The UK's FIG Regime for US Citizens: Four Tax-Free Years, and Why the IRS Doesn't Care (2026)

For two centuries a foreigner living in Britain could keep offshore income out of UK tax by leaving it offshore. That remittance basis, and the concept of non-domiciled status that underpinned it, ended on April 6, 2025. In its place the UK now runs a residence-based system with one relief for new arrivals: the foreign income and gains regime, known as FIG. The deal is simple. If you have been outside the UK for ten tax years and then become resident, you can elect for four tax years to pay no UK tax on your foreign income and foreign gains. You can bring the money into the UK freely. In year five you are taxed like any other UK resident on worldwide income, and after ten years of residence your worldwide estate falls into UK inheritance tax. For most nationalities FIG is a straightforward four-year gift. For a US citizen it is a UK relief bolted onto a US system that ignores it. The saving clause in the US-UK treaty means every pound the UK exempts is still taxed in full by the IRS, and because the UK charged nothing there is no foreign tax credit to claim. FIG lowers your UK bill. Whether it lowers your total bill depends on where your income comes from and what the US would tax it at anyway. This guide walks through the UK rules as they stand for the 2026/27 tax year, then the US overlay, then a worked example for a London arrival in 2026.

You can use FIG in a tax year if: - You are UK tax resident in that year under the Statutory Residence Test. - You were not UK tax resident in any of the ten tax years immediately before your first year of residence. Ten consecutive years out, judged under the residence rules that applied in each of those years. - The year is one of the first four tax years starting with your first year of residence. The four years are consecutive whether or not you claim in each of them. If you arrive in 2026/27, your window is 2026/27 through 2029/30. Leave for 2028/29 and come back, and you still only have 2029/30 left. Domicile, citizenship and where you were born are irrelevant. Returning Americans often fail the ten-year test without noticing. Someone who did a two-year London posting from 2018 to 2020 and comes back in 2026 has only six years out and gets no FIG at all. Count carefully, and remember UK tax years run April 6 to April 5.

A FIG claim removes from UK tax, for that year: - Foreign dividends and interest, including from US brokerage and bank accounts. - Foreign rental income, including rent from a US home. - Foreign pension income and distributions from foreign retirement plans. - Capital gains on assets situated outside the UK: US shares, US real estate, US funds, foreign crypto held offshore. - Distributions and benefits from non-UK trusts, under separate rules. - Employment income for duties performed outside the UK, through Overseas Workday Relief. It does not touch: - UK employment income, including US employer pay for days worked in the UK, and RSUs and options to the extent they relate to UK workdays. - UK rental income, UK dividends, UK interest and gains on UK property or UK shares. - Income from a UK trade or profession. - Any income or gain you choose not to include in the claim. The money can be brought into the UK, spent, invested in UK property, or left offshore. Remittance is no longer a concept. Overseas Workday Relief runs alongside FIG. If you qualify for FIG and you perform some of your employment duties abroad, you can exclude the pay for those non-UK workdays for the same four years. The relief is capped at the lower of 30% of your total qualifying employment income and £300,000 per tax year. A banker on £1,000,000 who spends 40% of the year working in New York can exclude £300,000, not £400,000. You no longer need to pay the money into an offshore account. Keep a workday diary; HMRC asks for it.

FIG is not free. In any year you claim it: - You lose the income tax personal allowance of £12,570. Your UK-source income is taxed from the first pound. - You lose the capital gains tax annual exempt amount of £3,000. - You cannot deduct foreign losses against UK gains, and foreign losses arising in a FIG year are not carried forward. At the 40% higher rate the lost personal allowance costs £5,028; at 45% it costs £5,657. That is the break-even. If your foreign income and gains would have produced less UK tax than that, do not claim. Anyone earning over £125,140 has already lost the allowance through the taper, so for high earners the cost is only the £3,000 CGT exemption, worth at most £720. The claim is made on the Self Assessment return for each year, and separately for foreign income, foreign gains and Overseas Workday Relief. You must state the amounts of income and gains you are claiming relief for, so the exempt income is disclosed on the return even though it is not taxed. You choose each year, and you choose what to include: you can claim relief for your US dividends but leave a foreign loss-making rental out, or claim for gains but not income. The claim can be made or amended within the normal window, which runs to the anniversary of the January 31 filing deadline. Not claiming in a year does not extend the window. The four years run regardless.

