A US citizen who arrives in the UK after ten or more tax years living elsewhere can usually claim the foreign income and gains regime for up to four tax years, and US dividends, interest and gains count as foreign income for that purpose. Whether the claim helps is a separate question. The United States taxes that income in full either way, so the claim saves only the UK tax that would have exceeded the US tax, and it costs the personal allowance and the capital gains annual exempt amount.
This post is for Americans newly resident in Britain whose foreign income is mostly US investment income, with a UK salary alongside it. It takes one section of our guide to avoiding US-UK double taxation and works through the decision: who qualifies, what counts as foreign, what a claim costs, how it interacts with US foreign tax credits and Article 24, a worked example, and the mechanics of claiming year by year. Our earlier article on what changed for Americans in Britain after non-dom covers the wider reform and the transitional rules.
Who qualifies for the FIG regime as a US citizen?
Anyone who becomes UK resident after at least ten consecutive tax years of non-residence. Citizenship and domicile play no part. HMRC calls such a person a qualifying new resident, and the relief is available in the first year of UK residence and the three tax years that follow, provided the person is UK resident in each of them.
Residence is decided by the Statutory Residence Test (opens the official HMRC page in a new tab), not by a simple count of days or by visa status. HMRC's manual on the regime adds a detail that catches people out: a year in which split-year treatment applies counts as a full year of UK residence. An American who arrives in London in the autumn and qualifies for split-year treatment has used the first of the four years, even though only part of it was spent here. A split year in the past can also break the ten-year run of non-residence.
Someone who first became UK resident in 2022/23, 2023/24 or 2024/25 can claim for whatever is left of their four years from 2025/26 onwards. Income that arose before 6 April 2025 is outside the regime. A year of non-residence inside the window is simply lost, and unused years cannot be carried forward. Our post on your first UK tax year as an American covers arrival-year residence in more detail.
- UK resident in the tax year under the Statutory Residence Test
- Not UK resident in any of the ten consecutive tax years immediately before the first year
- Within the first year of residence or the three years after it
- Not a member of either House of Parliament during the year
Does US-source income count as foreign income for FIG?
Yes, from the UK's point of view. The regime relieves qualifying foreign income and gains, and HMRC's guidance lists dividends from non-UK resident companies, interest such as interest on a foreign bank account, and gains on foreign assets. Dividends from US corporations, interest from a US bank and gains on US shares generally fall within those descriptions.
The word foreign means non-UK. It has nothing to do with the US definition of foreign-source income, under which the same dividends are US-source. That mismatch drives the whole analysis, because the UK can exempt an item that the United States treats as domestic income of its citizen, on which no US foreign tax credit would be available anyway.
Some income is outside the regime. Salary for work done in the UK is UK income and stays taxable in the usual way. Foreign employment income is also excluded, although a separate overseas workday relief may cover earnings for duties performed abroad. HMRC's helpsheet also excludes certain categories, such as disqualified pension income. US retirement accounts and pensions raise their own treaty questions, which we review separately for anyone holding them.
What does a FIG claim cost in the UK?
A claim removes the personal allowance and the capital gains annual exempt amount for that tax year. For 2025/26 those are £12,570 and £3,000. Both are lost even where the claim covers only one source of foreign income, or only foreign gains, so a small claim can cost as much as a large one.
The effect falls mainly on UK salary. Without the personal allowance, more of the salary is taxed under PAYE and the rates and allowances (opens the official GOV.UK page in a new tab) work out differently. A higher earner whose allowance has already been tapered away by income loses less, because there is less allowance left to give up. A claim also changes how losses work, and the relieved foreign income still counts when adjusted net income is worked out.
These costs are certain, while the saving depends on how much UK tax the foreign income would have attracted. That is why HMRC lets claimants choose which sources to claim on, and why the decision can change from one year to the next.
