Keeping your American house after you move to Britain

The house stops being your main home and becomes US rental property. That switch has its own rules. The figure you depreciate is the lower of what the house cost you and its market value on the day you start letting it.

So a house that has fallen in value since purchase depreciates from the lower figure. IRS guidance on property changed to rental use sets out how to fix that starting figure.

The switch also starts a clock on the main home exclusion. That exclusion needs ownership and use within a set window before the sale, so letting for too long can lose it.

Most owners use a property manager, and the choice matters for tax as well as tenants. The manager collects rent, pays bills and sends you the annual figures both returns rely on.

Give the manager the right tax form at the start. A US citizen provides Form W-9, and a foreign owner provides the form that stops withholding on gross rent.

Ask for a year-end statement by calendar year. A clean statement makes the American return quick, and it gives you the monthly detail you need to rebuild the British tax year.

Often, yes. Many states tax rent from property located inside them, even when the owner lives abroad and files no other return there. Moving to Britain does not end that duty.

States differ widely. Some have no income tax at all, while others expect a nonresident return every year you receive rent.

Check the state rules before the first year's filing. A missed state return tends to surface years later, with interest attached.

Then the US rules change considerably. A British owner who has left America is usually a nonresident alien for US tax. By default, US rent paid to a nonresident alien faces withholding on the gross amount.

Most owners elect instead to treat the rent as connected with a US business. That allows expenses and depreciation, and it means filing Form 1040-NR each year. The IRS guide for aliens explains the election.

The tenant or letting agent needs the right form to stop gross withholding. So sort the paperwork before the first rent payment, not after the first deduction.

It is Schedule E on your ordinary federal return. You report the rent, deduct allowable expenses and claim depreciation on the building. The profit or loss then joins the rest of your income.

Living in Britain does not change that calculation. The IRS guide to residential rental property applies to a US citizen in London exactly as it does in Denver.

State tax can apply as well. Many states tax rent from property located there, even when the owner lives abroad, so check the state rules for the house.

The United States does, because the property is there. Under the US-UK treaty, the country where real property sits may tax the income from it. So America keeps the first claim on the rent, whoever owns the house.

Britain taxes its residents on their worldwide income. So a UK resident reports the same rent to HMRC as well.

Credit resolves the overlap. Britain generally gives credit for the US tax on that income, and our guide to avoiding double taxation explains the mechanics.

Ownership structure can change this picture. Holding the house through a company or trust brings different rules on both sides, so take advice before changing how you own it.

A UK resident reports the rent on the foreign pages of Self Assessment. HMRC treats a foreign letting as an overseas property business. You work out the profit in pounds, using British rules on allowable expenses.

The British rules keep that business separate. HMRC guidance on rent from property outside the UK explains that its profits and losses stay apart from any UK letting. So a loss on your US house cannot reduce tax on a flat you let in Manchester.

If you are new to the system, our guide to registering for Self Assessment covers getting set up.

Both countries allow the ordinary running costs of letting, such as agent fees, insurance and repairs. The lists differ at the edges, and mortgage interest follows its own rules on each side, so keep receipts for everything.

Travel to inspect US rental property from Britain is a grey area on both sides. Keep the purpose documented, and expect scrutiny if the trip doubles as a holiday.

A property manager who itemises every cost on the annual statement saves a great deal of work here. Ask for that level of detail when you appoint one, rather than at the first filing deadline.

Each return converts into its own currency. The US return converts nothing, since the rent is already in dollars. The UK return converts the dollar rent and expenses into pounds.

HMRC accepts a reasonable, consistent method. Many owners use an average rate for the tax year, since rent arrives monthly and evenly.

Whatever you choose, use it every year. Switching methods between years makes the British profit look erratic and invites questions.

It can help a new arrival on the British side, but it changes nothing in America. Since April 2025, qualifying people in their first four years of UK residence can claim relief on foreign income and gains. You need a long gap of non-residence beforehand.

You claim the relief each year, and a claim has consequences of its own. HMRC guidance on who can claim the regime sets out the conditions.

For a US citizen, the American tax on US rental property continues regardless. So the regime only affects how much British tax sits on top.

Both countries usually tax the gain. America taxes it first as the location of the property, including recapture of depreciation. Britain then taxes a UK resident on the gain in pounds, with credit for the US tax.

The gain differs on each side, for the same reasons the rent does. Currency movement over the years of ownership can make the gap large.

A non-American seller also faces withholding on the sale price under the rules for foreign sellers of US real estate. Any excess comes back through the US return, so the filing matters even when no tax is due.

Timing the sale also matters in Britain. A UK resident selling US rental property reports the gain on Self Assessment for the tax year of the sale. Records of the original purchase in both currencies make that calculation far quicker.

That is a financial decision first and a tax decision second. However, tax changes the numbers more than people expect, so it belongs in the analysis before you decide either way.

Keeping the house brings two returns every year and a sale taxed in both countries later. Selling before you leave can simplify matters, especially if the house was your main home and still qualifies for the American exclusion.

Our guide to the statutory residence test explains when British residence begins. That date often decides which country taxes a sale made around the move.

Where you do keep it, appoint a letting agent who understands overseas landlords. Good records from the agent make both returns far quicker to prepare each year.

This order keeps both returns consistent and avoids the usual scramble in January.

Set it up once, then repeat it every year with the same method.

Take an illustrative example: an American couple move from Austin to Edinburgh and let their Texas house. Texas has no state income tax, so only federal tax applies in America.

On their federal return, depreciation and mortgage interest reduce the rental profit to a small figure. On their UK return, the same rent in pounds shows a larger profit, since Britain gives no depreciation.

They pay little US tax on the rent, so Britain has little to credit. Their combined bill is higher than they expected, but it is correct, and planning next year's expenses now helps.

The first is skipping depreciation because the house was once your home. The American rules reduce your basis anyway, so the deduction is simply lost.

The second is assuming the UK uses the US profit figure. In our practice we see this constantly, and it understates the British profit almost every time.

The third is ignoring withholding paperwork for a non-American owner. Gross withholding on rent is easy to prevent and slow to recover.

We prepare both sides of a cross-border letting through our treaty relief service, keeping the two returns consistent. Where a sale is coming, we model both countries before you list the house.

If you let US rental property from Britain, send us the details and we will map both returns at a fixed fee agreed first. This article is general information, not personal tax advice; take advice on your own facts from a qualified adviser.