For a US citizen NHS employee, US taxes run alongside PAYE rather than being replaced by it. Salary, overtime and bank shifts all belong on a US return, the treaty's government service article gives a citizen no exemption, and the NHS Pension Scheme raises separate questions on the return, the FBAR and Form 8938. Most of these catch-ups still end with little or no US tax to pay.
This post is for American doctors, nurses, allied health professionals and administrative staff employed by NHS bodies who have not been filing, or who filed without the pension. It goes deeper on one kind of client than our guide for people behind on US taxes in the UK. Choosing the years is covered in our post on which years Streamlined covers, so here we deal with what goes into them.
What NHS pay goes on a late US return
All of it, in dollars, for each calendar year. Basic salary, overtime, enhancements for unsocial hours, bank shifts worked through the trust and arrears paid in the year are all wages. US citizens abroad (opens the official IRS page in a new tab) report worldwide income on the same Form 1040 as people living in the United States.
The P60 is the wrong starting document. It covers the UK tax year, 6 April to 5 April, while the US return runs from January to December. Each US year is rebuilt from payslips, or from the pay history an employer's staff portal keeps, by taking the months that fall in that calendar year. The pounds are then converted, usually at the IRS yearly average rate (opens the official IRS page in a new tab), by one method across all three returns.
The second trap is the pension deduction. NHS contributions come out of pay before income tax is worked out, which GOV.UK describes as the employer taking pension contributions before deducting Income Tax (opens the official GOV.UK page in a new tab). Taxable pay on the payslip is therefore lower than gross pay. For the US return, start from gross pay and treat the contribution as a separate question, answered by the treaty and covered below, rather than letting the UK figure settle it.
- Gross pay by calendar month, taken from payslips rather than the P60
- Overtime, bank shifts and arrears in the month they were paid
- Employee pension contributions shown separately from taxable pay
- UK income tax deducted each month, for the foreign tax credit
- Agency or locum work outside the trust's payroll, flagged for separate review
Does Article 19 government service exempt NHS pay
Not for a US citizen. Article 19 of the US-UK treaty (opens the official IRS page in a new tab) can give the paying country sole taxing rights over pay from public funds, but the saving clause in Article 1(4) lets the United States tax its citizens as if the treaty did not exist. Article 1(5)(b) keeps Article 19 only for people who are neither citizens nor green card holders.
Article 1(5) has two lists. The first, in sub-paragraph (a), preserves benefits for everyone, citizens included, and covers growth inside pension schemes and relief from double taxation. The second, in sub-paragraph (b), covers government service, students, diplomats and host-country pension contribution relief, and protects only temporary residents. The Technical Explanation (opens the official US Treasury page in a new tab) says the second list is meant for people such as holders of non-immigrant visas, not citizens or permanent residents.
So whether an NHS body counts as the State for Article 19, and whether Article 19(3) on business carried on by the State would take it out again, never needs answering for a US citizen. The same is true of Article 19(2) on government pensions. Our post on the treaty saving clause explains the mechanism, and our treaty relief service reviews the positions that do survive it.
How is the NHS Pension Scheme treated on the US return
Growth and contributions are separate questions. Growth inside the scheme is generally not taxed by the US until benefits are paid, under Article 18(1), which the saving clause does not override. Relief for the employee's contributions, and for the benefit that builds up each year, depends on Article 18(5) and its narrower conditions.
The NHS Pension Scheme is a defined benefit arrangement: members build up a pension worked out from their pay, not an investment pot. Article 18(5) treats contributions attributable to UK employment, and benefits accrued under the scheme, as outside US taxable income only to the extent they qualify for UK relief and stay within what a corresponding US plan would allow. The US competent authority must also have agreed that the scheme generally corresponds to a US plan.
On that last condition, the Technical Explanation refers to retirement benefit schemes under the occupational pension provisions of the Income and Corporation Taxes Act 1988. Whether a statutory public service scheme sits within that description is something we check for each case, not something to assume. The contribution rules are set out in our post on pension contributions under Article 18, and a treaty position is generally disclosed on Form 8833.
If the review concludes that a treaty deferral election was needed and missed, the Streamlined Foreign Offshore page (opens the official IRS page in a new tab) explains how to ask for more time inside the submission, with a signed statement saying why the election was missed and how the failure came to light. Our US-UK pensions service reviews these points.