If you lived in the UK before April 2025 and claimed the remittance basis, two transitional reliefs matter more than FIG, which you probably cannot use. The Temporary Repatriation Facility lets a UK resident who claimed the remittance basis in the past designate pre-April 2025 foreign income and gains and pay a flat rate on them: 12% for designations in 2025/26 and 2026/27, and 15% in 2027/28. Once designated the money can be brought to the UK at any time with no further UK tax. Mixed funds can be cleansed by designating the whole balance. The facility ends on April 5, 2028. For an American this is genuinely useful: the income was already US-taxed in the year it arose, so the 12% is the only tax on bringing it home, and for post-2004 income the US credit is long gone anyway. Note that a designated amount is not automatically creditable in the US, since the US taxed the underlying income years ago. Rebasing to April 5, 2017 applies to former remittance-basis users who cannot benefit from FIG. If you were never UK domiciled or deemed domiciled before April 6, 2025 and claimed the remittance basis in at least one year from 2017/18 to 2024/25, you can treat foreign assets you held on April 5, 2017 as acquired at their value on that date when you sell them. The US does not rebase, so your Form 8949 uses original cost and your Form 1116 has a mismatch to reconcile. For a newly arriving American with no UK history, neither relief applies. Skip to the next section.

Domicile also died for inheritance tax on April 6, 2025. UK inheritance tax at 40% above the £325,000 nil-rate band now applies to worldwide assets if you are a long-term UK resident: resident in at least 10 of the 20 tax years before the year of death or gift. The years need not be consecutive. Until then only UK-situated assets are within the charge. An American arriving in 2026/27 with no prior UK years becomes a long-term resident from 2036/37. That is a decade of exposure limited to UK property, UK shares and UK bank accounts, and it is the reason many advisers now tell American clients to keep non-UK investments non-UK for as long as possible. Leaving does not switch it off immediately. Once you are a long-term resident there is a tail: you stay within worldwide inheritance tax for three years after leaving if you were resident for 10 to 13 years, rising one year for each further year of residence to a maximum of ten years for someone resident 20 years or more. The US estate tax exemption is $15,000,000 per person in 2026, so the UK charge is the one that bites for most families. The 1978 US-UK estate and gift tax treaty gives a credit for UK tax paid on the same assets, but a credit against a US tax that is zero is worth nothing. Trusts settled before you become long-term resident, and the ten-year clock itself, are the main planning tools.

Article 1(4) of the US-UK income tax treaty lets the United States tax its citizens as if the treaty did not exist, with a short list of exceptions that does not include anything relevant to FIG. And FIG is not a treaty provision anyway. It is domestic UK law. So from the IRS's point of view a FIG year looks like this: - Every dollar of US dividends, interest, rent and gains is reported on your 1040 and taxed at normal US rates. - Because the UK charged no tax on that income, there is no foreign tax paid and nothing to put on Form 1116 for it. - Your UK tax on UK-source income (salary, UK rent) is still creditable, but only in its own basket and only against US tax on that same kind of income. - The net investment income tax of 3.8% applies above $200,000 of modified adjusted gross income single or $250,000 joint, and no foreign tax can ever offset it. The practical consequence is a rule of thumb. FIG eliminates UK tax on foreign income; it does not reduce the total tax on that income below the US rate. If the UK rate on a type of income would have been higher than the US rate, FIG saves you the difference. If the UK rate would have been lower, or the UK would have given a credit for US tax that made the combined rate equal the higher of the two, FIG changes nothing except the personal allowance you gave up to claim it. Compare that with a French or Australian arrival, for whom FIG income is taxed nowhere. For Americans the honest name for the regime is not four tax-free years. It is four years of paying only US tax on foreign income, at the cost of £12,570 of allowance.

