Moving to the USA from the United Kingdom: tax, social security, your company, pensions and visas

Moving from Britain to Texas or anywhere else in America comes down to timing, a handful of forms and a few treaty rules that work well in your favor when you plan them. This page sets out how your UK tax residence ends, what happens to your shares, pensions and National Insurance record, and how a British company can sit comfortably above a US subsidiary. It closes with the visa routes open to British citizens.

How your UK tax residence ends when you move to the US

The UK decides residence under the Statutory Residence Test (SRT), the legislation in Schedule 45 to the Finance Act 2013, which took effect on 6 April 2013. Residence is decided separately for each tax year, so your move is judged one year at a time. Spending 183 days or more in the UK in a tax year makes you resident. The automatic overseas tests make you non-resident outright:

• If you were UK resident in one or more of the previous 3 tax years: fewer than 16 days in the UK in the tax year.
• If you were not UK resident in any of the previous 3 tax years: fewer than 46 days in the UK.
• Full-time work overseas with fewer than 91 days in the UK and fewer than 31 UK days on which you work more than 3 hours.

Between those limits, a leaver checks five ties, including a country tie, under the sufficient ties test. You stay UK resident with this many ties:

Split year treatment can divide the year you leave into a UK part and an overseas part, so HMRC may treat you as non-resident from the day after you leave. Cases 1 to 3 cover actual or deemed departure, and Case 1 (starting full-time work overseas) has priority over Cases 2 and 3. Case 3 (ceasing to have a UK home) requires, among other conditions, fewer than 16 days in the UK after you give up the home, non-residence in the next tax year and a sufficient link with your new country within 6 months, such as being tax resident in the US under US law, being there at the end of each day for 6 months, or having all your homes there.

Watch the five-year rule. If you had sole UK residence in at least 4 of the 7 tax years before departure and come back within 5 years or less, you are temporarily non-resident. Certain pension payments and lump sums, distributions from closely controlled companies, chargeable event gains, offshore income gains and capital gains can then be taxed on your return. Your period abroad must be longer than 5 years (5 years plus one day) for these rules not to apply.

On the practical side, tell HMRC that you are leaving to live abroad: use form P85 if you do not file Self Assessment (print and post it if you have not left yet), or the residence pages SA109, sent by post, if you do. P85 is not needed if you file a Self Assessment return for the year of departure. Tell your local council so Council Tax stops, and tell your GP practice so you are removed from the NHS register, since a permanent move ends automatic entitlement to NHS treatment.

Exit tax on individuals and on shareholdings

HMRC's guidance for people leaving describes no deemed disposal on departure. UK tax follows residence, not nationality, and non-residents do not pay UK tax on income or gains arising outside the UK. HMRC states that non-residents do not normally pay UK tax when they sell an asset, apart from UK property or land.

For Capital Gains Tax, non-residents pay only on gains on UK property or land and on assets used in a UK branch of a foreign business, not on other UK assets such as shares. That is good news for founders holding shares in their own UK company. The exception is an early return: a former resident who comes back within 5 years of leaving may pay Capital Gains Tax under the temporary non-residence rules described above.

Inheritance Tax works on a different clock. From 6 April 2025, sections 6A to 6C of the Inheritance Tax Act 1984 (inserted by Finance Act 2025, section 44) make scope depend on being a long-term UK resident, meaning UK resident for at least 10 of the previous 20 tax years. Property outside the UK is excluded property if its owner is not a long-term UK resident.

Long-term residence does not end the day you leave. It ends only after a run of consecutive non-resident years, the IHT tail, which runs from 3 years if you were resident for 13 or fewer of the 20 years, rising by one year for each extra resident year, to 10 years if you were resident for all 20. It also ends if you were non-resident for any 10 consecutive tax years in the previous 19.

The US-UK income tax treaty

The convention was signed in London on 24 July 2001, amended by a protocol signed on 19 July 2002, and entered into force on 31 March 2003. The IRS list of treaties in effect shows a general effective date of 1 January 2004.

Dividends. Source-country tax on dividends is capped at 15% in general and at 5% where the beneficial owner is a company holding at least 10% of the voting power of the payer. Dividends are exempt where the owner is a company that has held 80% or more of the voting power for a 12-month period ending on the date the dividend is declared, subject to further conditions, and dividends beneficially owned by a pension scheme resident in the other state are also exempt unless derived from a business carried on by the scheme.

Pensions. Pensions beneficially owned by a resident of one state are taxable only in that state of residence. Social security payments, such as the UK State Pension, are taxable only in the state of residence. A lump sum from a pension scheme is taxable only in the state where the scheme is established.

Tie-breaker. If both countries treat you as resident under their own law, you are resident only where you have a permanent home; if you have one in both, where your centre of vital interests lies, followed by habitual abode, nationality and mutual agreement. A US citizen or green card holder counts as a US resident for the treaty only with a substantial presence, permanent home or habitual abode in the United States.

