US–UK cross-border tax glossary

Accidental American

An accidental American is someone who is a US citizen — usually by birth in the US or to US-citizen parents — but has lived their life elsewhere and may be unaware of US tax and reporting obligations that nonetheless apply to them.

Dual-Status Return

A dual-status return is filed for the year someone is a US resident for part of the year and a non-resident for the rest — typically the year of arriving in or leaving the US. It combines resident and non-resident treatment across the year.

Estimated Tax

Quarterly US Tax Payments (Form 1040-ES)

US estimated taxes are quarterly payments toward tax not collected through withholding — often relevant to self-employed Americans abroad and those with investment or foreign income, who can otherwise face underpayment penalties.

Exit Tax

Expatriation Tax

The US exit tax can apply when a long-term green card holder or citizen gives up that status and meets certain wealth or income thresholds. It treats worldwide assets as sold at fair market value on the day before expatriation.

FEIE

Foreign Earned Income Exclusion (Form 2555)

The Foreign Earned Income Exclusion lets qualifying Americans abroad exclude a capped amount of foreign earned income from US tax. It is claimed on Form 2555 and requires meeting either the bona fide residence or physical presence test.

Foreign Tax Credit

FTC (Form 1116)

The Foreign Tax Credit gives US taxpayers a dollar-for-dollar credit against US tax for income tax paid to another country, preventing double taxation. It is claimed on Form 1116 and is often the best relief for Americans in high-tax countries like the UK.

Form 1040

US Individual Income Tax Return

Form 1040 is the standard US federal income tax return. US citizens and green card holders file it on their worldwide income every year, wherever they live — including Americans resident in the UK, who file it in addition to any UK return.

Form 1040-NR

US Nonresident Alien Income Tax Return

Form 1040-NR is the US income tax return for nonresident aliens — people who are not US citizens or green card holders and do not meet the substantial presence test. It reports only US-source income, unlike the worldwide-income Form 1040.

Form 1040-X

Amended US Individual Income Tax Return

Form 1040-X is used to correct a US federal return already filed — to fix errors, add missed income or reliefs, or claim a refund. Amended returns are also the mechanism for correcting back years under the Streamlined Filing Procedures.

Form 8854

Initial and Annual Expatriation Statement

Form 8854 is filed by US citizens who renounce citizenship and long-term green card holders who give up their status. It is how you certify compliance and determine whether the exit tax applies.

Green Card Holder

A US lawful permanent resident (green card holder) is taxed by the US on worldwide income just like a citizen, even while living in the UK — and keeps US filing and FBAR/FATCA obligations until the green card is properly relinquished.

ITIN

Individual Taxpayer Identification Number

An ITIN is a US tax identification number for people who must file or be reported on a US return but are not eligible for a Social Security Number — for example a non-US spouse or dependent of an American in the UK.

NIIT

Net Investment Income Tax (Form 8960)

The Net Investment Income Tax is a 3.8% US tax on investment income above certain thresholds. It is a well-known trap for Americans abroad because foreign tax credits generally cannot be used against it, so it can apply even when regular US tax is fully offset.

PFIC

Passive Foreign Investment Company

A PFIC is a foreign pooled investment — most non-US mutual funds, ETFs, and many investment-style accounts. US owners face punitive tax and complex Form 8621 reporting, which is why non-US funds (including many held in ISAs) are problematic for Americans.

Schedule B

Interest and Ordinary Dividends (Form 1040)

Schedule B reports interest and dividend income on a US return, and includes the foreign-accounts question that flags FBAR and FATCA obligations. Americans in the UK often must complete it even for modest UK savings and investment income.

Schedule C

Profit or Loss From Business (Form 1040)

Schedule C reports the income and expenses of a US person self-employment or sole-proprietor business. A self-employed American in the UK typically reports the UK trade here, and the net profit also feeds self-employment tax.

Schedule D

Capital Gains and Losses (Form 1040)

Schedule D reports capital gains and losses on a US return — from selling shares, funds, or property. For Americans in the UK it is where gains on UK assets are reported to the IRS, which can differ significantly from the UK CGT position.

Schedule E

Supplemental Income and Loss (Form 1040)

Schedule E reports rental income, royalties, and income from partnerships and S corporations on a US return. Americans in the UK use it to report UK rental property to the IRS alongside their UK tax position.

Schedule SE

Self-Employment Tax (Form 1040)

Schedule SE calculates US self-employment tax — the Social Security and Medicare charge on self-employment income. Whether an American in the UK owes it often turns on the US-UK totalization agreement.

Streamlined Filing Compliance Procedures

The Streamlined Procedures are an IRS amnesty programme letting US taxpayers who failed to file returns or FBARs non-wilfully catch up — typically penalty-free — by filing a limited number of back years and a certification of non-wilful conduct.

Substantial Presence Test

The Substantial Presence Test is the day-counting test that determines whether a non-citizen is a US tax resident. Passing it makes someone a US resident taxed on worldwide income; failing it generally means non-resident status and Form 1040-NR.