US-source income is where FIG disappoints. Take qualified dividends from a US brokerage account, the most common foreign income an American in London has. Without FIG, the UK taxes the dividends at 2026/27 rates of 10.75%, 35.75% or 39.35% depending on your band, after a £500 dividend allowance. The US taxes the same dividends at 15% (20% at the top, plus 3.8% NIIT above the thresholds). Under Article 10 of the treaty the US as source state keeps a 15% withholding right and the UK as residence state credits it. On the US return, the UK tax above 15% is creditable in the passive basket up to the US tax on that income. The combined rate is the higher of the two, the UK rate. With FIG, the UK charges nothing and the US charges 15% or 20% plus NIIT. For a higher-rate taxpayer that is a saving of 35.75% less 15%, about 20 points. Sounds good. But you gave up the personal allowance, which costs a 40% taxpayer £5,028. On $40,000 of dividends the UK saving is about £11,000 and the allowance cost is £5,028, so you are ahead. On $15,000 of dividends the UK saving is about £4,000, less than the allowance cost. You lose by claiming. US interest income is worse. UK savings rates are 20%, 40% and 45% (rising by two points from April 2027). US ordinary rates run to 37%. For a 40% UK taxpayer with US interest, FIG saves 40% UK tax but the US collects 22% to 35%. A modest saving that again has to beat the allowance cost. US rental income: the UK would tax net rent at 20% to 45% and credit the US tax; the US taxes it at ordinary rates with depreciation. FIG removes the UK layer, which is usually the higher one, so it helps, but only by the rate gap. The pattern: FIG on US-source income saves only the excess of the UK rate over the US rate, minus the allowance cost. Before you claim, add up the UK tax the foreign income would actually have generated after treaty credit, and compare it to £5,028 or £5,657.

FIG is at its best where the UK would otherwise tax something the US taxes lightly or not at all. - Large capital gains on non-UK assets. UK CGT is 18% and 24% with no preferential rate for long holdings; US long-term rates are 15% or 20%. A $500,000 gain on US stock costs the UK about £92,000 at 24% without FIG. With FIG the UK takes nothing and the US takes $75,000 to $100,000 plus NIIT. The saving is the rate gap on a large number, and it dwarfs the allowance cost. - Selling your former US home. Section 121 excludes $250,000 of gain single or $500,000 joint if you lived there two of the last five years. The UK has no equivalent for a foreign home once it stopped being your main residence, and its private residence relief only shelters periods of occupation plus the final nine months. Sell in a FIG year and both countries tax nothing on the excluded amount. - Roth conversions. The US taxes a traditional-to-Roth conversion as ordinary income in the year of conversion. The UK, without FIG, would tax it too as a foreign pension payment. Under FIG the conversion is exempt foreign income in the UK, and later Roth withdrawals are tax-free in both countries under Article 17(1)(b) of the treaty. A four-year window to convert at US-only rates is the single most valuable FIG play for a mid-career American. - Income already taxed only by the US. Some US-source income gets no UK credit problem because it is taxed in the US anyway at a rate the UK would only have topped up. Municipal bond interest, for example, is US tax-free and UK taxable: FIG makes it tax-free everywhere. - Non-US, non-UK income. Dividends from a Swiss or Singapore account, a gain on a French flat, or a distribution from a Cayman fund are taxed by the US at normal rates and, under FIG, by nobody else. Watch PFIC rules on non-US funds; FIG does not help with those. - Deferred compensation and bonuses for pre-arrival work, and RSUs relating to workdays before you arrived, which FIG and OWR keep outside UK tax while the US taxes them as it always would.

