FEIE for Americans in the UK: Your First-Year Calendar Explained
In your first year, the exclusion turns on a calendar: when your tax home moved, which 12 months you choose and when you can file. Here is how the two tests work from a UK arrival, with a day-by-day worked example and the costs of claiming.
The arrival date starts the count, but your tax home and your chosen 12-month period decide how much of the first year qualifies.
Written by the US UK Tax Experts team, cross-border tax specialists
FEIE for Americans in UK: an introduction
The FEIE for Americans in the UK lets a qualifying person exclude foreign wages from US income, up to $130,000 for 2025 and $132,900 for 2026. You need a tax home abroad and must meet one of two tests. Your first year is the hard part, because you may not qualify by the April filing date. Moreover, a partial year means a reduced limit. Most long-term residents should also compare it with the foreign tax credit before claiming.
This article supports our guide to the US-UK double taxation treaty. For the mechanics of the alternative, see our article on Form 1116 for UK tax. Here, we concentrate on the calendar.
What FEIE for Americans in the UK covers
The foreign earned income exclusion is a choice made on Form 2555. It covers pay for personal services performed abroad, such as wages, salaries and self-employment income. It does not cover interest, dividends, capital gains or pensions. Therefore, a UK pension in payment or a share portfolio stays fully within US tax, whatever your salary does.
The limit by year
The IRS page on figuring the exclusion gives the limits above. If both spouses qualify, each may claim their own limit. The amount is indexed each year, so check the year your return covers.
What are the two tests?
You pass with bona fide residence or physical presence. The second is the usual route in year one, because the first needs a full tax year in the UK.
The bona fide residence test
The IRS test requires residence abroad for an uninterrupted period that includes an entire tax year. So if you land in September 2025, the earliest full year is 2026. Residence is judged on your facts, such as your home, family ties and intentions. It is not automatic, as Publication 54 notes. Once you qualify, the period can reach back to your arrival.
The physical presence test
The physical presence test requires 330 full days in a foreign country during 12 consecutive months. A full day runs from midnight to midnight. Time over international waters does not count. Consequently, a transatlantic crossing can cost you a day at each end, including on visits home.
Tax home comes first
Both tests sit on top of a foreign tax home. Your tax home is generally your main place of work, not your family home. As the IRS explains in its page on the requirements, you must have one to claim. A US employee working in London for a few months on a temporary basis may not have moved it at all. Our article on the US tax deadline for Americans abroad covers the wider filing dates.
How do you count the first year?
You choose the 12-month period that gives the best result, then pro-rate the limit by qualifying days. The IRS allows overlapping periods, and they need not start on the day you arrive.
The worked example: the facts
Consider a typical case. Lauren is a US citizen who leaves Boston on 8 September 2025 and lands at Heathrow on 9 September, to start a permanent UK job. Her first full day in the UK is 10 September, and this is also the point at which we assume her tax home moved. She makes no trips home. Her UK pay is £60,000 a year. We assume $1.30 to the pound. This is an example, not a real client.
The worked example: the count
Her simplest window runs from 10 September 2025 to 9 September 2026. From 10 September to 31 December 2025 there are 113 days. Therefore, her 2025 limit is 113 ÷ 365 × $130,000, or about $40,247. Her September to December pay of roughly £20,000 is $26,000, so it fits entirely within the limit. In 2026, she has a full year, and her limit of $132,900 comfortably covers $78,000 of salary.
The trap in shifting the window
Normally, 330 days out of 365 leaves 35 days to spare. Some guides suggest starting the window up to 35 days before arrival for a bigger first-year limit. However, the IRS counts qualifying days as days with both a foreign tax home and a met test. Lauren's tax home did not exist before September. For her, the shift adds no qualifying days. Shifting helps only if your tax home moved before you were physically settled, which is uncommon.
The US wages remain
Lauren's January to August pay from her Boston employer is not excluded. It was earned in the US. Furthermore, the IRS requires tax on the remaining income to be worked out using the rates that would apply if nothing had been excluded. That is the stacking rule, set out in Publication 54. So excluded income still pushes her other income up the brackets.
When can you file in your arrival year?
Later than most people claiming FEIE for Americans in the UK expect. With no trips home, Lauren completes 330 full days on about 5 August 2026, well after her April and June 2026 deadlines. So she needs an extension or a different plan.
Form 2350
Form 2350 asks for extra time to file for people waiting to meet a test. According to Publication 54, you file it by the return's due date. If granted, the extension generally runs for 30 days beyond the date you expect to qualify. Lauren could therefore ask for time to about 4 September 2026. That does not extend the time to pay, so any US tax due still accrues interest.
The six-month alternative
Alternatively, the automatic two-month extension and a further request to October may be enough. You can also file on time, pay tax on all income and then amend. That brings cash back later, though it needs more paperwork.
Making the choice late
Regulation 1.911-7 says an election is valid on a timely return, or on an original return filed within one year of the due date. It is also valid later if you owe no federal income tax after the exclusion. Beyond that, relief needs IRS consent. Americans who are behind can read our IRS Streamlined Filing guide.
What does claiming the exclusion cost you?
FEIE for Americans in the UK can cost more than people expect, because UK tax is usually higher than US tax on a salary. Run this four-point check before you claim.
Lost credits on the excluded income
Publication 54 says you cannot take a credit or deduction for foreign tax on excluded earnings. Part of your UK tax therefore becomes useless. For someone in the UK, that often gives up a large credit and any carryover it could have built. By contrast, the credit route may clear your US income tax and bank the excess.
