may still need to appear on a US tax return.

The important distinction is between having to report income and having tax to pay. Eligible reliefs may reduce your liability, but they do not necessarily remove your filing obligations. Understanding the US expat tax requirements in the UK and UAE starts with recognising that your host country’s rules and your American obligations operate separately. IRS guidance for Americans abroad.

Why US tax responsibilities continue overseas

The United States generally taxes its citizens on worldwide income, regardless of where they live. Filing requirements depend on factors including income, filing status and age. Earning your salary from a British or Emirati employer does not, by itself, put that income outside the US system.

This means an overseas payslip is only part of the picture. Your US return may also need to reflect interest, investment income or other earnings. A move abroad should therefore prompt a review of your overall financial position, rather than a check of employment income alone. The IRS also makes clear that eligible taxpayers must file to obtain benefits such as the foreign earned income exclusion or foreign tax credit. IRS guidance on reporting foreign income.

US expats working in the UK

For Americans working in Britain, UK tax residence is a central consideration. UK residents normally pay tax on their worldwide income, although reliefs and exceptions can apply. Non-residents generally pay UK tax on UK income. Your residence position therefore needs to be established before deciding how overseas earnings should be treated. HMRC residence guidance.

An American taking a job in London should not assume that paying UK tax settles their US position. The two countries apply their own rules, and any relief needs to be considered within those rules. Coordinating the returns helps ensure that income and eligible tax payments are dealt with consistently.

How foreign tax credits may help

The US foreign tax credit can provide relief for qualifying foreign income taxes, subject to limitations. For an American paying UK income tax, it may reduce US tax on the relevant foreign-source income. However, it is not a promise that every dollar paid overseas will offset every type of US liability.

The foreign tax credit and foreign earned income exclusion also need to be coordinated. You cannot claim a credit for foreign taxes attributable to income excluded under the foreign earned income exclusion. Choosing the right approach requires a calculation based on your circumstances, not simply selecting the relief with the most attractive name. IRS foreign tax credit guidance.

New arrivals should check the current UK rules

From 6 April 2025, the UK’s four-year foreign income and gains regime introduced relief for qualifying new residents. Broadly, eligibility requires being within your first four UK-resident tax years after at least ten consecutive tax years of non-UK residence.

This is not a general exemption for your London salary. It concerns eligible foreign income and gains, and a claim is required. Americans relocating to Britain should check their eligibility rather than relying on older articles about the former non-dom system. HMRC eligibility guidance.

US expats working in the UAE

The UAE does not levy personal income tax on employment salaries. For an American employee, however, this does not mean that the salary is automatically free of US tax. The UAE treatment and the American treatment must be assessed separately. UAE Government taxation overview.

This creates a practical difference from working in the UK. Where no UAE income tax has been paid on a salary, there is no corresponding UAE salary tax to use as a US foreign tax credit. Other US reliefs may be available, but entitlement must be established.

Employees and business owners must also distinguish their positions. The UAE Federal Tax Authority states that individuals conducting UAE business activities can fall within corporate tax where business turnover exceeds AED 1 million in a calendar year. Wages are excluded from those business activities. Freelancers should therefore obtain advice appropriate to their business, rather than applying the rules for employees. UAE Federal Tax Authority guidance.

Understanding the foreign earned income exclusion

The foreign earned income exclusion allows qualifying taxpayers to exclude a limited amount of foreign earned income from US federal income tax. For the 2026 tax year, the maximum is $132,900 per qualifying person. This is a ceiling, not an automatic allowance for everyone working overseas, and part-year eligibility can affect the calculation. IRS exclusion limits.

Eligibility generally requires a foreign tax home and satisfaction of either the bona fide residence test or the physical presence test. The physical presence test generally requires at least 330 full days in foreign countries during a consecutive twelve-month period. Frequent travel can therefore matter when assessing eligibility. IRS physical presence test.

The exclusion does not cover all types of income. Investment income is not foreign earned income, and claiming the exclusion does not itself reduce US self-employment tax. These distinctions are particularly important when an employee becomes an independent consultant. IRS foreign earned income exclusion guidance.

Overseas bank accounts can create separate reporting duties

A US tax return is not the only document an expatriate may need to file. An FBAR generally applies where a US person has a financial interest in, or signature authority over, foreign financial accounts whose combined value exceeds $10,000 at any point during the calendar year.

The threshold concerns the combined accounts, not a separate $10,000 allowance for each one. Opening accounts for salary, household spending and savings can therefore create a reporting obligation even where each balance looks modest individually. FinCEN FBAR guidance.

Form 8938 may also be required for specified foreign financial assets above the applicable thresholds. Those thresholds depend on circumstances including filing status and whether the taxpayer qualifies as living abroad. Completing one reporting requirement does not necessarily satisfy the other. IRS Form 8938 guidance.

Use September to review your position

September is a useful point to organise outstanding records. For the 2025 calendar year, the automatically extended FBAR deadline is 15 October 2026. This is separate from any extension applying to your income tax return. IRS FBAR deadlines.

Gather your salary information, account statements, travel dates and details of taxes paid before speaking with an adviser. Clear records make it easier to identify the questions that need attention.

Speak to Xerxes Associates LLP

Xerxes Associates LLP provides US and UK tax services from London, including personalised support with compliance and tax planning. If you are working in the UK, or moving between the UK and UAE, contact the team to discuss your US and UK obligations and the scope of assistance you need. UAE domestic business-tax questions may require separate local advice.

Explore Xerxes’ US and UK tax services or contact Xerxes Associates LLP to discuss your circumstances.