If you are an American living in London — or anywhere outside the United States — there is one fact that catches almost everyone by surprise: you very likely still have to file a US tax return every year, no matter how long you have been away or where your income is earned. The good news is that filing is not the same as paying, and for most expatriates the system is built so that you are not taxed twice on the same money.
This guide explains, at a high level, why the obligation exists, the reliefs that usually prevent double taxation, the foreign-account reporting rules that catch people out, and how to get back on track if you have fallen behind. It is general information rather than advice on your particular situation, and US figures change every year — so treat the specifics as a map, not a destination, and confirm current requirements with the IRS or a qualified adviser before you act.
Why the US taxes you on your worldwide income
Most countries tax people on the basis of where they live. The United States is one of the very few that taxes on the basis of citizenship. This is often called citizenship-based taxation, and its practical effect is simple but far-reaching: if you are a US citizen — or a lawful permanent resident, the holder of a green card — the US treats your worldwide income as reportable, wherever in the world you happen to live or earn it.
So an American who has lived in the UK for twenty years, banks in pounds, works for a British employer and has not set foot in the States in a decade is, in the eyes of the Internal Revenue Service, generally still required to file a federal income tax return each year if their income reaches the relevant filing threshold. The same is true of accidental Americans — people who acquired US citizenship at birth through a parent or place of birth and may barely think of themselves as American at all.
The obligation to file is not the same as an obligation to pay. For a great many Americans abroad, the return is filed, the reliefs are applied, and the US tax owed comes to nothing — but the filing itself is still required.
It is worth saying plainly: this is not a loophole or an edge case. It is the baseline rule, and the reliefs below exist precisely because lawmakers recognised that taxing citizens abroad on income already taxed where they live would otherwise be punishing.
The reliefs that usually prevent double taxation
Because you are already paying tax in the country where you live and work, the US system provides several mechanisms designed to ensure you are not taxed twice on the same income. Three matter most for Americans in the UK.
The Foreign Earned Income Exclusion (FEIE), claimed on Form 2555, allows qualifying expatriates to exclude a capped amount of foreign earned income — broadly, wages and self-employment income earned abroad — from US tax altogether, provided you meet a residence or physical-presence test. The cap is set by the IRS and adjusts each year, so always confirm the current figure rather than relying on a number you remember.
The Foreign Tax Credit (FTC), claimed on Form 1116, takes a different approach: instead of excluding income, it gives you a credit against your US tax bill for income tax you have already paid to a foreign government. Because UK income tax rates are, for many people, higher than the equivalent US rates, the credit frequently wipes out any remaining US liability on the same income. The FEIE and the FTC can sometimes be combined, but the interaction is technical and choosing the right approach can have lasting consequences.
Sitting above both is the US–UK tax treaty, an agreement between the two governments that allocates taxing rights over particular categories of income — pensions, dividends, certain government payments and more — and contains provisions designed to relieve double taxation. Treaty positions can be powerful, but they are also intricate and sometimes interact awkwardly with US domestic rules, so they reward careful, specific advice.
- Form 1040 — the main US individual income tax return.
- Form 2555 — the Foreign Earned Income Exclusion (FEIE).
- Form 1116 — the Foreign Tax Credit (FTC).
- FBAR / FinCEN Form 114 — the report of foreign bank and financial accounts.
- Form 8938 — the FATCA statement of specified foreign financial assets.
The reporting rules that catch people out: FBAR and FATCA
For many Americans abroad, the bigger trap is not the tax return at all — it is the separate obligation to report foreign financial accounts, even when no tax is due. There are two regimes, and they overlap.
The FBAR — the Report of Foreign Bank and Financial Accounts, filed electronically as FinCEN Form 114 — must generally be filed if the combined value of your non-US financial accounts exceeds a reporting threshold at any point during the year. It is filed with the Treasury's Financial Crimes Enforcement Network, separately from your tax return, and it covers a wide range of accounts: current and savings accounts, certain pensions and investment accounts, and accounts over which you merely have signature authority.
Layered on top is FATCA — the Foreign Account Tax Compliance Act — which requires certain taxpayers to report specified foreign financial assets on Form 8938, filed with the tax return itself. FATCA also obliges foreign banks to report American account holders to the US, which is why your UK bank may have asked for your US details or a tax identification number.
The reason to take these seriously is the penalty regime. Failures to file the FBAR in particular can attract substantial penalties, with the harshest reserved for wilful non-compliance. The thresholds and penalty figures are set by US law and change, so confirm the current numbers on IRS.gov — but the principle is constant: reporting is mandatory, and the cost of ignoring it dwarfs the effort of complying.
Falling behind, and how to get compliant
A great many expatriates discover these obligations years late — often through a bank, an accountant, or an offhand comment from another American. If that is you, the most important thing to know is that there is usually a structured, forgiving route back, and that panic and silence are the worst responses.
The IRS operates the Streamlined Filing Compliance Procedures, designed specifically for taxpayers whose failure to file was non-wilful — that is, the result of a genuine misunderstanding rather than a deliberate attempt to hide income. For eligible Americans abroad, the streamlined route generally involves filing a limited number of back tax returns and FBARs together with a certification of non-wilful conduct, and it is structured to reduce or remove penalties for those who qualify. Eligibility and the exact requirements are specific and change over time, so this is an area where advice before you file is genuinely valuable.
On timing, Americans abroad benefit from an automatic extension beyond the usual spring filing date, giving expatriates additional time to file their federal return — though interest can still run on any tax actually owed from the original date, and further extensions can be requested. The FBAR has its own deadline with its own automatic extension. Because the precise dates shift from year to year, confirm the current deadlines on IRS.gov rather than assuming last year's apply.
- The US taxes citizens and green-card holders on worldwide income, so an American in London generally must still file a federal return — even if no US tax ends up being due.
- Double taxation is usually avoidable through the Foreign Earned Income Exclusion (Form 2555), the Foreign Tax Credit (Form 1116), and the US–UK tax treaty.
- The FBAR (FinCEN Form 114) and FATCA (Form 8938) require you to report foreign accounts and assets separately, even when no tax is owed — and the penalties for missing them are severe.
- If you have fallen behind without meaning to, the IRS Streamlined Filing Compliance Procedures offer a structured route back for non-wilful taxpayers.
- Filing thresholds, exclusion amounts and deadlines change every year — always confirm current figures on IRS.gov or with a qualified adviser before acting.
How Crejj & Partners can help
Cross-border tax is one of the few areas where getting the structure right early saves enormous cost and stress later. Our tax team advises Americans in the UK — and dual UK/US taxpayers more broadly — on coordinating their obligations on both sides of the Atlantic: choosing between the exclusion and the credit, applying treaty positions correctly, getting FBAR and FATCA reporting in order, and using the streamlined procedures to come back into compliance without unnecessary penalties. Where HMRC and the IRS both have an interest in the same income, we help make sure the two systems work together rather than against you. If you are unsure whether you should be filing, or you suspect you have fallen behind, the right first step is a confidential conversation before any return is submitted.
This article is provided for general information only and does not constitute legal or tax advice or create a solicitor–client (or attorney–client) relationship. US tax rules are complex and change; always confirm current requirements with the IRS (irs.gov) or a qualified adviser. Crejj & Partners is a fictional firm presented for illustrative purposes on this website.