UK resident selling US shares: which country taxes the gain

Which country taxes a UK resident's gain on US shares

The UK taxes it, as part of a UK resident's worldwide gains. The US generally does not, unless the seller is a US citizen, was US resident within the six years before the sale, spent a long period in the US that year, or holds shares the US treats as real property.

The starting rule is Article 13(5): gains from property not covered elsewhere in the article are taxable only where the seller is resident, and listed US shares fall into that residual class. Paragraphs 1 and 2 let the US tax real property, including a United States real property interest. Paragraph 6 preserves each state's own law for a seller resident there at any time in the six years before the sale.

Over all of this sits the saving clause in Article 1(4), which lets the United States tax its citizens as if the treaty had not come into effect. So the first question is never where the broker is, or which currency the account holds. It is who the seller is in US terms, and where they have lived over the past six years.

• British national, never US resident: UK taxes the gain, US generally does not
• Former US resident who left within the last six years: US domestic law decides
• Green card holder living in the UK: a US resident until status ends or a treaty claim applies
• US citizen, including a dual national: both countries tax, the US credits UK tax

Does the US tax a British investor with no US status

Usually not. A nonresident alien's capital gains from US shares are exempt from US tax unless they are effectively connected with a US business, or the seller was in the United States for a long stretch of the year. Most British investors meet neither condition, and the treaty would protect them if they did.

Publication 519 (opens the official IRS page in a new tab) sets out the domestic rule. A nonresident alien present in the United States for 183 days or more in the tax year pays tax at a flat rate on net US-source capital gains; below that, ordinary capital gains are tax exempt. Someone present that long is usually US resident under the substantial presence test anyway. A dual resident assigned to the UK by the treaty tie-breaker is a UK resident for Article 13, and discloses the tie-breaker position on Form 8833.

Real property is the exception that survives. Stock in a US company whose assets are mainly US real estate can be a US real property interest, taxed under the rules described on the IRS page on FIRPTA withholding (opens the official IRS page in a new tab). Publication 519 excludes a regularly traded class of stock unless the seller holds more than a small stake, with a different threshold for REITs. Units in US publicly traded partnerships are another case: a broker can withhold on the amount realised when a foreign partner sells.

What a W-8BEN does and does not do on a sale

A W-8BEN does not exempt a gain from US tax. The gain is already outside US tax for most British investors. What the form does on a sale is certify foreign status, so the broker can treat the sale proceeds as exempt from US information reporting and backup withholding.

The W-8BEN instructions (opens the official IRS page in a new tab) list broker proceeds among the payments for which a foreign person may need the form to claim that exception, separate from its main job of claiming the treaty rate on dividends. A broker holding no valid form may treat the account holder as a US person for reporting and apply backup withholding to proceeds, which is then recovered through a US return rather than credited in the UK. Our post on the W-8BEN for UK investors covers the dividend side and renewal.

A US citizen or green card holder must not sign the form at all, and gives Form W-9 instead. Signing a W-8BEN does not change who is a US person, and a sale by a US person stays reportable on Form 1040 whatever the broker's records show. A form signed in error should be withdrawn and replaced with a W-9.

What happens if you lived in the US before moving to the UK

Article 13(6) lets the US apply its own law to a gain by a UK resident who was US resident at any time in the six years before the sale. The treaty steps aside, but it does not create a charge. Whether US tax is due then depends on US domestic law.

For most former US residents who are now nonresident aliens, domestic law still exempts portfolio share gains under the rule in Publication 519. The paragraph matters where a special regime applies. One is the rule for an interrupted period of residence: a person who was US resident for at least three consecutive years, leaves, and becomes resident again before the end of the third calendar year after leaving can be taxed on US-source gains made while away. Another is the expatriation regime for former long-term residents.

Green card holders are a separate case. A green card holder is a US resident under the green card test (opens the official IRS page in a new tab) until the status is formally ended, so living in London does not by itself make a sale US tax free. Ending a long-held green card, or claiming UK residence under the treaty while holding one, can bring in the expatriation rules, which our expatriation service reviews before any step is taken.