Your UK salary is unaffected by FIG (unless part is for overseas workdays), so the usual FEIE-or-FTC decision on employment income stands. The 2026 exclusion is $132,900. UK income tax on a salary above about £50,000 runs at 40%, higher than the US rate on the same income, so the foreign tax credit usually beats the exclusion for anyone earning over roughly $100,000 and produces excess credits to carry forward. Under FIG that calculation tilts slightly further toward the FTC, because losing the personal allowance raises your UK tax on salary. The traps are on the investment side. - No credit on exempt income. Excess foreign tax credits are built only from foreign tax actually paid. FIG income has none, so it adds nothing to your passive basket carryforward. - Baskets do not mix. Excess UK tax on your salary sits in the general basket and cannot offset US tax on FIG-exempt dividends, which are passive basket. Many Americans in London are surprised to owe US tax on dividends while carrying forward $30,000 of unused general basket credit. - Timing. The UK tax year ends April 5 and UK tax is paid through the following January. Use the accrual method on Form 1116 consistently, or the cash method consistently, but pick one and keep it. - NIIT is never creditable. The 3.8% is a real cost whether or not you claim FIG, and it is a reason to keep MAGI under $200,000 single or $250,000 joint in high-income years. If you claim the FEIE on your salary, remember the stacking rule: excluded income still pushes your other income into higher brackets. FIG-exempt dividends on top of a $132,900 exclusion are taxed by the US as if the salary were still there.

Distributions from a US IRA or 401(k) are foreign pension income for UK purposes. Without FIG they are taxed in the UK at 20% to 45% as they are paid, with a credit for US tax under the treaty. With FIG they are exempt in the UK for four years. On the US side nothing changes. Traditional IRA and 401(k) withdrawals are ordinary income at up to 37%. The 10% early withdrawal penalty applies before 59½ with the usual exceptions. So a FIG-year withdrawal costs exactly what it would cost in Texas. That makes the FIG window a good time for: - Roth conversions, as above: US tax only, and the Roth then grows tax-free in both countries. - Withdrawals you were going to make anyway, if your UK marginal rate would exceed your US rate. - Taking a 401(k) lump sum. Outside FIG, the treaty's lump-sum rule in Article 17(2) gives the US the exclusive right to tax a lump sum from a US plan, so the UK would not tax it anyway. FIG adds nothing here, but it does not hurt. US Social Security is different. Under Article 17(3) of the treaty, Social Security paid to a UK resident is taxable only in the UK, and that exception survives the saving clause. Under FIG the UK exempts it as foreign income and the US does not tax it either. A retiree in their FIG years pays nothing on Social Security anywhere. That is a rare, and real, four-year tax-free result. UK pensions and workplace schemes are UK-source, so FIG is irrelevant to them; the treaty rules on contributions and growth apply as usual.

Because the window is fixed, the planning is about what you realise inside it. - Realise embedded gains on US and other non-UK assets before year four ends. In year five the UK taxes them at 24%. There is no UK rebasing when FIG ends, so the whole historic gain becomes UK-taxable. - Convert to Roth in years with room in the 22% and 24% US brackets. Spread conversions across the four years to avoid the 32% and 35% bands. - Time deferred bonuses and RSU vests. Pay for non-UK workdays is exempt under OWR up to the cap. Pay for UK workdays is not. Ask your employer to vest before, not after, the window closes where the award relates to pre-arrival service. - Sell the US home inside the window if the Section 121 exclusion covers most of the gain. - Move non-UK investments into structures that make sense for year five, such as UK reporting funds rather than non-reporting funds, while the switch is UK tax-free. - Do not use the window to buy UK assets with the proceeds if you can help it; UK assets are within inheritance tax from day one, and non-UK assets are outside it until year eleven. - Keep US-source dividend income modest and decide year by year whether the claim beats the allowance cost. And track days. Every extra tax year of residence counts toward the ten of twenty that brings your worldwide estate into UK inheritance tax.