Child tax credit and IRA room
If you claim the exclusion, you cannot take the additional child tax credit that year, according to Publication 54. That credit can be real money for a UK family. Excluded pay also does not count as compensation for IRA contributions. Therefore, a parent or a saver should model both options.
The five-year rule
The choice stays in force until you revoke it. Under Regulation 1.911-7, once you revoke, you generally cannot choose it again until the sixth year without IRS consent. So switching back and forth is not free. A first-year claim for convenience can shape your options for a long time.
Self-employment and investment tax remain
The exclusion does not remove US self-employment tax, although UK National Insurance coverage under the totalization agreement may. Similarly, section 1411 adds excluded income back when testing the 3.8% tax threshold. A consultant or investor should therefore check both before claiming.
Does the housing exclusion help in London?
Sometimes, on top of the salary exclusion. It covers housing costs above a base amount and up to a limit, for those with enough earned income.
The base and the cap
Publication 54 sets the base at 16% of the maximum exclusion, which is $20,800 for 2025. The standard limit is generally 30% of the maximum: $39,000 for 2025 and $39,870 for 2026. London has a higher limit, which is listed in the Form 2555 instructions and changes each year. Both amounts are pro-rated by qualifying days in a partial year.
When it matters
In practice, the housing amount only helps if you are already using the exclusion and earn above it, or if you need more room. For most people on a high UK salary, the credit gives a better result. However, a person with low UK tax, such as someone with a large allowance or foreign income relief, may gain from it. We would model that case with real rent figures.
How do bonuses and moves between countries work?
Pay follows where and when you did the work, not when it reaches your account. This trips up many first-year claims of FEIE for Americans in the UK, especially for people who changed role during the year.
A bonus paid after the move
Suppose Lauren's Boston employer pays a bonus in January 2026 for work done in 2025 in the US. It is US-source pay, and the exclusion does not cover it. Equally, a UK bonus paid in 2027 for work done in the UK in 2026 is foreign earned income for 2026. Publication 54 has specific rules for pay received in a later year. Therefore, you should ask your employer which period a bonus relates to, and keep the letter.
Trips to the US for work
Days worked in the US produce US-source pay, even if your UK employer pays you. You lose those days from the count, and you cannot exclude the pay for them. So a week of meetings in New York matters twice. A travel log with work and leave days marked solves both issues at once.
What about the UK side of your arrival?
The UK taxes you on its own rules, regardless of the exclusion. Claiming FEIE for Americans in the UK has no effect on your HMRC bill.
Residence and split-year treatment
The Statutory Residence Test decides whether you are UK resident, and split-year rules can apply on arrival. Your UK employer deducts PAYE on UK work in any event. Therefore, your UK tax runs from a different date to your US qualifying period, often with a gap.
A statement that can harm you
Publication 54 warns that telling a foreign authority you are not a resident, and being treated as not subject to its tax, can stop you being a bona fide resident. So keep your UK and US positions consistent. If you claim a UK non-resident status for any year, recheck your US claim. Our UK Self Assessment service handles that side.
A first-year checklist
Use this short sequence if you are arriving now. It covers the choices about FEIE for Americans in the UK that are hard to change later.
Before you travel
Record your departure date and your first full day abroad. Obtain your UK contract, because it evidences your tax home and that the job is not temporary. Note any US pay still to come. Keep both countries' payslips from the start, as you will need them for either method.
By your first US deadline
Decide whether you will file Form 2350, take the extension to October, or file now and amend later. Then model the exclusion and the credit together. If the credit is close, the five-year rule favours waiting. Finally, confirm whether you also need Form 8938 or an FBAR for your new UK accounts. Those duties apply however you treat your wages.
When you are ready to compare
Bring your first UK payslips and any US income for the year. The comparison of FEIE for Americans in the UK against the credit needs real figures, not a rule of thumb. Consider children, IRA plans and any freelance income. Each of those can change the answer, and a year's numbers usually make the choice clear.
How US UK Tax Experts can help
US UK Tax Experts prepares your US and UK returns from one file, so the two agree. For FEIE for Americans in the UK, we work out your qualifying days, prepare Form 2555 or Form 2350, and model the exclusion against the credit before you commit. Our US federal return service covers the form, and our guide to US-UK tax returns explains how the pair fit together.
Conclusion
The rule is simple, but the first year is not. Fix your tax home date, keep a travel log, choose your 12-month window and plan your filing date around it. Then ask whether FEIE for Americans in the UK is really better than the credit for you. On a typical UK salary, it often is not, and the five-year rule makes the choice worth making carefully.
Contact us
If you have just moved, or are about to, email hello@usuktaxexperts.com or use our contact page. We reply within one working day.
Frequently asked questions
The maximum exclusion for 2026 is $132,900 per qualifying person, up from $130,000 for 2025. A partial qualifying year reduces it by days. The amount is indexed each year.
Yes, usually through the physical presence test, once you complete 330 full days in a 12-month period. The limit is pro-rated for the days that fall in that first year. You may need Form 2350 or an extension, because you may not have qualified by the normal due date.
Only full days from midnight to midnight in a foreign country count. Time over international waters does not count, and travel days to the US usually cost you days. You may choose any 12-month period that gives you the best result.
Often not, because UK tax on a salary is usually higher than US tax. The credit can clear US income tax and build a carryover, while FEIE for Americans in the UK gives up credit on excluded pay. It can also remove the additional child tax credit, so a model of both is worthwhile.
No, it only covers pay for personal services performed abroad. Pensions, dividends, interest and capital gains remain in US income. They may be covered by the credit or the treaty instead.
Stopping counts as revoking the choice. You generally cannot claim it again until the sixth tax year after the revocation without IRS consent. Therefore, an unplanned switch can have a long-lasting effect.