US Tax Return (Form 1040)

US Individual Income Tax Return

The annual federal income tax return US citizens and residents must file on worldwide income.

Domicile

Domicile is a general-law concept of your permanent home, historically central to UK tax. The UK moved inheritance tax off domicile to a residence test from 6 April 2025, though domicile still matters for the US–UK estate and gift tax treaty.

National Insurance

NI

National Insurance is the UK social security contribution system, funding the state pension and certain benefits. For cross-border workers, the US–UK Totalization Agreement decides whether NI or US Social Security applies.

Self Assessment

Self Assessment is the UK system for reporting income not taxed at source — including self-employment, rental, and foreign income — by filing an annual tax return with HMRC. The online deadline is 31 January following the tax year.

Statutory Residence Test

SRT

The Statutory Residence Test is the UK set of rules for deciding whether you are UK tax resident in a given tax year, based on days spent in the UK and connecting factors like work, home, and family ties.

VAT

Value Added Tax

VAT is a UK consumption tax charged on most goods and services. Businesses must register once taxable turnover crosses the current registration threshold, then charge VAT and file periodic returns with HMRC.

Form 8802

Application for United States Residency Certification

Form 8802 requests IRS certification of US tax residency (issued as Form 6166), used to claim US-UK treaty benefits and reduce foreign withholding tax on US-connected income.

Form 8833

Treaty-Based Return Position Disclosure

Form 8833 discloses to the IRS that you are taking a tax position based on a treaty. It is required for certain treaty claims, and failing to file it when required can carry a $1,000 penalty for individuals.

Saving Clause

The saving clause in the US–UK tax treaty preserves the US right to tax its citizens and residents as if much of the treaty did not exist. It is why being American limits many treaty benefits that would otherwise reduce US tax.

Totalization Agreement

The US–UK Totalization Agreement prevents you paying social security taxes to both countries on the same earnings. It assigns your social security liability to one country, generally based on where you work, evidenced by a certificate of coverage.

US–UK Income Tax Treaty

The US–UK income tax treaty allocates taxing rights over cross-border income (wages, pensions, dividends, business profits) between the two countries and provides mechanisms to relieve double taxation. It is separate from the estate and gift tax treaty.

Delinquent FBAR

Delinquent Report of Foreign Bank and Financial Accounts

An FBAR (FinCEN Form 114) that was required in a prior year but never filed by the deadline.

Delinquent FBAR Submission Procedures

An IRS route for taxpayers who filed their US returns and reported their income correctly but missed the FBAR. The overdue FBARs are e-filed with a reason for the delay, and — where the related income was properly reported — generally without penalty.

FATCA

Foreign Account Tax Compliance Act

FATCA is a US law requiring US taxpayers to report specified foreign financial assets on Form 8938, and requiring foreign financial institutions to report US-held accounts to the IRS. Its individual reporting thresholds are higher than the FBAR threshold.

FBAR

Report of Foreign Bank and Financial Accounts (FinCEN Form 114)

The FBAR is an annual US report of foreign financial accounts, required when the combined balance of all your non-US accounts exceeds $10,000 at any point in the year. It is filed with FinCEN, separately from your tax return.

Form 1116

Foreign Tax Credit

IRS Form 1116 is how individuals claim the Foreign Tax Credit, reducing US tax by the foreign income tax already paid on the same income to avoid double taxation.

Form 14653

Certification by U.S. Person Residing Outside of the United States

The non-willfulness certification filed under the Streamlined Foreign Offshore Procedures.

Form 2555

Foreign Earned Income Exclusion

IRS Form 2555 is how individuals claim the Foreign Earned Income Exclusion, removing qualifying foreign earned income from US taxation when the residence or presence tests are met.

Form 3520

Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts

Form 3520 reports transactions with foreign trusts and large foreign gifts or inheritances to the IRS. Some UK arrangements, including certain pensions and trusts, can trigger it, and penalties for missing it are severe.

Form 3520-A

Annual Return for a Foreign Trust

IRS Form 3520-A is the annual information return for a foreign trust that has a US owner, reporting the trust’s activity and pairing with Form 3520.

Form 3520-A

Annual Return of a Foreign Trust With a US Owner

Form 3520-A is the annual information return for a foreign trust with a US owner. For Americans in the UK it can be triggered by certain UK pensions, trusts, and arrangements the IRS treats as foreign trusts.

Form 5472

Information Return of a 25% Foreign-Owned US Corporation

Form 5472 reports transactions between a US corporation and its 25% foreign owners or related parties. It can apply to Britons in the US who own a US company, and to certain foreign-owned US LLCs.

Form 8621

PFIC Reporting

IRS Form 8621 reports interests in a passive foreign investment company (PFIC) and records elections about how that investment is taxed under the PFIC regime.

