Moving From the UK to the US? 7 Tax Mistakes to Avoid Before You Arrive

What Changes When You Move

Before you land at JFK, the UK tax accounts that have served you well for years become some of the most complicated assets you own. The ISA stops being tax-free. The SIPP still works, but the paperwork around it changes. The unit trust you set up for the kids falls into a US tax category most UK investors have never heard of. And the day you land can move the start of your US tax residency by up to a year.

This article explains seven things every UK-based professional moving to the United States should understand before arrival. It is written for a corporate relocate with a UK pension, some investments and possibly a UK home. The aim is to help you walk into a pre-arrival conversation with a qualified US tax preparer and a cross-border adviser already knowing the right questions to ask.

The UK Accounts That Need Pre-arrival Attention

Most UK professionals arrive in the United States carrying the same handful of accounts. A workplace DC pension with a current employer and a legacy pot or two. A Self-Invested Personal Pension, or SIPP. One or more ISAs, cash, stocks-and-shares, or a Lifetime ISA. A general investment account with UK unit trusts or UCITS ETFs. A UK bank account or three, and possibly a UK primary residence or a buy-to-let.

Each behaves differently once the holder becomes a US tax resident. Some continue much as before. Some keep their tax treatment with a treaty position the US return has to document. Some lose their tax advantage entirely. And a handful fall into US tax categories that are expensive and reporting-heavy. The rest of this article walks through the seven questions that come up most often.

Retirement: Your SIPP and Its Treaty Protection

The UK pension is usually the largest pre-arrival account a UK professional owns. The US-UK income tax treaty recognizes UK pension schemes, including SIPPs and workplace DC schemes, and permits a treaty-based deferral of US tax on growth inside the scheme. In plain English: the SIPP can continue to compound without US tax on interest, dividends and capital gains, provided the treaty position is taken on the US return.

{{INSET-CTA-1}}

Contributions from the US

New UK pension contributions generally require UK earnings or UK residency. Once the arrival moves to US payroll and UK residency ends, contributions usually stop. The SIPP does not disappear, it just stops growing through new money.

Growth and US tax on accrual

Without a treaty position, the US default is to look through many foreign pensions and tax the growth as it accrues, year by year. The US-UK treaty's pension article is what prevents that outcome. Form8833 is used to disclose the treaty-based return position. In my work with UK arrivals, this is the single most common filing omission in a first US return.

Distribution sand withholding later

When the pension eventually pays out, the treaty governs which country has primary taxing rights, typically tied to residency at the time of the distribution and to whether the payment is a lumpsum or periodic. The deeper treatment of US retirement-account choice for expats already in the US is covered in the retirement flagship for this series.

Investments: Your ISA, Unit Trusts and the PFIC Question

The ISA loses its US tax advantage

An ISA is a UK domestic wrapper. The United States does not recognize it. From the start of US tax residency, interest, dividends and capital gains inside an ISA are taxable under US rules. The wrapper still shields the income from UK tax; that shield no longer reaches the US return.

UK unit trusts, UCITS funds and the PFIC overlay

The more serious issue sits inside the ISA or alongside it in a general investment account. UK unit trusts, UCITS ETFs and investment trusts are typically classified as Passive Foreign Investment Companies, PFICs. The PFIC regime taxes gains as ordinary income, applies an interest charge on deferred gains, and requires an annual Form 8621 for each holding. A typical UK diversified portfolio can contain eight or ten separate PFICs. This is the single largest pre-arrival cleanup conversation for UK-origin arrivals, and it is better addressed before US residency begins than after.

Property, Cost Basis and the UK Primary Residence

Cost basis on appreciated UK assets

Cost basis on appreciated UK assets does not reset on US Day One. A holding bought at £10,000 and worth £25,000 on arrival has a US cost basis of £10,000, not £25,000. A sale after US residency begins is a US-taxable gain from the original purchase price. Most arrivals meet this point only after they have already sold something, which is the wrong moment to meet it.

The UK primary residence, rent, sell, or hold

A UK home raises three separate questions. If sold before US residency begins, the transaction does not touch the US return. If kept and rented, the rental income becomes US-taxable, with UK tax credited through the Foreign Tax Credit, covered in the foreign rental piece in this series. If kept vacant, the property generates no US tax event until sold or let. Currency matters here too: a UK mortgage paid off during US residency can generate a US-taxable foreign currency gain under §988.

{{INSET-CTA-2}}

Reporting, and Why the Calendar Day You Land Matters

FBAR, Form 8938 and Form 8833

Three separate reporting forms commonly apply. FBAR, FinCEN Form 114, applies when aggregate foreign financial accounts exceed the FinCEN-published threshold at any point in the year. Form 8938applies at higher thresholds under FATCA and is filed with the US return. Form8833 discloses treaty-based positions, including the SIPP growth deferral. Missing FBAR carries penalty exposure out of all proportion to the cost of filing it.

The US tax residency start date

Under the substantial presence test, the default start date is the first day of physical US presence in the calendar year of arrival. Election options, including the first-year choice and dual-status year filing, can move that date. A pre-arrival stock sale, a pension action or a large capital gain can land on either side of the residency line depending on the day of the move. The month of arrival is still UK tax planning; the month after is already US.

UK Assets at a Glance: What Changes on US Day One

Illustrative summary of common UK-origin assets and their US treatment for a new US tax resident. The IRS publications and the US-UK treaty text are the authoritative sources for the rules in force at any point in time.

Source: Skybound 2026

Questions To Raise With A Qualified Adviser

For a UK professional thinking through a pre-arrival checklist, questions worth raising with a qualified US tax preparer and a cross-border adviser include:

• What is my full inventory of UK accounts, and what is each one's US treatment as a resident?
• Which of my ISA and GIA holdings are PFICs, and is restructuring before US residency available?
• How should my SIPP be disclose don my first US return, and who handles the Form 8833 position?
• What FBAR and Form 8938 filings will apply, including joint filing with a non-US spouse?
• Is there any pre-arrival sale, UK property, appreciated stock, an ISA holding, better executed before US residency begins?
• What residency start-date options apply given my planned arrival date, and what does each one imply?