Is an NHS pension reported on the FBAR or Form 8938
Form 8938 asks for an interest in a foreign pension plan where the filing threshold is passed, with rules for valuing it when the value is unknown. The FBAR is less certain. A defined benefit scheme has no account balance, and practice on reporting such schemes varies, so the view taken needs to be reasoned and applied consistently.
The Instructions for Form 8938 (opens the official IRS page in a new tab) say the interest in the plan is reported, not the plan's underlying assets. Where the member does not know, and has no reason to know, the fair market value, the value is based on what was distributed to them in the year, and with no distributions the value is zero. Whether the form is needed at all turns on the total of all specified foreign assets against the threshold, which for a single filer living abroad is $200,000 at year end or $300,000 at any time.
For the FBAR, the question is whether the scheme is a foreign financial account, and the threshold of $10,000 is an aggregate across all accounts at their highest point. Our post on whether a UK pension is reportable on the FBAR sets out the scheme types and the defined benefit uncertainty, so we do not repeat it here. In a catch-up, whatever view is taken should hold across all six reports on FinCEN Form 114 and the matching Form 8938 entries.
Should the late returns use the credit or the exclusion
Usually the foreign tax credit. NHS pay is taxed in full through PAYE at UK rates that are generally higher than US rates, so the credit tends to remove the US tax on the wages and leaves unused credit for other years. The foreign earned income exclusion is available, but in these cases it is seldom the better choice.
The credit works because PAYE tax was actually paid on the same wages. Publication 514 (opens the official IRS page in a new tab) explains the limits, and unused credit can generally be carried back one year and forward ten. The foreign earned income exclusion (opens the official IRS page in a new tab) instead removes wages from US income up to $130,000 for tax year 2025, and Publication 514 is clear that no credit is allowed for foreign tax on income that has been excluded.
Two points weigh against the exclusion on late years. The election has timing rules, which our post on claiming the exclusion late under Streamlined covers. And once made and later revoked, it cannot be made again for five years without IRS consent. The forms are Form 1116 for the credit and Form 2555 for the exclusion.
How might this look for a staff nurse in Leeds
Take a US-born staff nurse who moved to Leeds after qualifying, has worked for an NHS trust for nine years and has never filed a US return or an FBAR. She pays into the NHS Pension Scheme, picks up bank shifts most months, and holds a current account, an easy-access savings account and a cash ISA.
Her adviser rebuilds three calendar years of gross pay from her payslips, bank shifts included, and lists the UK tax deducted. With the credit claimed for that tax, the wages produce no US tax. The ISA interest is added as US income, because ISAs carry no US tax protection, and whether any tax results depends on the credit limits for that kind of income.
The pension takes longest. Her contributions are tested against Article 18(5), including the correspondence point, and any treaty position taken is disclosed. She has drawn nothing, so a Form 8938 value would follow the distribution rule, though her assets are well below the threshold. Her six FBARs report the bank accounts and the ISA, with the pension treated the same way in every year.
She has lived in the UK throughout, so she meets the Foreign route's test of 330 full days outside the United States in at least one of the years. She pays any tax and interest due, and claims nothing under Article 19.
What the non-wilful certification should say for NHS staff
It should explain, in your own words and with dates, why the US filings did not happen and what you did once you found out. The IRS treats non-wilful conduct as negligence, inadvertence, mistake or a good faith misunderstanding of the law, and you certify it on Form 14653 under penalty of perjury.
NHS facts often support that account, but they are facts to state, not a category to rely on. PAYE took UK tax at source, so there was no Self Assessment return to prompt questions, and many staff assumed that tax paid in full in the UK meant nothing was owed elsewhere. A colleague's warning years ago, or a bank's FATCA letter left unanswered, has to be dealt with honestly too. Our post on writing the non-wilful certification covers the structure.
The route has to be right as well. The Foreign route, for those meeting its test of 330 full days outside the United States, carries no penalty beyond tax and interest. Someone who has since moved to the US and did file returns may fall to the Domestic route (opens the official IRS page in a new tab), which charges a 5% miscellaneous offshore penalty. Both require non-wilful conduct certified in writing, and neither is available once the IRS has opened an examination. Our IRS streamlined filing service prepares the package, and our guide for people behind on US taxes in the UK shows the full sequence.
- When and how you first learned that US citizens abroad must file
- What you believed about PAYE and US tax, in plain terms
- Any FATCA letter or self-certification form from a UK bank, and your reply
- Who, if anyone, advised you and what they said
- What you did between finding out and filing
General information, not advice. The right answer depends on your circumstances and the tax year concerned.
