Visa holders · From the UK
Your ISA stays free of UK tax after you move to the US from the UK, but the US taxes what it earns.
No treaty article covers an ISA, so the US taxes the interest, dividends and gains inside it in the year they arise. Under the US-UK treaty’s Article 18(1), the US taxes a UK pension’s growth only when it pays out. Once you are non-resident, the UK generally taxes only your UK income, such as rent, and gains on UK property.
Updated · Sources
Your first years out of the UK
- US only
- taxes your UK State Pension once you live in the US, under Article 17(3) of the treaty.
- Over 5 years
- of UK non-residence keeps a move back free of UK tax on some gains and income from your years away.
- 10 years
- is the longest UK inheritance tax can keep reaching your assets worldwide after you leave.
The 5 year rule applies if you were solely UK resident in at least 4 of the 7 tax years before leaving. The 10 years applies if you were UK resident in each of the 20 tax years before leaving.
How long can the UK keep taxing you after you leave?
The UK tax year runs from April 6 to April 5, and the tests below count in those years.
You work full-time in the US
In a tax year of full-time US work, you are generally non-resident if you spend fewer than 91 days in the UK. Days with more than 3 hours of UK work must also stay below 31. In the year you leave, split year treatment can make you non-resident from the day after you go.
You move back to the UK
Under the temporary non-residence rule, the UK may tax some income and gains from your years away if you return within 5 years. It covers anyone solely UK resident in at least 4 of the 7 tax years before leaving. Your period of non-residence starts the day after you leave only under split year treatment, and otherwise on April 6.
You sell within 6 years of leaving
Article 13(6) of the treaty lets the UK tax your gains under its own law for 6 years after you leave. For a non-resident, UK law uses that room mainly through the temporary non-residence rule. After that, Article 13(5) leaves most gains on shares and funds to the US alone. The UK can still tax a gain on UK property.
You lived in the UK 10 of the last 20 years
UK residence in at least 10 of the last 20 tax years makes you a long-term UK resident for inheritance tax. While that status lasts, UK inheritance tax can reach your assets anywhere, on a gift you make or on your death. The status runs 3 tax years after a stay of 10 to 13 years, and longer after a longer stay.
Tell HMRC you are leaving on form P85, or on the SA109 residence pages of a paper Self Assessment return.
A £425,000 gift from a parent in the UK can leave you owing £40,000 of UK inheritance tax.
A gift is not income for US tax, though Form 3520 reports gifts over $100,000 in a year. UK inheritance tax can apply if the parent dies within 7 years.
Parent dies within 3 years
£40,000
The £100,000 above the £325,000 threshold is taxed at 40%.
Dies 4 to 5 years after the gift
£24,000
Taper relief cuts the rate on that £100,000 to 24%.
Dies 6 to 7 years after the gift
£8,000
The rate is 8% in the last year of the seven.
Parent lives 7 more years
£0
No tax is due on a gift once the giver has lived 7 years after it.
Because the parent’s gifts pass the £325,000 threshold, GOV.UK says you, as the person who received the gift, pay the tax. The example assumes no other gifts in those 7 years, a £3,000 annual exemption already used and no threshold inherited from a late spouse. GOV.UK’s taper table also sets 32% for a death at 3 to 4 years, and 16% at 5 to 6 years.
How does the treaty split your UK pension between the two countries?
The US-UK treaty, in force since March 31, 2003, sets which country taxes each part of a UK pension.
| UK | US | |
|---|---|---|
| Growth inside the scheme | Not taxed | Deferred until you draw it Article 18(1) |
| Regular payments from a private or workplace pension | Not taxed Article 17(1)(a) | Taxed Except any part the UK would exempt |
| A UK government service pension | Taxed Article 19(2) | Not taxed on a visa With a green card, the US can tax it too |
| A lump sum | Taxed under UK rules Article 17(2) | Unsettled Article 17(2) and the saving clause |
| UK State Pension | Not taxed | Taxed Article 17(3) gives the US the sole right |
Whether the US taxes the 25% tax-free lump sum is unsettled. Treasury’s technical explanation puts Article 17(2) under the saving clause, while some advisers read Article 17(1)(b) as protecting it.
What do new US residents from the UK most often get wrong?
Treating your arrival year as a full US year
Your arrival year usually has two parts for US tax: nonresident before your residency starting date, and resident from it. UK income you receive from that date goes on your US return, even a bonus earned before you left. A dual-status return for tax year 2025 cannot be e-filed.
Assuming your ISA shields the funds inside it
UK OEICs (open-ended investment companies), unit trusts and UK-listed ETFs are usually PFICs, even inside a stocks and shares ISA. With no election in place, the PFIC rules can tax a gain at the top US rate plus interest. Each fund also generally needs a Form 8621 every year, while funds inside a UK pension scheme need none.
