As the current UK tax year draws to a close, our US/UK tax experts have highlighted the key tax considerations for Americans living in the UK who are looking to minimise their global tax bill.

Most US citizens and US permanent residents (Green Card holders) living in the UK are subject to tax in both the UK and the US. Year-end tax planning therefore often needs to be considered twice a year when managing global tax exposure. UK taxes are usually higher than the equivalent US rate, but that’s not always the case, so it is worth seeking focused advice before taking any action.

In this article:

1. Spring Forecast 2026: what changed

2. Tax update: US pension lump sums

3. Planning opportunities before the UK tax year end

   • Pension planning

   • Charitable giving (US/UK dual-qualified charities)

   • UK tax-efficient investments

   • Business Asset Disposal Relief

   • Inheritance Tax planning

   • Offshore income gains

   • Foreign tax credits

4. Key UK and US tax deadlines

Spring Forecast 2026

The 3 March 2026 Spring Forecast from Rachel Reeves provided very little of note in relation to UK personal taxes. This was as expected given taxpayers are just now completing their first year under the new FIG and long-term residence regime, after the abolition of the non-Dom rules from 5 April 2025.

The only tax change to note is the updated guidance that HMRC issued in September 2025 regarding the taxation of US pension lump sums.

Prior to the issuance of this updated guidance, US pension lump sums received by UK tax residents were fully taxable in the US and treated as excluded from UK tax. HMRC’s new guidance clarifies that whilst such lump sums are fully taxable in the US they are also taxable in the UK, with the US taxes paid being available as double taxation relief (DTR).

For additional rate taxpayers this means they will now pay 37% US tax and 8% UK tax (being the difference between the 37% US rate and the 45% UK rate) on such lump sum payouts.

Not only does this change take effect immediately, as it was a clarification and not a rule change, but it also has unwelcome consequences for those looking to make Roth rollovers from IRAs funded since 6 April 2017.

For such IRAs, HMRC may now seek to tax the portion of the rollover that relates to deductible contributions. If you think this may impact you, ensure you seek comprehensive tax advice before actioning the rollover. You may also wish to sign up to our ‘US/UK tax’ mailing list to receive our insights on any changes as they’re announced straight to your inbox.

Opportunities before year-end

What opportunities should you consider before the end of the 2025/26 tax year? Below we have summarised several planning opportunities and the key actions to consider.

Pension planning

While UK pension plans are not qualified for US tax purposes, UK pension planning can still be effective at reducing your global tax rate in the short and long term. Please note that particular care needs to be taken if cumulative employee contributions are likely to exceed cumulative employer contributions in the UK, or if pension arrangements are moved or consolidated.

You should seek US advice, in addition to UK advice, prior to making pension contributions, taking benefits from a plan or making a change to an existing arrangement. With numerous changes to the tax rules regarding UK pensions over the years, it’s also recommended that you seek advice to explore whether you are at the limit for making pension contributions, to determine whether you can utilise higher-rate tax relief.

For 2025/26, the pension annual allowance is £60,000 and the income threshold at which the annual allowance begins to be tapered is £260,000. If you earn more than £360,000, the annual allowance is capped at the minimum £10,000. All pension contributions in excess of your annual allowance are subject to the annual allowance charge, which effectively claws back the tax relief available on pension contributions. Utilising any unused relief from the previous three years will be important for anyone affected.

If you are auto-enrolled into a NEST pension by your employer, you should consider whether to ‘opt out’ if the US reporting requirements on this plan outweigh the value of the pension itself. The NEST pension is a trust-based plan and depending on the level of contributions between you and your employer, the NEST pension could be considered a Foreign Grantor Trust which may result in annual US reporting requirements.

The abolition of the pension lifetime allowance took effect on 6 April 2024, although this freedom is curtailed given that UK pensions will form part of a taxpayer’s death estate from 6 April 2027.

What should you do?

Review your existing pension arrangements to check whether you are maximising your tax relief on pension contributions and ensure that you are not exceeding your limits.

Charitable contributions to dual qualified US and UK charities

A donation to a US/UK dual-qualified charity will relieve taxes in both jurisdictions.

Cash donation

UK tax - You will have the option to Gift Aid the donation so that the UK government tops up the donation by 25%. As long as you have paid enough UK tax to cover the Gift Aid, there will be no clawback. If you’re a higher (40%) or additional (45%) rate taxpayer, you also benefit by extending your basic rate band so that more of your income is taxed at a lower rate.

US tax - Only taxpayers who itemise their deductions will directly benefit from their charitable donations.

Asset donation

UK tax - If you donate assets other than cash, such as appreciated listed securities or real estate, you will not be subject to UK Capital Gains Tax (CGT) on the disposal. The market value of the land or shares donated to charity is deductible from your general income, providing tax relief of up to 45%.

US tax – You will not be subject to US CGT on the disposal. The market value of the land or shares donated to charity is considered as part of your itemised deductions.

What should you do?

Check the status of the charity to determine if it’s US/UK dual-qualified and keep the receipts relating to your donations. If you’re making significant donations, speak to our tax experts about setting up a dual-qualified Donor Advised Fund.

UK tax-efficient investments

UK tax-advantaged investments rarely have a beneficial impact on ones US tax liability but can still be utilised effectively by dual taxpayers.

If you have excess foreign tax credits carried over from prior years, Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) investments can reduce your UK tax bill and also be an effective way to use up these excess foreign tax credits, which are carried forward but have a limited life of 10 years.

