As the numbers of Americans leaving the US grows, the UK is one of the most popular destinations to relocate and start a new life. The similarities in language and culture are obviously huge draws, but as with relocation to any other country, it also brings with it a number of frustrating challenges, specifically when it comes to investing.
At Experts for Expats, we deal with thousands of American expats every year, and questions around investing are always high on the list. Our experience is that whether you’ve recently relocated or have lived in the UK for a number of years, it’s likely that you’ve encountered barriers when trying to open investment accounts, invest in funds, or even make use of traditional tax-efficient savings options that other UK residents rely on every day.
It’s also likely that you’ve approached independent advisors for help and been turned away because you’re under their minimum investment amounts.
These are just some of the challenges American expats face whether they live in the UK or elsewhere in the world. This guide outlines the key issues American expats face when investing from the UK, offers potential solutions, and answers some of the most frequently asked questions from our community.
Disclaimer
Please be aware that this article is intended for information purposes only and does not constitute financial, tax, or legal advice. This article was created following a webinar held in October 2024 and while every effort has been made to keep the information up-to-date and relevant, every individual’s circumstances are unique, and you should not make any decisions based solely on the content of this article. You must always consult an independent, regulated professional with cross-border (UK and US) expertise before taking any decisions.
First up: Why is it so complicated for Americans and nobody else?
The primary issue stems from the fact that the United States is one of the only countries in the world that taxes its citizens regardless of where they live. This unique tax system means that even if you’ve lived outside the US for decades, you will still be subject to IRS rules and annual US Federal tax filing requirements.
The introduction of the Foreign Account Tax Compliance Act (FATCA) means that many UK-based financial institutions either refuse to work with Americans or severely limit the investment products available to them.
If you’ve ever been told “sorry, we can’t help” by a UK based adviser or platform, FATCA is likely to be the root cause. For some firms, the additional costs that come from IRS scrutiny mean that smaller investment amounts are simply not cost effective for either the investor or the firm, hence why people with under €250k to invest will often be unable to get formal advice.
On top of this significant barrier, the IRS classifies many popular UK investment options, including mutual funds and ETFs (Exchange Traded Funds), as Passive Foreign Investment Companies (PFICs), which are taxed heavily and come with highly complex reporting obligations.
Investment Options That May Work for some American expats
Despite these significant barriers and complications, there are options available for you to investigate, depending on your personal circumstances. You will always face a challenge if you are investing smaller amounts, but you could consider looking into any or all of the following.
1. US-Based Investment Platforms
Some US brokerages will maintain investment accounts for Americans living overseas, allowing you to access US mutual funds and ETFs that are IRS-compliant. Be aware that not all firms offer this service and those that do may still have asset minimums and/or restrictions based on your UK residency.
2. Individually Managed Accounts (IMAs) with a Specialist Firm
A bespoke solution for many US expats is an IMA which is an investment portfolio tailored to your specific circumstances as an American expat. IMAs are created with tax efficiency and UK/US cross-border compliance in mind and will often use IRS-recognised assets. They are typically managed by firms experienced in working with US-connected individuals.
3. UK Pensions
UK pensions (eg SIPPs or employer provided schemes) may be possible although their treatment by the IRS is not consistent. While UK tax rules around pensions may offer benefits, these do not always align with US tax treatment. If you are in any doubt about a pension and how it will be treated by the IRS, it is essential to understand the specific structure of your pension and you can do this by speaking to an independent financial advisor with cross-border expertise.
Frequently Asked Investment Questions from American Expats
Following a recorded discussion between cross-border tax and US/UK investment professionals, we've compiled this FAQ to address some of the most commonly asked questions by US citizens living in the UK. These are real questions that arise regularly through our enquiry service and were discussed in depth during the conversation. This FAQ has been created to clarify the complexities and outline the key considerations. We will be publishing the full conversation during Summer 2025 as both a video on our YouTube channel and as a podcast.
While this FAQ offers helpful guidance, it does not constitute personal financial advice. If you're considering any financial or tax-related action, it's essential to speak with a qualified specialist who can assess your individual circumstances.
Can I invest in a Cash ISA as a US citizen?
