US and UK Tax Specialists for American Citizens: Expat Mistakes

Living Abroad Comes with Tax Traps

Moving to the UK brings exciting opportunities, but for American citizens, it also brings complex tax obligations. Many Americans assume that once they live and work in Britain, they only need to pay UK taxes. Unfortunately, that’s one of the biggest — and most expensive — misunderstandings. The United States taxes its citizens on worldwide income, regardless of where they live. That means even if you’ve lived in London for years, you must still file a US tax return. This dual system creates confusion, especially without guidance from US and UK Tax specialists for American citizens.

At JungleTax, we help Americans in the UK stay compliant, avoid double taxation, and prevent unnecessary penalties. Let’s explore the top tax mistakes expats make and how to avoid them.

Mistake 1: Assuming You Don’t Need to File a US Tax Return

Many American expats believe that living abroad exempts them from US tax filing requirements. The truth is, as a US citizen or Green Card holder, you must file an annual federal tax return if your income exceeds IRS thresholds.

Even if you owe no US tax after claiming foreign exclusions, the filing obligation still applies. Failing to file can trigger penalties and make it harder to prove compliance later.

For example, a marketing professional living in Manchester earned £70,000 and paid full UK taxes. She thought that meant she didn’t need to file in the US. Years later, the IRS contacted her about missing filings, resulting in late fees and interest.

With expat tax filing support from specialists in the UK, she retroactively filed under the IRS Streamlined Program and regained compliance — avoiding a potential audit.

Mistake 2: Misunderstanding Double Taxation

One of the main benefits of working with US and U.K. tax specialists for American citizens is understanding how double taxation relief works. The US and UK have a tax treaty that prevents income from being taxed twice.

However, applying these rules correctly requires expertise. Many expats either:

• Claim the wrong credits, or

• Miss out on the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC).

For instance, some expats qualify for both but only use one, leaving potential savings on the table. The FEIE allows exclusion of up to $120,000 (2024 figure) in foreign income, while the FTC gives credit for taxes paid to the UK.

Without professional advice, these reliefs can be misapplied, leading to overpayment or compliance issues. At JungleTax, we ensure your filings fully leverage the US-UK double taxation relief treaty to protect every dollar you earn.

Mistake 3: Forgetting FATCA and FBAR Reporting

Another major pitfall involves overseas bank accounts. The Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank Account Report (FBAR) require disclosure of your international financial assets.

If your combined non-US bank account balances exceed $10,000 at any point during the year, you must file an FBAR. FATCA applies to higher asset thresholds and requires additional IRS reporting.

Non-compliance leads to severe penalties, even if unintentional. We’ve seen expats face fines of up to $10,000 per missed report — sometimes more for repeated offences.

Specialist accountants handle FATCA reporting accurately, ensuring you meet all deadlines and avoid costly surprises.

Mistake 4: Incorrectly Claiming the Foreign Housing Exclusion

Many Americans in the UK qualify for the Foreign Housing Exclusion, which allows deductions for reasonable housing expenses such as rent or utilities.

However, IRS rules define “reasonable” differently for each country. Claiming too much or excluding non-eligible expenses often triggers audits.

For example, a US expat in London once claimed the entire rent for a luxury flat. The IRS disallowed half because the rate exceeded the city’s designated cap. With expert guidance from JungleTax, she later adjusted her claim correctly and avoided penalties.

Our US and UK Tax specialists for American citizens ensure your housing claims remain compliant and optimised for both UK and US reporting standards.

Mistake 5: Overlooking UK Self-Assessment Requirements

Many expats focus solely on their US filings, neglecting the UK’s Self-Assessment system. If you’re self-employed, have multiple income sources, or earn from property or investments, you must file a UK tax return.

Missing UK deadlines results in penalties starting at £100 and increasing over time. The HMRC also imposes interest on unpaid tax.

Partnering with JungleTax simplifies this process. We handle both your US and UK filings simultaneously, ensuring seamless integration of your financial data across both tax systems.

Mistake 6: Not Considering State Tax Obligations

Even after relocating to the UK, some Americans remain liable for US state taxes. States like California and New York continue to tax income until residency is formally terminated.

Expats often forget to change their residency status, leading to unexpected state tax bills. If you previously lived in a high-tax state, your accountant can help you formally establish non-residency to prevent future liabilities.

Our team at JungleTax routinely manages these transitions, ensuring expats don’t get caught in tax disputes back home.

Mistake 7: Failing to Report Investment Income Correctly

US citizens living in the UK often invest in local ISAs, pensions, or mutual funds — without realising these may trigger US tax consequences.

For example, UK ISAs (Individual Savings Accounts) are tax-free in Britain but fully taxable under US law. Similarly, UK-based mutual funds are classified as PFICs (Passive Foreign Investment Companies), which require complex US reporting.

Our US and UK Tax specialists for American citizens understand these cross-border complexities. We help you structure your investments to minimise exposure and remain compliant with both IRS and HMRC.

Mistake 8: Ignoring Currency Exchange Issues

When reporting foreign income, the IRS requires it to be converted into US dollars using official exchange rates. Expats often use inconsistent or incorrect rates, causing discrepancies in filings.

For example, using daily rates instead of annual averages can inflate income figures and trigger higher tax liabilities. JungleTax ensures consistent and IRS-approved conversions for accurate tax reporting.

Mistake 9: Forgetting About Social Security and Pensions

The US-UK Totalization Agreement prevents double payment of social security taxes. However, expats often misunderstand how contributions apply when self-employed or working under UK contracts.

Failure to apply the correct treaty rules may lead to overpayments or missed benefits. Our specialists ensure your contributions align with both systems, protecting your pension rights in both countries.

Mistake 10: Choosing Generic Accountants Over Specialists

Finally, many expats rely on local UK accountants unfamiliar with US tax laws — or US accountants who don’t understand HMRC regulations. The result is partial compliance, not complete protection.

Only dedicated US and UK Tax specialists for American citizens can bridge the gap between the two tax systems. At JungleTax, our dual-qualified team handles both ends — ensuring accuracy, efficiency, and total compliance.

Real-Life Example: A London Expat Who Overpaid $12,000 in Taxes

A California tech professional moved to London and filed US taxes independently for three years. Without correctly claiming the Foreign Tax Credit, he ended up paying thousands more than necessary.

After consulting JungleTax, our experts reviewed his filings, amended errors, and claimed back $12,000 in overpaid taxes. With coordinated US and UK filings, he now saves both time and money each year.

This example shows the power of professional cross-border tax management — and how costly DIY filing can be.

Stay Compliant with Expert Cross-Border Guidance

Taxes for American expats in the UK are not impossible to manage — but they require precision and expertise. JungleTax provides tailored accounting for individuals balancing life between two tax systems.

US and UK Tax specialists for American citizens streamline every stage—from tax planning to reporting—ensuring peace of mind and full compliance.

For expert help with your taxes, contact JungleTax today at hello@jungletax.co.uk or call 0333 880 7974.