FOR US CITIZENS LIVING IN THE UK
American in the UK? Your money answers to two tax systems at once.
You opened the ISA everyone recommended, and your UK adviser put you in funds that made sense at the time. Then you found out the IRS sees all of it differently.
N2 plans your UK financial life with the US rules in mind, and coordinates with your US tax adviser so the two sides fit together.
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It really is this complicated
The US taxes you on where you were born. The UK taxes you on where you live. Most financial products are built for one system or the other, never both. So the sensible move in one country becomes a penalty in the other. You did everything you were supposed to. The rules just weren't written with you in mind.
The traps that catch Americans in the UK
The ISA that isn't tax-free for you
In the UK an ISA grows tax-free. The IRS doesn't recognise the wrapper, so it usually taxes everything inside it. The "tax-free" account becomes one of the most expensive ones you own.
Funds that turn toxic across the Atlantic
Most UK funds, OEICs and investment trusts are treated by the IRS as Passive Foreign Investment Companies, or PFICs as they are more commonly known. That means punitive tax rates and a separate IRS form for each holding, every year. Standard UK fund advice can quietly create a large US tax problem. It is not even necessarily any tax payable to be concerned about, but the reporting itself, which can be very costly if a CPA is engaged to complete your US tax returns.
The 401(k) or IRA you left behind
Many US providers freeze accounts once you have a UK address. You can see the money, but you can't manage it or add to it. Your retirement savings end up stranded.
The bank or platform that turned you away (FATCA)
You went to open an account and got asked for a W-9, or got turned down altogether. UK firms often avoid US clients to sidestep FATCA reporting. It's common, and it isn't a reflection on you.
Paying tax twice, or fearing you will
Two tax systems with different deadlines and different rules for almost everything. Used correctly, the US-UK treaty stops you being taxed twice on the same income. Used carelessly, the mismatch costs you.
What happens to your estate, and your family
From April 2025 the UK taxes long-term residents on their worldwide estate. Layer that over US estate tax and the 1978 treaty, and a will that works in one country can fail in the other. Your family inherits the confusion.
A US person holding £100,000 of ordinary UK funds may owe a separate IRS form (Form 8621) for each fund, every year, whether or not anything was sold.
A service engineered for clarity
Navigating the complexities others fear to thread
With over 25 years of experience between us advising US citizens resident in the UK, and others facing multi-jurisdictional challenges, there is a reason we are the go-to financial planners in this field. Our expertise in financial planning and comprehensive wealth management for US expats in the UK is reflected in the testimonials from our existing clients.
As a general rule, US citizens are assessed on their worldwide income, irrespective of where they live. Many double taxation conventions contain what is known as a "saving clause", which allows US citizens resident in other countries to be taxed on the basis of citizenship.
There are many challenges and complexities that US expats in the UK need to understand.
Passive Foreign Investment Company rules (PFICs)
Investing in non-US domiciled ETFs, unit trusts or other types of collective investment results in additional IRS reporting, which also costs you more through tax adviser fees, higher tax paid, and possible penalties if not reported in time. At N2 Asset Management, all portfolios, including those for personal pensions, are made up of non-PFIC investments.
Personal pension contributions
Personal pensions are seen as foreign grantor trusts for US taxation, which means there is only UK tax relief and no US tax relief on contributions, although there could be enough foreign tax credit that no additional US tax would be paid. The gains and income of the trust are reportable to the IRS and would be taxable in the US. There is, however, a double taxation treaty between the US and the UK which allows the US taxpayer to defer the tax. This decision needs to be taken based on personal circumstances.
US Social Security and the UK State Pension
The interaction is complex when people have earned benefits in both countries. You could be paid benefits from each country, or there may be cases where you use the social security agreement between the US and the UK, sometimes known as the "totalisation agreement", and receive benefits from only one country.
UK reporting funds
Most US domiciled ETFs and unit trusts are not reporting for HMRC purposes, and as a result realised gains are not subject to the lower capital gains tax rates but to the marginal income tax rate, which is a lot higher at 40% and 45%. Portfolios made up of US domiciled ETFs, held to meet the non-PFIC rules, therefore need to be constructed carefully from reporting ETFs.
Sale of a UK main residence
US citizens are taxed on the gains from selling their UK main residence, although an exemption of $250,000 will apply.
Claiming the arising basis or the FIG regime
The Foreign Income and Gains (FIG) regime enables qualifying new residents to claim UK tax relief on foreign income and gains arising during their first four years of UK residence.
Becoming a UK long-term resident and subject to UK Inheritance Tax
The matter is complex, but as a rule, once you have been resident in the UK for ten years and are treated as a long-term resident, your worldwide estate becomes subject to UK Inheritance Tax on death. Funds settled in discretionary trusts, including non-UK trusts, where the settlor becomes a UK long-term resident, will also become subject to the ten-year periodic charge of 6% on the amount above the nil rate band, currently £325,000.
