Taxes in UK vs US: What are the differences?
The biggest difference between taxes in the UK and US is that the UK generally taxes UK tax residents, while the US taxes its citizens and Green Card holders on worldwide income. As a result, many Americans living in the UK may need to file tax returns in both countries, although available relief can often prevent the same income from being taxed twice.
Last updated August 19, 2026
Written by: Clark Stott
In this article
UK vs US taxes at a glance: UK 2025/26 and US 2025
|
Feature |
United Kingdom |
United States |
|
Who is taxed? |
UK residents on worldwide income and nonresidents on certain UK-source income |
US citizens and resident aliens, including Green Card holders, on worldwide income |
|
Basis of taxation |
Primarily residence and source-based |
Citizenship, residence and source-based |
|
Tax year |
January 1 – December 31, 2025 |
|
|
Do I still need to file after moving abroad? |
Generally only if you remain a UK tax resident or have UK filing obligations |
Yes. Many US citizens and Green Card holders must continue filing US tax returns even while living overseas. |
|
How is double taxation reduced? |
Through domestic tax rules and applicable tax treaties. |
Through the Foreign Tax Credit, Foreign Earned Income Exclusion, and applicable tax treaties |
Do I need to file taxes in both the UK and the US?
Possibly. US citizens and Green Card holders living in the UK may have filing obligations in both countries. However, being taxed through UK PAYE does not automatically mean you need to file a UK Self Assessment return.
Your filing obligations may include:
- UK Self Assessment return: This may be required if you have self-employment income, rental income, foreign or other untaxed income, capital gains, or another HMRC filing requirement.
- US federal tax return: This is generally required if your worldwide income meets the applicable IRS filing threshold, even if all of your income was earned in the UK.
Will I pay more income tax in the UK or the US?
Headline income tax rates are often higher in the UK than in the US, but that does not necessarily mean every taxpayer will pay more in the UK. The result depends on income, filing status, deductions, National Insurance, US state tax, and the types of income received.
Income tax comparison: UK 2025/26 and US 2025
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Feature |
United Kingdom |
United States |
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Lowest marginal rate on taxable earned income |
|
10% |
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Top income tax rate |
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37% |
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Tax-free allowance |
Personal Allowance (subject to eligibility) |
Standard deduction (varies by filing status) |
|
State or regional income taxes |
Scottish rates and bands differ; Welsh rates can also be set separately |
State and local income taxes may apply |
How do the UK and US help prevent double taxation?
The UK and US help reduce double taxation through a combination of US tax relief provisions and the US-UK Income Tax Treaty.
- Foreign Tax Credit (FTC): Lets you claim a credit for eligible UK income taxes paid, reducing your US tax liability up to the applicable foreign tax credit limit.
- Foreign Earned Income Exclusion (FEIE): Allows eligible taxpayers who meet the foreign tax home and residency or physical presence requirements to exclude up to US$132,900 of qualifying foreign earned income from US taxation in 2026.
- US-UK Income Tax Treaty: Helps determine taxing rights for certain types of income and provides relief from double taxation. However, the treaty’s saving clause generally allows the US to continue taxing US citizens, subject to specific exceptions.
Why does the UK use VAT instead of sales tax?
The UK uses Value Added Tax (VAT), while the US has no federal sales tax and instead relies on state and local sales taxes.
Although both are consumption taxes, they’re collected differently. The standard UK VAT rate is 20% for most goods and services, although some supplies are reduced-rated, zero-rated, or exempt from VAT. US sales tax rates vary by state and local jurisdiction.
The most noticeable difference is how the tax is applied. In the UK, VAT is usually included in the advertised price. In the US, sales tax is typically added at the checkout, so the final amount you pay may be higher than the price displayed.
How do capital gains and property taxes compare?
The UK and US both tax capital gains and property, but the rules, rates, and how they’re applied are different.
- Capital gains tax. Both the UK and US can tax gains from selling assets such as shares and investment properties, although each country applies different rates, exemptions and basis rules. However, each country has its own tax rates, allowances, and rules for calculating taxable gains.
- Property taxes: Property taxes vary across the UK. Residents may be liable for Council Tax on their home, while property buyers in England and Northern Ireland may also pay Stamp Duty Land Tax (SDLT). Scotland and Wales use their own property transaction taxes.
What else should I know about taxes in the UK and the US?
A few practical differences can still affect how you manage your taxes, even after you’ve understood the main rules.
- National Insurance vs Social Security. Although both systems help fund benefits such as pensions, they’re separate programs with different contribution rules. Depending on your circumstances, the US-UK Totalization Agreement may help prevent you from paying social security taxes to both countries on the same earnings.
- Tax administration. Most UK employees pay tax through the Pay As You Earn (PAYE) system, where employers withhold tax before wages are paid. In the US, many taxpayers are still responsible for filing an annual federal tax return, even if tax has already been withheld from their income.
- Record-keeping. Keeping accurate records of your income, investments, and assets can make it easier to prepare your tax returns and meet reporting requirements in both countries.
Frequently Asked Questions
Which country has the higher overall tax burden?
It depends on your income, where you live, and the types of taxes you pay. While the UK generally has higher income tax rates than the US federal system, Americans may also have to consider US state income taxes, National Insurance or Social Security contributions, and other taxes when comparing their overall tax burden.
Can I stop filing US taxes after moving to the UK?
Moving to the UK does not, by itself, end your US tax obligations. US citizens generally remain subject to US filing rules while living abroad, although whether you need to file in a particular year depends on the applicable filing thresholds.
Do I pay UK tax before US tax?
The UK generally has the primary taxing right over employment income earned while working in the UK. A US citizen must still report that income on a US return and may then use an available Foreign Tax Credit or other relief to reduce double taxation.
Does the US-UK tax treaty eliminate double taxation?
Not entirely. The treaty can help reduce double taxation, but its saving clause generally preserves the US right to tax its citizens, subject to specific exceptions.
Because the US and UK tax years do not align, the two returns often need to be coordinated. Depending on the income involved and how foreign taxes are claimed, preparing the UK figures first may sometimes make it easier to calculate eligible Foreign Tax Credits on the US return.
Should I file my UK or US tax return first?
Many US expats choose to complete their UK tax return first because it can make it easier to report UK income and claim eligible foreign tax credits on their US return. The best approach depends on your income, filing deadlines, and personal circumstances.
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Clark Stott has been with Expat Tax Online since 2015. Being a dual national based in the UK, Clark has unique experience helping US citizens (and Accidental Americans) become tax compliant via the Streamlined Tax Amnesty program. Clark likes to help Americans in the UK keep their tax situations as simple as possible to avoid harsh IRS treatment.
