Moving to the US from the UK: What to Do Before American Tax Begins

When US taxation actually starts

For a UK citizen without a green card, US tax residence usually arrives through the substantial presence test: 183 days, counted as all days this year plus one-third of last year's plus one-sixth of the year before, with at least 31 days in the current year. Cross the threshold and residency generally backdates to your first day of presence in that year — not the day the test was met. A green card is simpler and stricter: lawful permanent residence makes you a US tax resident from admission, and it keeps doing so until formally abandoned, wherever you later live.

Either way, the start date is the hinge. Before it, the US taxes only your US-source income. From it, the US taxes your worldwide income and — just as importantly — starts applying its reporting regimes to your entire UK financial life: FBAR for accounts, Form 8938, and Form 8621 for the funds discussed below.

What America sees in your UK accounts

The US does not recognise UK wrappers, and it penalises non-US funds:

• ISAs lose their magic. To the IRS an ISA is just an account. Interest and dividends become taxable; gains become taxable. There is no UK tax to credit because HMRC charges none — the ISA advantage simply inverts into a pure US cost.
• UK funds become PFICs. Unit trusts, OEICs, most UK-listed ETFs and the funds inside a stocks and shares ISA are typically passive foreign investment companies to the IRS. The default PFIC regime taxes gains and large distributions at top rates with an interest charge, reported fund-by-fund on Form 8621. It is the single worst asset class for a new US resident to be holding.
• Pensions survive best. UK workplace pensions and SIPPs generally benefit from the treaty's pension provisions, though they bring their own analysis — see US–UK pensions.
• A retained UK home brings letting income onto the US return and, on eventual sale, a capped US main-residence exclusion plus possible currency gain — see cross-border property.

The pattern: restructuring an ISA or fund portfolio before the start date costs UK tax at worst — and often little of that, given ISA exemption and UK CGT allowances. Restructuring after costs PFIC-rate US tax.

Leaving the UK: split year and P85

On the UK side, departure is administratively light. If you are within Self Assessment you report the departure and claim split-year treatment where it applies, ending UK taxation of most non-UK income partway through the year; if not, form P85 notifies HMRC and triggers any PAYE refund. UK-source income — rent above all — remains UK-taxable after you leave, typically within the Non-resident Landlord scheme, and UK residential property gains keep their own 60-day reporting rule.

Two longer shadows are worth knowing about. UK anti-avoidance rules can tax certain gains and income if you return within a set period of a short absence, so "sell it while abroad" is not a free move for a temporary posting. And from April 2025 inheritance tax follows long-term residence, with a tail that can keep worldwide estates in scope for years after departure.

Timing the gains and the awards

The start date turns timing into money. Worth modelling before travel:

• Unrealised investment gains — realising them before US residency keeps them out of the US system entirely.
• Share options and RSUs — vesting and exercise dates relative to the move decide how much each country claims, by workday sourcing; see employment and RSUs.
• Deferring UK income into a period when you are taxed by the US alone, or accelerating it into UK-only years, depending on your rates on each side.
• State selection — the state you land in adds its own income tax layer, outside the treaty's protection.

The shape of a good move

A well-run UK-to-US move is mostly sequencing: fix the fund problem, decide the ISA, price the gains, set the date, then let the split-year and dual-status filings record decisions already made. The first year usually involves a part-year UK return, a first US return of unfamiliar length, and a credit reconciliation across mismatched years — after which the pattern settles. The work is front-loaded; so are the savings.