Filing a US return from the UK: what actually changes

The Foreign Earned Income Exclusion takes a slice of employment income out of the US calculation entirely — $130,000 for the 2025 tax year and $132,900 for 2026, indexed annually. Foreign tax credits instead give you dollar-for-dollar credit for tax already paid to HMRC, across every income type, with excess credits carrying forward for 10 years.

They are not interchangeable, and the choice compounds. Because UK tax rates usually exceed US ones, credits alone often wipe the US bill while building a carryforward buffer — and they keep IRA contributions and refundable child tax credits available, which the exclusion can cost you. Revoking the exclusion later locks you out of it for five years, so the first year's choice deserves modelling, not a software default.

You also pick up filing obligations that simply do not exist in the UK system. FBAR reporting is triggered by the combined high balance of your non-US accounts crossing $10,000 at any point in the year — an aggregate test, measured at each account's annual peak, that an ordinary London salary crosses without noticing. It carries no tax, only a disclosure duty and meaningful penalties for missing it.

Form 8938 stacks a second, higher-threshold disclosure on top for larger asset totals, and holding UK funds — including inside an ISA — can add PFIC reporting on Form 8621. None of these forms changes the tax you owe; all of them change the risk of getting the paperwork wrong.

Living abroad gives you an automatic filing extension to 15 June, with a further extension to 15 October on request — though payment is still due 15 April, and interest runs from that date on anything unpaid. The FBAR nominally shares the April date but auto-extends to October.

The extra room is genuinely useful, because a US return prepared before the UK position is settled often has to be revisited. The UK tax year ends 5 April and Self Assessment figures firm up over the summer; preparing the two returns together, in the right order, is what makes the credits land cleanly instead of approximately.

Most people prepare whichever return is due first and treat the other as a copy exercise. That gets the arithmetic backwards. Where UK tax on the same income exceeds the US charge, the US return depends on the UK figure, because the foreign tax credit claimed is the UK tax actually paid or accrued.

So the sequence is usually UK first, US second, even though the US deadline comes earlier. Where the UK bill is still an estimate at that point, the US return can be filed on a reasonable accrual and revisited, which is one of the honest arguments for taking the later extension rather than filing in April.

The tax years do not line up either. The UK year runs to 5 April and the US year to 31 December, so a single salary is split across two UK years on the American return and across two American years on the UK one. Apportioning that split consistently, and keeping the method, matters more than which method you pick.

Federal filing is the part everyone expects. A state return is the part that catches people, because leaving the country is not the same as leaving a state, and some states are considerably harder to leave than others.

States that look at domicile rather than physical presence can keep taxing a former resident who still holds a driving licence, a voter registration, a property or an intention to return. California, New York and Virginia are the names that recur in our casework, though the rule is specific to each state rather than general.

Severing state residence is a documentary exercise done at the time of the move, not a case argued afterwards. Where the move is still ahead of you, this is the cheapest item on the whole list to get right.

Arriving in the UK usually brings you into Self Assessment, either because HMRC issues a notice to file or because untaxed income makes one necessary. PAYE handles a straightforward salary, so the return exists for what PAYE cannot see: foreign income, rental profit, dividends, gains and the American accounts you still hold.

Split-year treatment can divide the year of arrival or departure so that only the UK part is taxed here, which is worth establishing in the year it applies rather than reconstructing later. Our guide to the UK tax year covers the mechanics, and registering for Self Assessment covers the deadlines for getting into the system.

The two systems also disagree about what income even is. Employer pension contributions, share awards and certain benefits are taxed at different moments on each side, which is how the same package produces two different taxable figures in the same calendar period.

Four dates do most of the work in a cross-border year. The automatic June extension is specific to taxpayers living outside the United States and needs no application, though it extends the time to file and not the time to pay.

This order is the one that avoids rework. The common failure is preparing the US return first, claiming an estimated credit, and then amending once the UK figure lands.

Take an illustrative example: an American who moves to Manchester in March on a salary of the kind that comfortably exceeds the $16,100 single filing threshold. She assumes the move ends her US filing and hears otherwise from a colleague eighteen months later.

Her first full year is straightforward once it is sequenced properly. UK tax on the salary exceeds what the US would charge, so foreign tax credits remove the US liability and leave a carryforward she can use for up to 10 years. Her combined account balances passed $10,000 in her second month here, so an FBAR was due from the first year.

Her partner, who is British with no American ties, files nothing in the United States at all. Same household, same accounts, and an entirely different compliance burden - which is the shape of almost every case we see.

The first is treating the exclusion as the default. It is the better answer for some people and the worse answer for many, and revoking it later locks you out for five years, so the first year deserves a model rather than a tick box.

The second is filing the US return and stopping there. The disclosure forms are separate filings with separate thresholds, and the FBAR does not travel with the return at all.

The third is assuming a refund position means nothing is due. Filing obligations follow income, not tax, and the disclosure forms follow balances rather than either.