Expat tax · US-UK treaty
Even under the US tax treaty, UK residents who are US citizens stay taxable in the US.
The US-UK treaty’s saving clause, Article 1(4), keeps the US free to tax its citizens as if the treaty did not exist. Only the exceptions in Article 1(5)(a) still help citizens, such as the credit for UK tax and the UK pension rules.
Updated · Sources
The US-UK treaty, as amended in 2002
- 2003
- is the year the treaty came into force, on March 31. It replaced the 1975 convention.
- $0
- of US tax is due on a qualifying UK pension scheme’s growth before it pays out, citizens included.
- 15%
- caps the US tax on most dividends paid to a UK resident who is not a US citizen.
Does the US-UK income tax treaty change your US tax?
Either country taxes you as a resident
The treaty’s benefits go to residents of the US or the UK. You are resident in a country if it taxes you on grounds such as your domicile, residence or citizenship. A US citizen or green card holder has to meet one more test to be a treaty resident of the US. They need a substantial presence, a permanent home or a habitual abode (where they usually live) in the US.
The tie-breaker, if both countries claim you
Article 4(4) settles dual residence by placing you in one country. A permanent home decides it first, then closer personal and economic ties, known as your centre of vital interests. Next come your habitual abode (where you usually live) and your nationality. If those fail, HMRC and the IRS try to agree.
The saving clause, for US citizens
The saving clause in Article 1(4) still applies when the tie-breaker places a US citizen in the UK. A green card holder placed in the UK by the tie-breaker owes US tax only as the treaty allows.
Your income falls under an exception
Article 1(5)(a) lists the rules the saving clause does not override. They include the credit for UK tax in Article 24 and the social security rule in Article 17(3). The pension rules in Articles 17(1)(b), 18(1) and 18(5) are on the list too.
Form 8833 is how you disclose a treaty position to the IRS. Positions on pensions and social security usually need no Form 8833.
How much US tax does the US-UK double tax treaty leave a citizen in London?
Article 24 lets the US credit UK tax, but only the tax the UK charges.
UK salary
$0
UK income tax of $4,500 is more than the $2,400 of US tax, so the credit covers all of it.
Growth in a UK workplace pension
$0
The example assumes the pension meets the treaty’s definition of a pension scheme, so Article 18(1) defers US tax until it pays out.
Interest in a cash ISA
$2,400
The UK does not tax ISA interest, so there is no UK tax to credit against the $2,400.
US tax is 24% of each $10,000, or $2,400, before any credit. UK income tax on the salary is 45%, or $4,500, at the additional rate for 2026 to 2027. No article of the treaty covers an ISA, and no IRS guidance names one. The 3.8% net investment income tax, due above $200,000 of modified adjusted gross income for a single filer, is left out. Amounts are round figures in US dollars.
What can the US tax when you live in the UK?
For UK residents who are not US citizens, the treaty caps the US tax on income from the US. For citizens, the saving clause removes most of those limits. The UK credits US tax only up to the treaty rate, and the US credits the UK tax left over.
| US citizen | Not a US citizen | |
|---|---|---|
| Most dividends from US companies | Normal US rates The UK credits US tax up to 15% | 15% at most 5% for a company with 10% of the voting power |
| Interest from a US bank | Normal US rates The US credits the UK tax | No US tax Only the UK taxes it |
| A private US pension, paid regularly | Normal US rates The US credits the UK tax | No US tax Only the UK taxes it |
| US Social Security | No US tax The saving clause does not apply | No US tax Only the UK taxes it |
A US government pension stays taxable only in the US, unless you are a UK national living in the UK. Under Article 17(1)(b), the UK must exempt any US pension payment the US would exempt, such as a tax-free Roth IRA payout. Under the treaty’s capital gains article, Article 13, the country where real property sits can tax a gain on it. That includes US real property interests and unlisted shares that draw most of their value from UK land.
Five treaty rules people get wrong.
The 25% tax-free lump sum
The UK usually lets you take 25% of a pension tax-free, capped at £268,275. The treaty never names that lump sum, and Treasury’s explanation says the US can still tax it for a citizen. Some advisers read Article 17(1)(b) the other way, and the IRS has not ruled.
Paying into a SIPP
Money you pay into a SIPP may get no US deduction. Article 18(5) covers a US citizen who lives in the UK and is paid by a UK employer or UK branch. Qualifying workplace pension contributions are then excluded from US income, within US limits. Treasury ties that rule to workplace schemes. A SIPP’s growth may still be deferred, since Treasury lists personal pension schemes as treaty pension schemes.