Other common issues
There are other issues, such as letting your US credit score lapse by not using US credit cards, assuming US trust and estate planning works in the UK, and neglecting to make UK National Insurance contributions.
This information should not be considered UK or US tax advice.
how we work
How N2 plans around the US rules.
Good planning starts with your life, not tax rules. Once we understand where you're heading, we build a structure that works with both US and UK residency.
Investments built to behave in both countries
Where it fits your plan, that means holding direct shares and bonds, or funds that carry the right reporting status, so your portfolio doesn't trigger PFIC treatment or punitive UK tax rules in either the US or UK. The aim is a portfolio you can keep wherever life takes you.
Your UK plan and your US tax position, joined up
We plan your pensions, investments and allowances on the UK side, with a clear eye on how each decision lands with the IRS. Where you have a US tax adviser, we work directly with them so nothing falls between the two.
The two tax years, handled deliberately
The US runs on the calendar year, the UK from April to April. We plan around that mismatch so credits line up and you're not caught short at either deadline.
One plan for your whole life, not just your portfolio
Retirement on both sides, property, what you leave behind, a possible move back to the States. It all sits in one place, so the pieces work together.
Authorised and regulated by the Financial Conduct Authority
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What to expect when working with us
Financial planning with N2 follows a clear path — from an initial conversation to a written plan built around your life, and an ongoing relationship that keeps it on track as things change.
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Getting to know each other
02
Understanding your situation
03
Making sense of where you stand
04
Building your plan
05
Putting the plan into action
06
Reviewing life as it moves on
What our clients say
"Eugen delivered calm, professional guidance that gave me clarity and confidence. Eugen has a very good understanding of the US and UK legal and tax issues regarding international divorces and I now have a plan I trust and a much stronger sense of financial security."
— Verified client, Surrey
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"Eugen and team build a view on of our financial acumen and situation, and from there, provide guidance which is accessible (at our level) to us, practical, and considered in context of macro economic and political dynamics influencing long term investments."
— Verified client, London
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common questions
Questions Americans in the UK ask us
Can I open an ISA as a US citizen living in the UK?
You can open one under UK rules, but it rarely works in your favour. The IRS doesn't treat an ISA as tax-free, so it usually taxes the income and gains inside it, and the funds within are often PFICs, which makes the reporting heavy. For most US persons the ISA loses the advantage it's designed to give.
Why are my UK funds a problem for the IRS?
Most UK funds, unit trusts, OEICs and investment trusts fall under the US PFIC rules. PFICs are taxed at high rates and need a separate IRS form (Form 8621) for each holding, every year, whether or not you sold anything. It's one of the most common and expensive surprises for Americans investing through standard UK products.
What happens to my 401(k) or IRA now I live in the UK?
The accounts usually keep their tax-deferred status under the US-UK treaty, so moving doesn't trigger an immediate tax bill. The practical problem is access: some US providers restrict accounts held by people with an overseas address, which can leave you unable to manage or add to them. Planning here is mostly about access, drawdown and timing.
Can I move my US retirement account into a UK pension?
Generally no. HMRC doesn't recognise US plans like 401(k)s and IRAs as qualifying overseas pension schemes, so a direct transfer into a UK SIPP isn't available. Most people keep retirement savings in both countries and plan how they draw from each.
Does the US-UK treaty protect my 25% tax-free pension lump sum?
This is one to be careful with. The UK lets you take up to 25% of a pension tax-free, but the US generally still taxes that lump sum as income because of the treaty's saving clause. An amount that's tax-free on the UK side can be taxable on the US side, so it needs planning before you take it.
Why do UK banks and platforms turn away American customers?
To avoid the cost and risk of FATCA reporting, many UK firms simply don't take on US clients. Being asked for a W-9, or being turned down, is common and isn't a reflection on you. The work is finding providers and structures that will take you and keep you compliant on both sides.
Do I need a specialist, or will a normal UK adviser do?
A standard UK adviser will often recommend exactly the products that cause US tax problems, because they're planning for one system. US-aware advice on the UK side, coordinated with a US tax professional, is what keeps the two from working against each other.
Do I need a US will and a UK will?
Often yes, and they have to be written so they don't cancel each other out. Since April 2025 the UK taxes long-term residents on their worldwide estate, which sits alongside US estate tax and the 1978 treaty. Estate planning across the two countries is technical and worth getting right early.
Is there a minimum I need to invest?
[N2 decision — see Section 7. Either state your minimum plainly, or say you work with people at different stages and the first call is about fit.]
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