Living in the UK as a U.S. citizen or Green Card holder comes with exciting opportunities—and a few unexpected tax twists. One of the biggest questions we often hear is: “Do I still need to pay U.S. taxes while living abroad?” The answer is usually yes, and here’s what you need to know.
U.S. Taxes Follow You — Even Abroad
The United States is one of the only countries that taxes its citizens and permanent residents based on citizenship, not residency. That means even if you’re sipping tea in London or working in Manchester, Uncle Sam still wants to hear from you during tax season.
If you’re:
- A U.S. citizen
- A Green Card holder
- Or someone who meets the Substantial Presence Test (in certain cases)
…you are generally required to file a U.S. tax return every year, no matter where you live.
What If You’re Paying Taxes in the UK?
Good news: The U.S. has tax treaties in place to prevent double taxation, and the UK is one of those treaty countries.
Here’s how you may reduce or eliminate U.S. taxes:
- Foreign Earned Income Exclusion (FEIE)
You can exclude up to $120,000+ (amount varies yearly) of your foreign income from U.S. taxation if:
- You live outside the U.S. for 330 days in a 12-month period, or
- You’re a bona fide resident of the UK.
- Foreign Tax Credit (FTC)
If you’re paying taxes in the UK, you can claim a credit on your U.S. tax return to offset what you owe in the U.S. This is useful if your income exceeds the FEIE limit.
- Tax Treaty Benefits
The U.S.-UK Tax Treaty has specific provisions to help prevent double taxation and guide which country gets taxing rights over certain types of income (like pensions, dividends, royalties, etc.).
Filing Requirements
Even if you owe nothing, you may still need to file forms like:
- Form 1040 – U.S. individual income tax return
- Form 2555 – Foreign Earned Income Exclusion
- Form 1116 – Foreign Tax Credit
- FBAR (FinCEN 114) – If you have foreign bank accounts with total balances over $10,000
- FATCA (Form 8938) – For reporting foreign financial assets (above certain thresholds)
Penalties for Non-Compliance
Failure to file or report foreign accounts can lead to hefty penalties—even if you don’t owe any tax. So even if your income is fully excluded or offset by credits, the IRS still wants you to file.
Bottom Line
Yes, you still need to file U.S. taxes while living in the UK—but with the right planning, you likely won’t owe much (or anything). However, missing the required forms or deadlines can be costly.
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