Reading another treaty’s rules into this one
This treaty does not treat a UK State Pension as US Social Security. It lets only the US tax a UK State Pension paid to a US resident. IRS Publication 915 suggests the US then taxes it like an annuity. The US-Canada treaty is different: it treats Canada’s social security benefits as US Social Security once a US resident receives them.
Claiming UK residence on a green card
A green card holder who uses the tie-breaker to be treated as a UK resident must file Form 8833. If you held a green card in at least 8 of the last 15 tax years, the claim ends your US tax residency. Form 8854 is then due, and the expatriation tax under Section 877A may follow.
Self-employment in the UK
Under the separate US-UK totalization agreement, a self-employed American living in the UK pays into UK National Insurance only. Attach a copy of your certificate of coverage to each year’s US return. It proves you owe no US Social Security contributions, which the US collects as self-employment tax.
We claim the benefits of the tax treaty between the US and the UK on your US return.
Valim’s CPAs file the US returns of Americans living in the UK, with the treaty applied to their pensions and UK tax.
- We credit your UK tax on Form 1116, working alongside any UK accountant who files your Self Assessment.
- We report your UK pension as the treaty allows, with its growth and qualifying contributions kept out of your US income.
- We compare the US tax on your UK salary under the credit and under the foreign earned income exclusion.
- We plan estimated payments for US tax on ISA interest.
- We answer any IRS letter about a treaty claim on a return we prepared, including a Form 8833, within your fee.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
US-UK tax treaty questions.
Is the UK in a tax treaty with the US?
Yes, there is an income tax treaty between the UK and the US. It was signed in London on July 24, 2001, and amended by a protocol signed on July 19, 2002. It has been in force since March 31, 2003. Its saving clause lets the US keep taxing its citizens who live in the UK. A separate agreement, in effect since January 1, 1985, coordinates Social Security and UK National Insurance.
Do I pay taxes in both the US and the UK?
Yes, the UK and the US can each tax you, but the credits between them usually stop double tax. The UK normally taxes a resident on income from anywhere, while US citizenship or a green card keeps you in the US system. Article 24 lets you claim a foreign tax credit on your US return for UK income tax. A US citizen living in the UK gets a UK credit on US-source income only up to what a non-citizen would owe. On most US dividends, that is 15%. The US then credits whatever UK tax remains.
How is a UK pension taxed for a US citizen?
Under the US-UK tax treaty, pension growth in a qualifying UK scheme is not taxed by the US until you draw it. When you take a regular pension, the US taxes only the part that is taxable in the UK. Whether the UK’s 25% tax-free lump sum is free of US tax is unsettled, and the IRS has not ruled. Contributions cut US tax only for Americans in the UK who work for a UK employer, within US limits.
Who qualifies for the US tax treaty?
Residents of the US or the UK qualify for the US-UK tax treaty. Article 4 makes you resident in a country that taxes you as a resident, for example because you live there. Individuals always pass Article 23, the limitation on benefits, since it targets entities such as companies and funds. US citizens can claim the treaty too, but the saving clause keeps most of its rules from cutting their US tax. Residents of other countries rely on their own country’s treaty, such as the US-India tax treaty.
What are the UK-US tax treaty withholding rates?
Under the UK-US tax treaty, the US can tax most US dividends paid to a UK resident at no more than 15%. A company that owns at least 10% of the paying company’s voting power pays 5%. Some pension schemes pay nothing. So do some parent companies that have held 80% of the votes for 12 months and meet a further treaty test. Most interest is taxable only where its owner lives, so the US usually takes no tax on a UK resident’s US bank interest. A US citizen in the UK gets none of these limits, because of the saving clause.
Does the US-UK tax treaty cover estate and inheritance tax?
No, the US-UK income tax treaty does not cover estate, gift or inheritance tax. It deals with taxes on income and capital gains. US estate and gift tax, and UK inheritance tax, fall under a separate US-UK estate and gift tax treaty.
Sources
- US-UK income tax convention (2001)
- Protocol to the US-UK convention (2002)
- Treasury, technical explanation of the US-UK convention and 2002 protocol
- HMRC, USA tax treaties
- IRS, Form 8833 (Rev. December 2022), Treaty-Based Return Position Disclosure
- IRS, Publication 915, Social Security and Equivalent Railroad Retirement Benefits
- IRS, Estate & gift tax treaties (international)
- HMRC, Inheritance Tax Manual IHTM27161, double taxation conventions
- GOV.UK, Tax when you get a pension (what’s tax-free)
- GOV.UK, Individual Savings Accounts
- GOV.UK, Income Tax rates and Personal Allowances
- Social Security Administration, US-UK social security agreement
- Social Security Administration, US international social security agreements (status)
- GOV.UK, Tax on foreign income: residence
Reviewed and updated September 2026. General information, not advice for your situation.