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      US citizens face the unique challenge of being subject to US federal tax and the obligation to file US tax returns, no matter where they live and work. Our UK & US tax advisors can help individuals and families that pay tax in the United States with all aspects of their reporting, compliance, and tax residency complexities.

      If you are a US citizen living overseas, or a non-US citizen thinking of moving to or investing in the US, our expert team of UK & US tax advisors can help you navigate the complex US tax system. We are part of a global private client team, which enables us to access expertise around the world to provide multi-jurisdictional advice to US-connected clients.

      Andrew Harrison
      Andrew Harrison

      Partner, US High Net Worth, Family Office and Private Client

      KPMG in the UK

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      US & UK personal tax services

      • Preparation of US federal and state tax filings, including the reporting requirements for non-US companies, partnerships and trusts.
      • US tax advisory services for US citizens living outside the US.
      • US tax advisory services for non-US citizens moving to or investing in the US.
      • US estate and gift tax planning for US citizens living overseas and for non-US citizens with US assets.

      Frequently asked questions

      US citizens are subject to US federal tax on their worldwide income and gains, so if your total income and gains exceed the annual filing thresholds you will need to file a federal tax return. If you’re a UK resident and paying full UK tax, your US federal tax will be reduced by foreign tax credits, and it may be that no tax is due. Nonetheless, you still have the requirement to file a tax return each year. If your income is in excess of the Net Investment Income Tax (‘NIIT’) thresholds in any year, your investment income and gains will be subject to 3.8% NIIT – this cannot be reduced by foreign tax credits, and you will therefore owe this tax to the US each year.

      In addition, you may be required to file an annual Foreign Bank Account Report (‘FBAR’), also known as Form FinCEN 114. This is required if the aggregate balance on your non-US financial accounts exceeds $10,000 at any point during the year. The FBAR must be filed even if you are not required to file a US tax return.

      You should take steps to file your US tax returns as soon as possible. If the Internal Revenue Service (‘IRS’) were to contact you before you have filed tax returns, your options will be severely limited and the penalties for non-filing could be severe.

      If you have lived outside the US for at least three years and, during that time, spent less than 35 days in the US each year, you may qualify for the IRS Streamlined Foreign Offshore Procedures (‘Streamlined Procedures’). Using the Streamlined Procedures, you can file three years’ late tax returns and six years’ late FBARs, and the IRS will agree to waive all penalties for late filing and payment of tax (but not interest). You would need to certify that the reason you failed to file your tax returns and FBARs was not the result of ‘wilful’ conduct.

      The US tax system offers no tax incentives for inbound expatriates; once you become a US tax resident you are subject to US tax on your worldwide income and gains. In addition, the US federal tax rules often impose significant reporting obligations on US residents with non-US assets. US residents with material interests in non-US companies, non-US partnerships and non-US trusts are subject to extremely onerous reporting. In addition, the tax rates applied to income from non-US assets can often be confiscatory. We always recommend taking tax advice before becoming US resident, to make sure the impact of these rules is understood and, where possible, mitigated.

      Most of the 50 US states have their own income tax system and their own tax residence rules. Depending on which US state you are planning to move to, you may need to take advice on your state tax position.

      As a US citizen you will remain subject to US federal tax after you leave. However, depending which US state you are resident in, you may be able to ‘break’ your state tax residence when you move.

      If you’re paying tax in the UK, you will be able to claim a foreign tax credit to reduce your federal tax liability. However, you may need to make sure that any UK tax is paid in the same calendar year as the income or capital gain is received, to ensure that the credit is claimed as soon as possible.

      In the UK you may qualify for the Foreign Income and Gain (‘FIG’) regime, if you have not been resident in the UK for a period of ten straight tax years. If you qualify, the FIG regime would enable you to exempt your non-UK income and gains from UK tax for the first four tax years you are in the UK. US federal tax would still be due on all income and gains.

      Ownership of US real estate can be complex, and many US-based advisors will recommend ownership through a Limited Liability Corporation (‘LLC’) or ‘living trust’, structures which are not always appropriate for UK taxpayers.

      If you rent out the property you will be subject to US federal and possibly state tax on the profits, and you will need to file US tax returns and obtain a taxpayer identification number (‘ITIN’). If you sell the property, any capital gain realise is subject to federal and possibly state tax, and 15% of the proceeds of sale will be withheld and paid over to the Internal Revenue Service (although this can be reduced in some circumstances). If you haven’t already filed US tax returns, you will need to file them in the year of sale, and if the tax withheld is higher than the final amount due, you will receive a refund.

      US real estate is subject to federal estate tax and non-residents of the US received a limited estate tax exemption of $60,000. If the US property is in your estate on your death, estate tax will be due, even if the property passes to a surviving spouse. With careful planning the estate tax exposure can be mitigated or even alleviated completely.

      Our UK & US personal tax advisory insights

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      Our people

      Andrew Harrison
      Andrew Harrison

      Partner, US High Net Worth, Family Office and Private Client

      KPMG in the UK

      Nitin Naik
      Nitin Naik

      Director, US High Net Worth, Family Office and Private Client

      KPMG in the UK

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