Be aware that Venture Capital Trusts (VCTs) and investments commonly found in ISAs are often considered Passive Foreign Investment Companies (PFICs) for US tax purposes. We do not recommend them if you’re a US taxpayer because PFICs are subject to US anti-avoidance rules that make them tax inefficient.

Cash ISAs are not PFICs, the interest they earn is simply taxed at US income tax rates plus the Net Investment Income Tax (NIIT) when due. In some cases, it will be possible to find funds for an ISA that are not PFICs, but the investment options are more restrictive.

What should you do?

Review your excess foreign tax credit position and determine whether EIS/SEIS investments could be used to utilise some of your excess credits.

Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief)

If you qualify for Business Asset Disposal (BAD) relief, you will pay 14% Capital Gains Tax (CGT) on all gains on qualifying assets in the UK, limited to £1million of gains in a lifetime.

This tax rate goes up to 18% from 6 April 2026.

There is no equivalent BAD relief in the US. However, if you undertake careful planning from the outset, and if the business is structured to be treated as transparent for US tax purposes, you can obtain a nil US Capital Gains Tax (CGT) position and therefore retain the benefit of a 14/18% tax rate in the UK, limited to gains of up to £1million in a lifetime.

Conversely, if no planning is carried out, any gain would attract a US tax rate of 23.8%, being 20% long term CGT plus 3.8% Net Investment Income Tax (NIIT). Please note that NIIT is not due on the sale of business assets, but it is due on the sale of shares, including those in privately owned companies.

With the Net CFC Tested Income (NCTI) tax in place since 2018 (formerly known as GILTI), US owners of foreign businesses should seek advice on how their position is affected by the UK corporation tax rates, which include the main rate on companies with profits over £250,000 being set at 25%.

What should you do?

If you’re a US owner of a foreign business, you should consider the implications that the 2018 US tax reform has on your global tax bill. There are some additional tax considerations now, such as the NCTI tax, which may make it necessary for you to consider elections that would mean the company is treated as transparent or treated as a US company. There are also a number of other tax mitigation techniques in this realm to consider.

UK Inheritance Tax (IHT)

The figures below show that tax planning around UK IHT can save you over $10million (for a married couple) if you’re not yet fully subject to UK IHT but might become fully subject to UK IHT. Here are the key differences with the UK and US estate tax regimes:

* the family home allowance may increase this threshold over time up to £1million.

Planning trusts to mitigate UK IHT can still work effectively for a US taxpayer. However, with the elimination of excluded property trusts, this will be far more restrictive and heavily reliant on treaty reliefs going forward. It may be that Family Limited Partnerships become more popular for American families in the UK who want to reduce their IHT exposure.

Gifts to a charity can be effective from an Income Tax and IHT perspective, but the recipient will need to be to a dual-qualified charity to ensure that this is tax efficient, in both the US and the UK. Furthermore, with changes in the US relating to itemised and standard deductions, it could be that clustering charitable contributions into certain tax years would be more effective. You may also consider using a Donor Advised Fund that has a US/UK dual-qualified status.

Moreover, if you’re a long term UK resident, you may want to avoid making a charitable contribution directly into a US charitable trust because, depending on your circumstances, this could be a chargeable lifetime transfer and potentially subject to an immediate 20% charge (if your nil rate band has been used up).

What should you do?

If you’re a US person in the UK who is considering making gifts or looking to reduce your exposure to UK Inheritance Tax, you should consult with our specialist tax advisers to help you set up the right plan.

Offshore Income Gains

If you’ll be paying UK tax on your worldwide income and gains, you should be aware that when you invest in non-UK collective investment funds (e.g. US mutual funds) that do not have HMRC reporting status, any gains made on the sale are charged to UK Income Tax (up to 45%) and not UK Capital Gains Tax (CGT) at 24%. Also, any loss on such an investment will be treated as a capital loss and cannot be offset against income or Offshore Income Gains. As a US taxpayer, you should be aware that non-US collective investments can be caught by the punitive PFIC regime.

What should you do?

Be aware that investments held in the US, such as US mutual funds, that do not have UK reporting status could be taxed at rates higher than the normal 18-24% CGT rate. Get in touch with our experts to discuss the options for US/UK tax efficient investments.

Foreign tax credits

We normally advise clients to consider making an upfront UK tax payment before 31 December, in the calendar year they receive income or realise a gain, when there has been no withholding tax or payment on account covering the relevant UK tax liability. This applies to most clients who are on the 'paid' basis for foreign tax credit purposes.

For those clients on the 'accrued' basis, it can be efficient tax planning to time your income payments or capital transactions to take place at the start of the calendar year and before 6 April 2026. This is so that the UK tax accrues in the same US tax year for that item of income or gain, thereby ensuring the foreign tax credits are offset in the same US tax year that an item of income or gain is generated.

What should you do?

If you claim the accrued basis for foreign tax credit purposes, you should consider timing income payments or capital transactions to take place before 6 April 2026, so that the foreign tax credit matches up with when the income or gain is declared.

Key deadlines

Here are some of the key US and UK tax deadlines to consider over the next few months:

Get in touch

For professional advice tailored to your unique circumstances, please fill out the form below and one of our experts will be in touch to discuss your requirements and how we can help.

Please note that our advisory services are charged at our hourly rates and a formal engagement will need to be in place before any advice is provided. For advisory-only clients, our minimum charge is £2,000 plus VAT.