The US side, explained.
The United States taxes its citizens on worldwide income wherever they live. That single fact drives almost every complication on this page.
Citizenship, not residence
Almost every country taxes you on where you live. The US taxes on who you are. If you hold US citizenship or a Green Card you file a return every year, reporting worldwide income, regardless of how long ago you left or whether you have ever worked there.
The obligation is to file, not necessarily to pay. Most people abroad owe little or nothing once reliefs are applied — but the reliefs only work if you claim them, and claiming them requires the return you might not know you owe.
Two reliefs, not interchangeable
The Foreign Earned Income Exclusion removes a band of employment income from the US calculation entirely. Foreign tax credits instead give you credit for tax already paid to HMRC. Both reduce the bill; they do very different things to your position over time.
Choosing one can close off the other in later years, and revoking an exclusion locks you out for five. This is a decision worth making deliberately rather than defaulting into whichever your software suggested first.
- Form 2555 — Foreign Earned Income Exclusion
- Form 1116 — foreign tax credits
- Form 8833 — treaty-based positions
- Form 1040 — the annual return itself
The forms that carry the penalties
The expensive part of US expat compliance is rarely the tax. It is the disclosure forms — FBAR, FATCA, PFIC and foreign trust reporting — which raise no liability at all but carry severe penalties when missed.
FBAR alone is triggered by the combined high balance of your non-US accounts crossing $10,000 at any point in the year. It is aggregate, it counts the peak rather than the closing balance, and people cross it without noticing.
Last reviewed . Thresholds and rates change annually — check figures against the current tax year before relying on them.
Not sure which of these apply to you?
Describe your position and we will tell you exactly which returns and disclosures are required, with a fixed fee to handle them.