CGT for Americans living in the UK works on two fronts. As UK residents, Americans pay UK Capital Gains Tax on their worldwide gains at 18% or 24%. As US citizens, they are also taxed by the IRS on the same gains. The US-UK tax treaty and foreign tax credits stop most gains being taxed twice, but differences between the two systems, such as the treatment of your home, ISAs and US funds, can still create unexpected bills.
Since 6 April 2025, new UK arrivals who have not been UK resident for the previous 10 years can claim the 4-year foreign income and gains regime instead. GOV.UK explains who can claim the 4-year FIG regime.
This guide explains CGT for Americans living in the UK, how the treaty relief works, a worked example on US shares, and the traps that catch US expats most often.
How CGT for Americans Living in the UK Works
| Issue | UK position | US position |
|---|---|---|
| Who is taxed | UK residents on worldwide gains | US citizens on worldwide gains, wherever they live |
| Rates | 18% or 24% | 0%, 15% or 20% for long-term gains, plus 3.8% NIIT for higher earners |
| Tax-free allowance | £3,000 a year | No equivalent, but a 0% band for lower incomes |
| Main home | Private Residence Relief, usually full exemption | Exclusion of up to $250,000 ($500,000 for married couples) |
| Tax year | 6 April to 5 April | Calendar year |
UK rates and allowances are covered in our guides to CGT rates for 2026 and the CGT annual exempt amount.
How the US-UK Treaty Prevents Double Tax
The US-UK double taxation convention contains a “saving clause” that lets the US tax its citizens as if the treaty did not exist. Relief therefore comes mainly through credits:
- Gains on non-US assets, such as UK shares or UK property, are taxed first in the UK. The US gives a foreign tax credit for the UK tax.
- Gains on US real estate are taxed first in the US, and the UK gives credit for the US tax.
- Gains on US shares held by a UK resident are generally taxed first by the UK, with the US giving credit, under the treaty’s special rules for citizens.
Because UK rates are often higher than US long-term rates, UK tax frequently covers the whole US bill. GOV.UK explains how to claim relief if you’re taxed twice.
Worked Example: Selling US Shares While Living in the UK
Sarah is a US citizen who has lived in London for 12 years, so the FIG regime does not apply. She is a UK higher-rate taxpayer. In 2026/27 she sells US shares with a gain of $50,000, which is £40,000 at an assumed rate of $1.25 to £1.
| Step | Amount |
|---|---|
| UK gain | £40,000 |
| Less UK annual exempt amount | (£3,000) |
| UK CGT at 24% on £37,000 | £8,880 |
| US tax at 15% on $50,000 ($7,500) | £6,000 |
| Less foreign tax credit for UK tax | (£6,000) |
| US tax payable | £0 |
| Total tax on the gain | £8,880 |
The unused £2,880 of UK credit can usually be carried forward in the US. If Sarah’s income were above the NIIT threshold, the 3.8% Net Investment Income Tax could still be due, as the IRS generally does not allow foreign tax credits against it. Our shares CGT calculator estimates the UK side.
Common Traps for US Citizens in the UK
- Selling your UK home. Private Residence Relief may make the gain tax-free in the UK, but the US exclusion is capped, so a large gain can be taxable in the US with no UK tax to credit.
- Currency gains. The US measures gains in dollars, so exchange rate movements, including on repaying a sterling mortgage, can create US gains that do not exist in the UK.
- ISAs. ISA gains are tax-free in the UK but taxable in the US, and UK funds inside them may be treated as PFICs.
- US mutual funds and ETFs. Many are not UK “reporting funds”, so gains are taxed in the UK as income at up to 45%, not as capital gains.
- Different tax years. A gain in the UK tax year may fall in a different US calendar year, which affects credit timing.
Leaving the UK
If you return to the US, UK CGT generally stops on most assets once you become non-resident, but UK property remains taxable and the temporary non-residence rules can apply if you come back within five years. See our guide to non-residents CGT on shares.
Frequently Asked Questions
What taxes do I have to pay as an American citizen living in the UK?
You pay UK Income Tax and CGT as a UK resident, and you must still file US returns as a citizen. Foreign tax credits and the treaty usually prevent the same income or gain being fully taxed twice.
Do Americans pay tax on capital gains?
Yes. US citizens pay US tax on capital gains worldwide, at 0%, 15% or 20% for long-term gains, plus 3.8% NIIT for higher earners. Living in the UK adds UK CGT, with credits to avoid double tax.
What happens to Capital Gains Tax for non-residents in the UK?
Non-residents pay UK CGT only on UK land and property and shares in UK property-rich companies, and must report UK property sales within 60 days.
How are foreign capital gains taxed in the UK?
UK residents pay CGT on worldwide gains, unless they qualify for the 4-year FIG regime as new arrivals. Foreign tax paid on the same gain can usually be credited.
Can I keep my US brokerage account while living in the UK?
Yes, but check whether your funds have UK reporting status. Gains on non-reporting funds are taxed in the UK as income.
Get expert help: Every situation is different, so speak to a qualified capital gains tax accountant before you act. Our non-resident CGT team can review your figures, and we also work with clients looking for capital gains tax advice in Manchester and across the UK.
Conclusion
CGT for Americans living in the UK means two tax systems apply to the same gain. In most cases the UK taxes the gain at 18% or 24% and the US gives credit, so the total tax is close to the higher of the two. The real risks are where the systems differ: your home, currency movements, ISAs and US funds.
Review your investments and any planned property sale with both systems in mind before you act.
For UK CGT advice as a US citizen, speak to our shares and investments CGT specialists or our tax planning team. Call us on +44 (0)1204 859315 or send us your question for a free initial consultation and a fixed-fee quote within 24 hours.