- Personal allowance lost for the year of claim
- Capital gains annual exempt amount lost for the year of claim
- Foreign capital losses arising in the claim year cease to be allowable
- Losses of an overseas property business in the claim year cannot be relieved or carried forward
- Relieved foreign income still counts towards adjusted net income, including for the child benefit charge
Why is the saving smaller for a US citizen?
Because the United States taxes the relieved income anyway. Without a claim, UK tax on US dividends is largely creditable against US tax on them, so the combined charge comes to roughly the higher of the two countries' rates. With a claim, the UK charges nothing and the US charge stands. The saving is only the part of the UK tax that exceeded the US tax.
Under the arising basis, the Article 24 re-sourcing rule is what makes UK tax on US dividends usable on the US return. The UK credits US tax up to the treaty rate of 15%, and the US then credits the remaining UK tax on a separate Form 1116, treating the income as UK-source. Under a FIG claim there is no UK tax, so nothing is re-sourced and the foreign tax credit (opens the official IRS page in a new tab) has nothing to work with. The US tax on the dividend is paid in full.
The comparison therefore turns on rates. Where the UK rate on an item is higher than the US rate, as it can be for a UK higher-rate taxpayer on dividends or interest, a claim removes that excess. Where the US rate is the higher one, the US tax was already the larger charge and the claim saves little UK tax that was not being credited. The 3.8% net investment income tax (opens the official IRS page in a new tab) sits outside this comparison, since it is generally not creditable under domestic law and treaty-based claims are contested.
- UK rate on the item above the US rate: a claim can remove the excess
- US rate on the item above the UK rate: a claim saves little or nothing
- Extra UK tax on salary from the lost allowance: often adds to excess credits the US return cannot use
- Gains on US shares: compare UK capital gains tax with the US long-term rate
How does this work for an American in London with US investments?
Take a US citizen who moves from Boston to London to take a UK job, never having lived in Britain. She has a US brokerage account producing dividends, some interest and occasional gains. She becomes UK resident in her year of arrival, so that is year one of her four, and her salary puts her into the UK higher-rate band.
Without a claim, she reports the US dividends and interest on the SA106 foreign pages (opens the official HMRC page in a new tab), claims Foreign Tax Credit Relief (opens the official GOV.UK page in a new tab) for US tax at the treaty rate, and pays UK tax on the balance. Gains go through the UK computation at 18% and 24% after the annual exempt amount. On her US return she credits UK tax on her salary in the general category and re-sources the UK tax on her US dividends. Her investment income is taxed at roughly the higher of the two rates.
With a claim, the UK ignores the brokerage income and she pays US tax on it with no credit. She loses her personal allowance, so more UK tax falls on her salary. Because UK rates on her salary are generally above US rates, the US credit on her salary may already cover all US tax on it, and the extra UK tax becomes an excess credit that may never be used. She compares the UK tax removed from her investment income with that extra salary tax, and repeats the comparison in each of her four years.
How is the claim made, and how often should it be reviewed?
On the Self Assessment return for each year, separately. The claim is indicated on the SA109 residence pages and the relieved income or gains are entered on the page for each source, such as SA106 for foreign dividends and interest. Nothing carries over automatically, so the claim has to be made again for each year it is wanted.
HMRC's helpsheet says the claim must be made within one year of the 31 January filing deadline for the tax year concerned. That leaves time to finish the US return before the UK claim is final. A new arrival who is not yet in Self Assessment must register by 5 October after the tax year ends. The SA109 residence pages (opens the official HMRC page in a new tab) cannot be filed through HMRC's free online service and need commercial software or paper, as our page on SA109 explains.
The order in which the two returns are prepared matters. We model each year twice, with and without a claim, using the same exchange rates and the same US categories, and the UK Self Assessment service and treaty relief service work from one set of figures. The timing of disposals inside the four years is a planning point we take up through our tax planning service. The guide to avoiding US-UK double taxation shows how the regime fits with the other reliefs.
General information, not advice. The right answer depends on your circumstances and the tax year concerned.