Leaving a UK pension off Form 8938
A UK workplace or personal pension counts toward Form 8938, though the UK State Pension does not. A single filer living in the US files Form 8938 once foreign financial assets pass $50,000 at year end, or $75,000 at any point. On a joint return, the thresholds are $100,000 and $150,000.
Keeping the pension deduction after a green card
A green card ends the US deduction for UK pension contributions, because the saving clause then applies. On a visa, you can deduct them within US limits if you or your employer paid into the scheme before your US job began. The US competent authority must also accept that the scheme broadly matches a US plan.
A posting that keeps you in UK National Insurance
The US-UK Social Security agreement’s coverage rules have applied since January 1, 1985. An employer’s temporary posting can keep you paying UK National Insurance instead of US Social Security. The posting generally has to be expected to last 5 years or less, and a certificate of coverage proves the exemption.
We prepare the US returns your move from the UK brings.
Valim is a CPA firm for UK expats living in the US, and we work alongside the accountant who files your UK return.
- We prepare your first US return, often dual-status, and every federal and state return after it.
- We report ISA income and gains each year, and keep UK pension growth out of US income under Article 18(1). We also file your FBAR, any Form 8938 and each Form 8621. Your quote counts every account and fund.
- We work out estimated payments on your UK rent.
- We credit the UK tax on your rent on Form 1116, within its limits.
- We check if your UK pension contributions can cut your US tax, and what a green card changes.
- We answer IRS or state notices about returns we prepared, such as one on your UK pension, within your fee.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
Questions to settle before you leave the UK.
How to avoid the 60% tax trap in the UK?
Moving to the US and becoming UK non-resident takes your US salary out of the 60% trap. A UK non-resident pays UK income tax only on UK income, unlike Americans living in the UK. In the 2026 to 2027 tax year, the trap is the band between £100,000 and £125,140 of adjusted net income. There, the £12,570 Personal Allowance shrinks by £1 for every £2, so each extra pound costs 60p in income tax outside Scotland. After the move, UK income such as rent from a home you let can still put you back in it.
Do I pay US taxes if I live in the UK?
Yes, if you are a US citizen or green card holder: you owe US tax on your worldwide income while living in the UK. A foreign tax credit for the UK tax you pay can offset US tax on the same income. A green card keeps you US tax resident until it is abandoned or rescinded, or a treaty tie-breaker claim on Form 8833 ends it. If you held the card in 8 of the last 15 tax years, ending it any of these ways counts as expatriating. Once your US residency ends, you pay US tax only on US-source income, such as US dividends.
What is the UK expat 5 year rule?
The UK expat 5 year rule, HMRC’s temporary non-residence rule, taxes some income and gains from your time away if you move back. It reaches people who were solely UK resident for at least 4 of the 7 tax years before they left. It bites only if you return within 5 years, and the tax falls in the year you come back. For gains, the US-UK tax treaty does not block the rule, since Article 13(6) preserves UK taxing rights for 6 years after departure.
Can I keep my ISA after moving to the US?
Yes, you can keep your ISA open, and the UK keeps exempting what it earns. Once you are UK non-resident, you cannot pay into it, unless you are a Crown employee overseas or their spouse or civil partner. Tell your provider when your UK residency ends. The US taxes the account’s income and gains anyway, because no treaty article covers an ISA.
Does the US tax my UK pension?
Yes, the US taxes a UK pension when you draw it, but Article 18(1) of the US-UK treaty leaves its growth untaxed until then. Regular payments from a private or workplace pension are then taxed only by the US, except any part the UK would exempt. Article 19 leaves a UK government service pension to the UK instead, though a green card lets the US tax it too. Whether the US taxes a lump sum is unsettled: the treaty gives it to the UK, yet Treasury says the US may tax it.
Sources
- US-UK income tax convention (2001)
- Treasury, technical explanation of the US-UK convention and 2002 protocol
- GOV.UK, Tax if you leave the UK to live abroad
- HMRC, RDR3: guidance note for the statutory residence test
- GOV.UK, Individual Savings Accounts (ISAs): if you move abroad
- HMRC, Inheritance Tax if you’re a long-term UK resident
- GOV.UK, How Inheritance Tax works: rules on giving gifts
- GOV.UK, Income Tax rates and Personal Allowances
- IRS, Instructions for Form 3520 (Rev. December 2025)
- 31 C.F.R. § 1010.350, Reports of foreign financial accounts
- 31 C.F.R. § 1010.306, Filing of reports
- IRS, Instructions for Form 8938
- 26 U.S.C. § 1291, Interest on tax deferral
- 26 C.F.R. § 1.1298-1, Section 1298(f) annual reporting requirements for United States persons that are shareholders of a passive foreign investment company
- IRS, Publication 519 (2025), U.S. Tax Guide for Aliens
Reviewed and updated September 2026. General information, not advice for your situation.