Moving to the UK to start or grow a business is an exciting step, but the tax implications catch many American women off guard. The United States taxes its citizens on worldwide income regardless of where they live, while the UK taxes anyone who is tax resident here. Understanding how UK taxes vs US tax interact helps you avoid double taxation, missed deadlines, and unexpected bills.
Many US citizens in the UK run consultancies, e-commerce brands, creative agencies, or professional practices. If you are among them, you need to navigate both HMRC and IRS rules at the same time.
How UK tax residency is decided
HMRC uses the Statutory Residence Test to decide whether you are UK tax resident. The rules are based on days spent in the UK, ties to the UK, and your intentions. For most American women moving to the UK, the key test is simple: if you spend 183 days or more in the UK during the tax year, which runs from 6 April to 5 April, you are automatically UK resident.
You can also become resident if the UK becomes your main home, if you work full-time in the UK, or if you have sufficient UK ties and meet the day-count thresholds. Once resident, HMRC taxes your worldwide income and gains, not just money earned in the UK.
This is different from the US, where citizenship-based taxation means you file a US return every year even if you have no US income. The UK bases tax on residence, not citizenship.
UK taxes vs US tax: income tax
For the 2026/27 UK tax year, the personal allowance remains frozen at £12,570, according to HMRC. You pay no income tax on the first £12,570 of taxable income. Above that, the rates are:
| Band | Taxable income | Rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Be aware that the personal allowance reduces by £1 for every £2 of income above £100,000, so it disappears completely once income reaches £125,140.
The US federal system also uses progressive rates. For 2026, IRS rates range from 10% to 37%, with brackets adjusted each autumn for inflation. Unlike the UK, US taxpayers can file jointly as married couples, which often produces a lower combined bill. The UK does not offer joint filing; instead, the marriage allowance lets one partner transfer £1,260 of their personal allowance to the other, provided the recipient is a basic-rate taxpayer.
National Insurance vs Social Security
In the UK, National Insurance contributions (NICs) fund the state pension, NHS, and certain benefits. For employees in 2026/27, the main rate is 8% on earnings between £12,570 and £50,270, and 2% above that, according to HMRC. Employers pay 15% on earnings above £9,100 from April 2026, up from 13.8% in 2025/26, following the October 2024 Budget.
If you are self-employed, you pay Class 4 NICs at 6% on profits between £12,570 and £50,270, and 2% above that. Class 2 flat-rate contributions were abolished from April 2024, simplifying bills for sole traders, according to HMRC. You can read more in our guide to self-employed tax in the UK.
In the US, employees and employers each pay 6.2% Social Security tax on wages up to an annual cap, plus 1.45% Medicare tax with no upper limit, according to the IRS. Self-employed Americans pay both portions, giving a combined rate of 15.3% on earnings up to the Social Security cap. The US and UK have a totalisation agreement, so you generally pay social security in only one country, but you must file the correct certificate to prove it.
VAT and sales tax
Value Added Tax (VAT) is a UK consumption tax collected by businesses on behalf of HMRC. The standard rate is 20%. You must register for VAT if your taxable turnover exceeds £90,000 in any rolling 12-month period, a threshold that rose from £85,000 on 1 April 2024, according to HMRC. Some goods and services qualify for reduced or zero rates, including most food, children’s clothing, and books.
The US has no national VAT. Instead, individual states and local authorities impose sales taxes, which range from roughly 0% to over 10% depending on location. There is no federal sales tax, so the rules vary far more than in the UK.
Property tax and capital gains
UK property owners pay council tax to their local authority. The amount depends on the property’s valuation band, which in England is still based on estimated 1991 values. Average Band D council tax in England for 2025/26 is £2,171.81 per year, according to the Ministry of Housing, Communities and Local Government.
Capital Gains Tax (CGT) applies when you sell assets at a profit. For residential property in 2026/27, the rates are 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers. For other assets, the rates are 10% and 20%. Everyone has an annual exempt amount, which is £3,000 for 2026/27, according to HMRC.
US long-term capital gains rates are 0%, 15%, or 20%, depending on taxable income, according to the IRS. If you sell a UK home while still subject to US tax, you may need to report the gain to both countries and claim foreign tax credits to avoid double taxation.
US expat filing obligations in the UK
US citizens in the UK must keep up with IRS requirements even after moving abroad. The Foreign Bank Account Report (FBAR), FinCEN Form 114, is required if the combined value of your foreign accounts exceeds $10,000 at any point during the year, according to FinCEN. It is filed with the Financial Crimes Enforcement Network, not the IRS.
You must also file FATCA Form 8938 with your US tax return if your foreign financial assets exceed $200,000 at the end of the tax year, or $300,000 at any point, for single filers living abroad, according to the IRS. The thresholds are higher for married couples filing jointly.
The US-UK double taxation treaty, along with the Foreign Earned Income Exclusion and Foreign Tax Credit, usually prevents you from paying full tax to both countries. However, the paperwork is complex, and mistakes can be expensive.
Practical steps for American women running UK businesses
- Confirm your UK tax residency date as soon as you arrive, using HMRC’s Statutory Residence Test guidance.
- Choose the right business structure. A limited company offers liability protection and flexible profit extraction, but you must file annual accounts with Companies House and a corporation tax return with HMRC. Read our guide on how to pay yourself as a limited company director.
- Register for Self Assessment if you receive untaxed income, such as dividends, rental profits, or self-employment earnings above £1,000.
- Track your allowable expenses carefully; they reduce both your UK and, potentially, your US taxable income.
- Check whether you need to register for VAT once turnover approaches £90,000.
- Keep records in both pounds sterling and US dollars, because the IRS requires figures in USD.
- File FBAR and FATCA forms on time; FBAR deadlines are strict and penalties for late filing are severe.
- Speak to a tax adviser who understands both UK and US systems before making major decisions about salary, dividends, or property.
Key takeaways for American women in business
Understanding UK taxes vs US tax is essential if you are an American woman running a business in the UK. The UK system is residence-based, with a 6 April to 5 April tax year, while the US taxes citizens globally on a calendar-year basis. Key differences include National Insurance versus Social Security, VAT versus state sales tax, and the way each country treats married couples and capital gains. With the right records, timely filings, and specialist advice, you can meet both sets of obligations without paying more tax than necessary.
Please note: this article is for information only and is not a substitute for professional tax advice.