Yes, but the interest is not tax-free in the US. The IRS disregards the ISA wrapper entirely, so the interest must be reported on your US tax return. There are no US tax advantages to using a Cash ISA.
Can I invest in a Stocks and Shares ISA?
Yes, technically, but it comes with significant tax risks. If your ISA value exceeds $25,000, it may be treated as a PFIC by the IRS, leading to punitive taxes. Even under that threshold, gains and income are still fully taxable in the US.
Does the US-UK double tax treaty help with ISA taxation?
No. Since ISAs aren't taxed in the UK, there’s no credit available under the treaty to offset US tax. The IRS will tax ISA income as if the wrapper doesn’t exist.
Can I just invest in HMRC-approved reporting funds?
Yes, but you must be careful. Only specific fund versions qualify. The list changes, so monitoring is required. You also need a platform that accepts US citizens with a UK address.
Why can’t US citizens in the UK just get financial advice like everyone else?
This is primarily because most advisers are not licensed to operate in both the US and UK. Dual regulation, insurance, and compliance requirements mean firms often only work with clients above specific asset thresholds.
What can I do if I don’t meet investment minimums?
Consider building cash reserves and contributing to a UK pension, which is tax-recognised by both countries. If you still have access to US platforms, you may be able to invest directly with care. Specialist advice is essential.
When do I need to start reporting income to the IRS?
It depends on your filing status. For example: single filers around $15,000, married filing separately just $5. US citizens must report worldwide income even if they’re fully taxed in the UK via PAYE.
What happens if I invest in UK property?
Rental income and capital gains must be reported in both countries. The US offers depreciation and mortgage interest relief, but also requires depreciation recapture and possibly a net investment income tax on sale. Dual advice is recommended.
Can I put assets in my non-US spouse’s name?
Yes, but you lose legal ownership and protections. While it can reduce tax exposure, you must be absolutely certain of the relationship and risks. It can be a poor financial move if things go wrong.
Can I invest in a child’s ISA?
Yes, but the same tax issues apply. If your child is a US person, any gains or interest must be reported. Junior ISAs can’t be unwound easily, and low filing thresholds may trigger annual reporting obligations.
How are pensions taxed from a US perspective?
Pensions are generally protected under Article 18 of the US-UK tax treaty. Contributions and growth are usually tax-deferred. Taxation depends on where you live and whether the payments are lump sums or regular income. Get specialist advice before drawing any pension.
Should I renounce my US citizenship to avoid taxes?
Renouncing is possible, but complex. You must be fully tax-compliant and may be subject to an exit tax if your net worth is over $2 million. It can’t be done for tax reasons alone and may restrict future access to the US. It’s a major life decision, not just a tax one.
The importance of trying to get advice, even though it may not be possible
Without doubt, the biggest challenge that American expats face is trying to get formal, independent advice – not because it’s not possible, but because of the barriers already mentioned.
This often means that people with under $100k are left with very few, if any, options which is incredibly frustrating given you will be told to avoid doing things on your own.
Without expert help, Americans living in the UK will often miss opportunities or, even worse, face expensive compliance issues.
In addition, many well-meaning advisers in the UK do not fully understand the implications of working with US citizens, leading to decisions that seem sensible locally but can create serious problems with the IRS. Although in most cases, UK financial advisors will know not to work with US citizens as a matter of course.
At Experts for Expats, we try to connect people like you with independent, trusted professionals who are experienced in both US and UK cross border issues, but even then our partners cannot always help.
Our free introduction service will attempt to connect you with a qualified specialist, without obligation, so you can get some degree of clarity before you commit to any course of action.
Don’t be disheartened, there may still be options
Investing as an American expat in the UK can be complex, especially if you have limited wealth. Unfortunately, it’s more complex than just choosing the right fund or platform due to FATCA and the complications which descend from the reporting requirements.
It’s essential that your financial plan is aligned with the laws and tax systems of both countries (the US and the UK in this case) but with the right support, you can still make compliant decisions about your investments, and we’d like to try and help.
If you’d like to request an introduction, please use our free service and you will potentially be eligible for a free discovery call with one of our trusted partners. Even if they cannot provide you with formal advice, they may be able to put your mind at rest that you’re doing everything by the book.