Do I pay both UK Corporation Tax and US tax on my company's profits?

Potentially, yes — but not usually in full. Your UK company pays UK Corporation Tax on its profits. As the US owner, you can separately face US tax on those profits (through GILTI/NCTI on retained profit, and on salary or dividends you extract). The US-UK treaty and foreign tax credits are designed to prevent the same profit being fully taxed twice, but the relief isn't automatic and timing mismatches can leave gaps.

Does the US-UK treaty stop double taxation of my company?

It helps, but it doesn't fully eliminate the issue for a US citizen, because the treaty's saving clause preserves the US right to tax its own citizens. The treaty and foreign tax credit mechanisms reduce double taxation on most ordinary income, but areas like GILTI/NCTI and the timing of when each country taxes can still create friction that needs active management.

Why am I being taxed in the US on profits the UK already taxed?

Usually because of a timing or mechanism mismatch. The classic example is GILTI/NCTI: the US taxes a US individual on retained company profit currently, but without a Section 962 election the individual generally can't credit the company's UK Corporation Tax against that US tax. The result can be genuine double taxation until the right election or planning is applied.

How do I avoid double taxation on my UK company?

Through deliberate coordination: choosing the right entity treatment, using the Section 962 election so corporate foreign taxes can offset GILTI/NCTI, timing profit extraction sensibly, and applying foreign tax credits correctly on salary and dividends. There's no single switch — it's the combined effect of elections, timing and credits, which is why cross-border modelling matters.

Is salary or dividends better for a US owner of a UK company?

It depends, and the UK-efficient answer isn't always the US-efficient one. Salary and dividends are treated differently for UK tax, for US foreign tax credit purposes, and potentially for additional US taxes. The right mix balances UK Corporation Tax, UK personal tax, US tax and credit usage together — which usually needs modelling rather than a rule of thumb.

How UK Corporation Tax and US Tax Interact for American-Owned Companies

A US citizen who owns a UK limited company is, in effect, standing in two tax systems at once — and those systems were not designed to mesh neatly. The company pays UK Corporation Tax; the owner can separately face US tax on the same underlying profits. Most of the time, relief mechanisms stop the same money being fully taxed twice — but "most of the time" hides real gaps. This guide explains how the two systems interact, and where double taxation can still slip through.

The short answer

A US-owned UK company can face tax in both countries on the same profits: UK Corporation Tax at the company level, and US tax on the owner (via GILTI/NCTI on retained profit, and on extracted salary or dividends). The US-UK treaty and foreign tax credits are designed to prevent full double taxation, but relief isn't automatic — and because the treaty's saving clause preserves the US right to tax its citizens, gaps remain. The most common gap is GILTI/NCTI, where, without a Section 962 election, an individual generally can't credit the company's UK tax against the US charge.

Key takeaways

The company pays UK Corporation Tax; the US owner can be taxed again on the same profits.
The treaty and foreign tax credits reduce double taxation but don't fully eliminate it for US citizens.
The saving clause preserves the US right to tax its own citizens regardless of the treaty.
The biggest gap is GILTI/NCTI without a Section 962 election.
Avoiding double taxation is about coordinating elections, timing and credits — not one switch.

Executive summary

The interaction between UK Corporation Tax and US tax has two layers. At the company level, the UK taxes the company's profits — that part is clean and one-sided. The friction is at the owner level, where the US asserts the right to tax the same profits in the owner's hands: currently, under GILTI/NCTI, on retained profit; and on extraction, when salary and dividends are paid out. The US-UK treaty and the foreign tax credit are the tools meant to reconcile this, and for ordinary salary and dividend income they usually work well. The persistent trouble spots are GILTI/NCTI (where individual credit relief requires a Section 962 election) and timing (where the two countries tax the same profit in different years). Managing the interaction is therefore an exercise in elections, sequencing and credits — not a single relief you claim.

Layer one: the company pays UK Corporation Tax

This part is simple. Your UK limited company is a UK taxpayer; it pays UK Corporation Tax on its profits, files a CT600, and prepares company accounts. The US doesn't tax the company itself. If the story ended here, there'd be no double taxation. It doesn't end here — because of who owns the company.

Layer two: the US taxes the owner

Because you're a US citizen, the US reaches through the company to tax you on its profits in two ways:

On retained profit, currently: GILTI/NCTI can tax you on the company's profits in the year earned, even undistributed. We cover this fully in GILTI/NCTI rules for Americans with UK companies.
On extracted profit: when you pay yourself salary or dividends, those are taxed in the UK (personally) and are also US-taxable, with foreign tax credits generally available to offset the US charge.

So the same underlying pound of company profit can be looked at by the US at two moments — when retained, and when extracted — which is where careful coordination earns its keep.

How relief is supposed to work

Two mechanisms exist to stop the same profit being fully taxed twice:

The foreign tax credit — credits foreign tax paid against US tax on the same income. For salary and dividends, this generally works well, because UK personal tax is creditable against the US tax on the same income.
The US-UK treaty — allocates taxing rights and provides relief, sitting alongside the credit.

For an American drawing ordinary salary and dividends from a UK company, these usually reduce the US bill to little or nothing. The problems arise at the edges.

Where double taxation still slips through

Three recurring gaps:

GILTI/NCTI without a Section 962 election. This is the big one. The US taxes the individual on retained profit, but by default the individual cannot credit the company's UK Corporation Tax against that charge. A Section 962 election is usually what bridges this — letting corporate foreign taxes offset the inclusion. Without it, genuine double taxation can occur.
Timing mismatches. The UK and US don't always tax the same profit in the same year. UK Corporation Tax hits when the company earns; US tax on a dividend hits when you extract; GILTI/NCTI hits on retention. Credits have to be matched to the right year, and mismatches can strand relief.
The saving clause. Because the treaty's saving clause preserves the US right to tax its citizens, you can't simply "treaty away" the US charge the way a non-citizen sometimes could. The treaty reduces friction; it doesn't remove the US from the picture.

Salary vs dividends — a cross-border, not UK-only, question

How you extract profit is the lever you most directly control, and it's genuinely two-sided. A salary reduces company profit (affecting UK Corporation Tax) and is creditable personal income for US purposes; dividends are paid from post-tax profit and interact differently with UK personal tax and US credits. The UK-efficient mix and the US-efficient mix can differ, so the right answer balances UK Corporation Tax, UK personal tax, US tax and foreign tax credit usage together. This is exactly the kind of thing our tax planning work models.

Common mistakes we see

Assuming UK Corporation Tax cancels all US tax — it doesn't, especially for GILTI/NCTI.
Skipping the Section 962 election and suffering avoidable double taxation on retained profit.
Ignoring timing so that foreign tax credits don't line up with the US charge.
Optimising extraction for the UK only, then losing the benefit on the US side.
Treating the treaty as a complete shield — the saving clause means it isn't, for citizens.