How a US citizen in the UK is taxed on the same sale

Both countries tax the gain. The UK charges Capital Gains Tax as the country of residence. The US taxes the dollar gain under the saving clause. Relief runs one way: the US credits the UK tax on Form 1116, and the UK gives no credit for US tax on a share gain.

The Form 1116 category depends on source, and Publication 514 (opens the official IRS page in a new tab) supplies the test: gain on selling shares is generally sourced by the seller's residence. A US citizen with a foreign tax home is treated as a nonresident for this purpose only if the foreign country charges income tax of at least a minimum share of the gain. Where UK tax on the sale meets that test, the gain is foreign source and normally goes in the passive category. Where it does not, the gain stays US source.

For US-source gains, Article 24(6) does the work. The UK credits only the US tax that could be charged on a UK resident who is not a citizen, which for a share gain under Article 13(5) is nil, so the UK collects its full tax. The US credits the UK tax, treating the gain as arising in the UK to the extent needed, on a separate Form 1116 for income re-sourced by treaty. Our post on re-sourcing under Article 24 explains that category. Unused credit carries back one year and forward ten.

• UK tax on the gain meets the minimum share: foreign source, passive category
• UK tax below that share: US source, re-sourced under Article 24(6)
• No UK tax at all, for example within the annual exempt amount: full US tax, nothing to credit
• Gain on a US real property interest: the US taxes first, the UK credits

How the UK works out and reports the gain

In pounds, on the Capital Gains Tax (opens the official GOV.UK page in a new tab) rules for the tax year of the sale. For 2025/26 the rates are 18% and 24% after an annual exempt amount of £3,000. The same rules apply to every UK resident seller, US citizen or not.

Each dollar figure is turned into sterling at the rate for its own date. HMRC's Capital Gains Manual, in its section on foreign currency (opens the official HMRC page in a new tab), treats the cost of shares bought for dollars as the sterling equivalent at acquisition, and the proceeds as the sterling equivalent at disposal, so the UK gain picks up exchange movements. Shares of the same US company are still pooled under the matching rules in tax when you sell shares (opens the official GOV.UK page in a new tab), which our post on Section 104 pools and US lots works through.

Gains go on the capital gains pages of the SA100 return, with tax due by 31 January after the tax year ends. GOV.UK requires a registered taxpayer to report sales whose total proceeds exceed a set limit even where no tax is due. Two reliefs remove UK tax and leave a US citizen with full US tax: shares held in an ISA, and the regime for people new to the UK (opens the official GOV.UK page in a new tab) in their first four tax years. Our UK Self Assessment service prepares these pages.

Two colleagues selling the same US shares

Take two engineers at the London office of a US software company, both UK resident for years and both holding vested RSUs in the parent company at a UK platform. One is a British national who has never lived in the US. The other is a US citizen. Each sells half of the holding in the same week.

The British engineer has a valid W-8BEN, no US tax on the gain and no US return to file for it. She reports the sterling gain, measured from the market value at vesting, on her Self Assessment return. The American engineer reports the same sale on SA100 and on Form 1040, with the dollar gain on Form 8949. His UK tax on the gain meets the sourcing test, so the gain is foreign source, normally passive, on Form 1116, credited when paid or accrued under his chosen method.

Had his gain fallen within the annual exempt amount, the UK would have charged nothing and the US would have taxed the full gain, with no credit to claim and no category question to answer. The treaty relief service checks the category and timing, and our individual tax returns service prepares Form 1040. For the full set of reliefs, return to the guide to US-UK double taxation.

• Confirm US status: citizen, green card holder or none
• Check for US residence in the six prior years
• Count US days this year and note any tie-breaker claim
• Rule out US real property companies and publicly traded partnerships
• Convert cost and proceeds to sterling at each date
• US persons only: fix source and Form 1116 category