The UK has a treaty and a totalization agreement — but your ISA is not tax-free in America.
There is a US–UK income tax treaty and a totalization agreement, so double income tax and double social security are both addressable. What neither does is make a tax-free British wrapper tax-free in the US: an ISA is fully taxable on your US return, and a stocks-and-shares ISA is usually a PFIC.
Tax snapshot — United Kingdom
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Sources: IRS Publication 54; IRS Publication 901; US–UK income tax treaty (2001, as amended); US–UK totalization agreement (1985); IRC §1291–1298; Rev. Proc. 2025-32. Checked 28 August 2026.
What that means on your return
The ISA is the single item I unwind most often. Cash ISA interest is ordinary taxable interest to the US, and the funds inside a stocks-and-shares ISA are usually passive foreign investment companies, which brings Form 8621 and a punitive default calculation. Nobody at the bank mentions this when you open it.
Pensions are addressable under the treaty, and the 25% tax-free lump sum is the contested one. The UK treats it as tax-free; the US treatment turns on the article relied on and how the scheme is structured. It is a position to take deliberately and document, not to assume.
National Insurance sits inside the totalization agreement, so a self-employed American paying Class 2 or Class 4 generally escapes the 15.3% US SECA charge — with a certificate of coverage as the evidence rather than an assumption.
If you are in the United Kingdom as a…
Questions I get about the United Kingdom
Is my ISA tax-free on my US return?
No. The US does not recognise the wrapper. Interest and dividends inside it are taxable, and funds held inside a stocks-and-shares ISA are usually PFICs requiring Form 8621.
Is my 25% tax-free pension lump sum taxable in the US?
The UK treats it as tax-free; the US position is not settled and depends on the treaty article relied on and how the scheme is structured. It is a position to take deliberately and document before it is drawn, not after.
I already pay high tax in the United Kingdom. Do I still file a US return?
Yes, every year. Citizenship-based taxation does not care what you pay locally. The foreign tax credit usually removes the US liability, but the filing obligation stands, and FBAR and FATCA reporting stand with it.
When is my return due?
15 June, under the automatic extension for filers living abroad. Form 4868 moves it to 15 October, and I file the extension free.
Do I have to file an FBAR for my British bank account?
If your foreign accounts together passed $10,000 at any point in the year, yes. You can file it free through FinCEN's own system. The non-willful penalty for not filing is $16,536.
I have not filed for several years. What now?
The Streamlined Foreign Offshore Procedures: three returns, six FBARs and Form 14653 certifying non-willfulness. Penalties are waived. Note that the IRS terminated the separate Delinquent FBAR Submission Procedures around 1 July 2026.
Filing from the United Kingdom this year?
Twenty minutes with the Enrolled Agent who will prepare and sign it. Complete return, $599.
An IRS Enrolled Agent working only on US tax for Americans living abroad. I prepare and sign every return myself — 17 years in practice, 12 of them as an Enrolled Agent.