A single US citizen moves to London on April 10, 2026 for a tech job. She holds a $300,000 US brokerage account that pays $40,000 of qualified dividends in the year, and $100,000 of RSUs vest in the year, all relating to UK workdays. Her salary is ignored to isolate the two items; it is taxed identically with or without FIG. Assume £1 = $1.30, so the RSUs are £76,923 and the dividends £30,769. UK without FIG. The RSUs are employment income. After the £12,570 personal allowance, £64,353 is taxable: £37,700 at 20% is £7,540 and £26,653 at 40% is £10,661, a total of £18,201. The dividends sit above that: £500 is covered by the dividend allowance and £30,269 is taxed at 35.75%, which is £10,821. UK tax: £29,022, about $37,730. National Insurance on the RSUs is ignored. UK with FIG. No personal allowance, so the whole £76,923 of RSUs is taxed: £7,540 plus £39,223 at 40%, which is £15,689, a total of £23,229, about $30,200. The dividends are exempt. UK saving from claiming: £5,793, about $7,530. US, either way. Taxable income is $140,000 less the $16,100 standard deduction, $123,900. The $83,900 of ordinary income is taxed at $1,240 plus $4,560 plus 22% of $33,500, which is $13,170. The $40,000 of qualified dividends stack on top at 15%, $6,000. US tax before credits: $19,170. Her MAGI is below $200,000, so no NIIT. Credits without FIG. The UK tax on the RSUs, about $23,660, sits in the general basket and covers all $13,170 of US tax on them, with $10,490 carried forward. The UK tax on the dividends, about $14,070, sits in the passive basket and covers the $6,000 of US tax, with $8,070 carried forward. US tax due: nil. Total tax: $37,730. Credits with FIG. The general basket still covers the $13,170. The passive basket is empty because the UK charged nothing on the dividends, so the $6,000 is payable. Total tax: $30,200 plus $6,000, which is $36,200. FIG saved her $1,530 on the year. The UK saving of $7,530 was mostly handed to the IRS. Now add a sale. Suppose she also sells $100,000 of stock with a $60,000 long-term gain. Without FIG the UK charges 24% on £46,154 less the £3,000 exemption, about £10,357 or $13,460, and the US 15% of $9,000 is fully credited, so the gain costs $13,460. With FIG the UK charges nothing and the US takes $9,000. FIG now saves $4,460 on the gain, and $5,990 for the year in total. The bigger the non-UK gains, the better FIG looks. On dividends alone, it is close to a wash.

HMRC side. Register for Self Assessment in your first year. Make the FIG claim on the return, with separate entries for foreign income, foreign gains and Overseas Workday Relief, and quantify each. The return for 2026/27 is due January 31, 2028. Keep a workday diary, brokerage statements in sterling at the daily rate, and evidence of your arrival date and prior non-residence. IRS side. Nothing about FIG appears on a US return. Form 8833 discloses treaty-based return positions, and FIG is UK domestic law, not a treaty benefit, so no Form 8833 is triggered by claiming it. You may still need Form 8833 for genuine treaty positions in the same year: excluding US Social Security under Article 17(3), or claiming pension contribution relief under Article 18. File the usual set: - Form 1040 with all worldwide income, including everything FIG exempted. - Form 1116 for UK tax on UK-source income, by basket, or Form 2555 if you use the exclusion on salary. - Schedule B and the FBAR for UK bank accounts over the $10,000 aggregate threshold. - Form 8938 if foreign financial assets exceed $200,000 at year end or $300,000 at any time for a single filer living abroad, $400,000 and $600,000 joint. - Form 8621 for any non-US fund, including UK unit trusts and ETFs, which are PFICs regardless of FIG. State side. Check that you have broken residency with your former state before April 2026. A California or New York domicile taxes FIG-exempt dividends a second time and gives no credit for anything. FIG is worth claiming for most Americans with meaningful foreign gains, a home to sell, or a Roth conversion to run. It is worth skipping for Americans whose only foreign income is a modest stream of US dividends. Either way, run the numbers each year, because the claim is annual and the allowance cost is fixed.