What UK Residents with U.S. Income Need to Know About Tax Compliance
If you live in the UK and receive US rent, dividends or pension income, this is what each country expects you to file and how the treaty limits the US tax.
Written by the US UK Tax Experts team, cross-border tax specialists
Do UK residents have to pay US tax on US income?
Sometimes. If you are not a US citizen or green card holder, the US taxes only your US-source income, and the US-UK treaty limits how much. Dividends are usually taxed at 15%, most interest and royalties are exempt, and rent from US property is taxable in the US.
If you are a US citizen or green card holder living in the UK, the position is different: the US taxes your worldwide income and you file a full return every year.
What is Form W-8BEN and why does it matter?
Form W-8BEN tells a US payer that you are a UK resident entitled to treaty rates. Without it, US brokers and companies withhold 30% from dividends and other payments. With it, the treaty rate applies at source, which for most dividends is 15%.
The form is given to the payer, not the IRS, and generally needs renewing every three years. Companies use Form W-8BEN-E instead.
When does a UK resident need to file a US tax return?
You file Form 1040-NR if you have US income that was not fully taxed by withholding, or income connected with a US business. The most common cases are US rental property and the sale of US real estate.
- US rental income: by default it is taxed at 30% of the gross rent. Electing to treat it as business income lets you deduct expenses and pay tax on the profit instead, which requires filing a return.
- Selling US property: the buyer generally withholds 15% of the sale price under FIRPTA. A return is filed to calculate the real tax and reclaim any excess.
- US partnerships and LLCs: a share of US business income usually brings a filing requirement with it.
How do I report US income to HMRC?
UK residents are taxed on worldwide income, so US income goes on the foreign pages of the Self Assessment return. Where the US has also taxed it, you claim Foreign Tax Credit Relief, limited to the amount the US was entitled to charge under the treaty.
That limit is the detail people miss. If a US broker withheld 30% because no W-8BEN was in place, HMRC gives credit for 15% only, and the rest has to be reclaimed from the IRS.
How are US pensions taxed for UK residents?
Under the treaty, regular payments from a US pension, including an IRA or 401(k), are generally taxable only in the country where you live. A UK resident reports them on the UK return. Lump sums are treated differently and can be taxed in the US, so they need checking before they are drawn.
What are the deadlines and penalties?
- UK Self Assessment: online returns and payment are due by 31 January after the tax year ends on 5 April. The late filing penalty starts at £100.
- US Form 1040-NR: due on 15 April if you had wages subject to US withholding, otherwise 15 June.
- UK payments on account: due on 31 January and 31 July, where they apply.
Has the UK remittance basis changed?
Yes. From 6 April 2025 the remittance basis for non-domiciled taxpayers was replaced by a regime based on residence. New arrivals who have not been UK resident in the previous ten years can claim relief on foreign income and gains for their first four years. After that, worldwide income is taxed as it arises. Returns that relied on the old rules need checking against the new ones.
What records should I keep?
- US Forms 1042-S and 1099 showing income paid and tax withheld.
- Rental statements and expenses for any US property.
- Completion statements for property purchases and sales, with dates and exchange rates.
- Copies of every W-8BEN you have given.
- Pension statements showing payments made in the year.
We prepare the UK return and any US return together, so the credit claimed with HMRC matches the tax actually due to the IRS.