Form 8858

Information Return for Foreign Disregarded Entities

Form 8858 reports foreign disregarded entities and foreign branches to the IRS. Americans in the UK most often meet it when a single-member UK company is treated as disregarded for US tax, or when they run an unincorporated UK business.

Form 8865

Return of US Persons With Respect to Certain Foreign Partnerships

Form 8865 reports interests in foreign partnerships. Americans in the UK meet it through UK LLPs, Scottish partnerships, and some jointly-owned ventures that the US treats as partnerships.

Form 8938

Statement of Specified Foreign Financial Assets

Form 8938 is the IRS form used to report specified foreign financial assets under FATCA. It is filed with your tax return when your foreign assets exceed thresholds that depend on your filing status and whether you live abroad.

Form 926

Return by a US Transferor of Property to a Foreign Corporation

Form 926 reports transfers of cash or property by a US person to a foreign corporation. Capitalising a UK limited company — putting money in to fund it — can trigger it once thresholds are met.

Reasonable Cause

A good-faith, non-willful explanation that can support penalty relief for late filings.

Willful vs Non-Willful

The distinction that determines which FBAR penalty regime and disclosure programme applies.

CFC

Controlled Foreign Corporation

A CFC is a foreign company more than 50% owned by US persons. US owners of a CFC face anti-deferral rules (like GILTI/NCTI and Subpart F) and information reporting on Form 5471. A US-owned UK limited company is usually a CFC.

Check-the-Box Election

Entity Classification Election (Form 8832)

The check-the-box election lets the owner of an eligible foreign entity choose how it is treated for US tax — as a corporation or as a disregarded/pass-through entity. It can simplify or worsen a US owner position depending on the facts.

Corporation Tax

UK Corporation Tax is the tax a UK limited company pays on its profits. For an American owner, the company profits may also be exposed to US tax under the CFC/GILTI rules, with the UK tax available as a credit.

Form 5471

Information Return of US Persons With Respect to Certain Foreign Corporations

Form 5471 is an IRS information return that US owners, officers, or directors of certain foreign corporations must file. Failure to file carries a penalty starting at $10,000 per form per year.

Form 8992

US Shareholder Calculation of GILTI

Form 8992 is where a US shareholder calculates GILTI — the current US tax on the profits of a controlled foreign corporation. Americans who own UK limited companies commonly file it alongside Form 5471.

Form 8993

Section 250 Deduction for GILTI and FDII

Form 8993 claims the Section 250 deduction that reduces the GILTI a US shareholder is taxed on. It is the relief side of the GILTI calculation for Americans who own UK companies.

GILTI

Global Intangible Low-Taxed Income

GILTI is a US anti-deferral rule that can tax a US owner currently on the profits of a controlled foreign corporation, rather than only when distributed. It commonly affects Americans who own UK limited companies.

NCTI

Net CFC Tested Income

NCTI is the renamed and revised successor to GILTI for US tax years beginning after 31 December 2025. It continues to tax US owners on a controlled foreign corporation income, with adjusted mechanics.

Section 962 Election

A Section 962 election lets an individual US shareholder of a controlled foreign corporation be taxed on GILTI/Subpart F income at corporate rates, and claim a credit for foreign corporate tax — often reducing the US tax on a UK company profits.

Subpart F Income

Subpart F is an older US anti-deferral regime that taxes US owners currently on certain passive or mobile income of a controlled foreign corporation, regardless of distribution. It operates alongside GILTI/NCTI.

Depreciation Recapture

Depreciation recapture is US tax on the depreciation previously claimed (or claimable) on a rental property, charged at up to 25% when you sell. It applies even if the Section 121 exclusion shelters the rest of the gain.

Long-Term Resident (UK IHT)

From 6 April 2025 the UK bases inheritance tax on long-term residence rather than domicile. Someone UK-resident for 10 of the previous 20 years is a long-term resident, exposed to UK inheritance tax on worldwide assets, with a 3–10 year tail after leaving.

Private Residence Relief

PRR

Private Residence Relief is a UK relief that can exempt the entire gain on your main home from UK Capital Gains Tax, with no monetary cap. Its US counterpart, the Section 121 exclusion, is capped — creating a common cross-border mismatch.

Section 121 Exclusion

Main Home Sale Exclusion

Section 121 lets a US taxpayer exclude up to $250,000 of gain ($500,000 for a married couple) on the sale of a main home. It applies to a foreign home but is capped — unlike UK Private Residence Relief, which can be unlimited.

Section 988 Currency Gain

Section 988 can tax the foreign-exchange gain when you repay or refinance a non-dollar mortgage. If the dollar strengthened since you borrowed, repaying a sterling mortgage can create a US-taxable gain as ordinary income — with no UK equivalent.

US–UK Estate and Gift Tax Treaty

A separate 1980 treaty (distinct from the income tax treaty) that allocates estate, gift, and inheritance tax rights between the US and UK using treaty-domicile tie-breakers. It survived the UK 2025 inheritance tax reforms.