Saving clause. Each state may tax its own residents, and the US its citizens, as if the convention had not come into effect, except as provided in Article 1(5). That exception list includes Article 17(3) on social security, but not Article 17(2) on pension lump sums.

Social security: the US-UK totalization agreement

The agreement was signed on 13 February 1984 and entered into force on 1 January 1985, with Part III on benefits in force from 1 January 1988. A supplementary agreement signed on 6 June 1996 has applied since 1 September 1997.

• Posted employees: if your employer sends you from the UK to work in the US and the posting is not expected to exceed 5 years (or a longer period agreed by the authorities), you stay covered by the UK only.
• Self-employed: you are covered only by the country where you ordinarily reside, so once your home is in the US, that means US coverage.
• Certificate of coverage: to be exempt from US Social Security contributions while covered by the UK, the employer or self-employed worker requests a UK certificate of coverage from HMRC.
• Benefits: if you have at least six US quarters of coverage but not enough for US entitlement, the US agency counts your UK periods of coverage too.

You may also be able to pay voluntary National Insurance contributions while abroad, for example to keep building your UK State Pension.

Keeping your UK company with a US subsidiary

CFC rules. The United States is listed as an excluded territory in Part 1 of the Schedule to SI 2012/3024. For a CFC resident in the US, the income threshold and IP conditions of section 371KB(1)(b) and (c) do not have to be met for the excluded territories exemption, subject to requirements A and B. The subsidiary must not, at any time in the accounting period, carry on business through a permanent establishment outside the US, and it must not be involved in an arrangement whose main purpose, or one of whose main purposes, is a tax advantage. A separate tax exemption applies where the tax paid locally on the CFC's profits is at least 75% of the corresponding UK corporation tax. For reference, the UK main rate is 25% for profits above GBP 250,000, and US federal corporate income tax is 21% of taxable income.

Dividends up to the UK parent. For a small company, a dividend is exempt if the payer is resident only in the UK or a qualifying territory, it is not a listed non-dividend distribution, no foreign deduction is allowed for it, and it is not part of a tax advantage scheme. A qualifying territory is one with double taxation arrangements containing a non-discrimination provision, and the US-UK convention has one in Article 25(1). For a company that is not small, dividends are exempt if they fall into an exempt class, and distributions from a company the recipient controls are such a class.

US withholding. Under the treaty, US tax on dividends to a UK parent holding at least 10% of the voting power is capped at 5%. The 0% rate for an 80% parent also requires that the parent held 80% before 1 October 1998, or is a qualified person under the listed-company test (shares listed on a recognised exchange and regularly traded, or at least 50% owned by five or fewer such companies), or qualifies under the derivative benefits rule or a competent authority determination.

Choice of entity. HMRC's classification list treats a US Limited Liability Company, including a New York LLC, as opaque, though HMRC says the list gives only a general view and its view of a specific entity may vary.

Pensions and retirement savings when you move

UK State Pension. The State Pension is paid worldwide, but it rises each year only in the EEA, Switzerland or a country with a qualifying social security agreement, and the USA is on that list, so recipients living there usually get the annual increase. You can claim from abroad through the International Pension Centre within 4 months of State Pension age, have it paid into a US bank with a 0.39% conversion charge, and send changes of address or bank details to the Centre by phone or in writing. Under the treaty, the State Pension paid to a US resident is taxable only in the US, and the saving clause does not override that rule.

Workplace and private pensions. Pensions beneficially owned by a US resident are taxable only in the US, and any part of a UK scheme pension that would be exempt for a UK resident is also exempt in the US. Income earned inside a UK pension scheme is taxed as your income only when paid to you, not when transferred to another pension scheme. Lump sums are taxable only in the UK where the scheme is established there, but that rule is not shielded from the saving clause.

• Most UK treaties let work pensions and purchased annuities be paid to a resident of the other country without UK tax deducted. You apply for relief at source on form DT-Individual, granted by an HMRC notice under SI 1970/488; otherwise tax is reclaimed. The tax code NT means no tax is deducted.
• Most UK government pensions are taxed only in the UK.
• As a non-resident British citizen you keep the Personal Allowance, claimed each year on form R43.
• Certain pension payments and lump sums received during temporary non-residence can be taxed on your return.

Transfers abroad. A transfer to a QROPS can trigger the overseas transfer charge at 25%. It is excluded if, during the relevant period, you are resident in the country where the receiving QROPS is established and there is no non-excluded onward transfer.

Visas: E-1 and E-2 treaty status, reciprocity and the Visa Waiver Program

The United Kingdom is a treaty country for both the E-1 treaty trader and the E-2 treaty investor visa, with the treaty in force since 3 July 1815. For founders building or buying a US business, the E-2 is often the natural route.

The reciprocity fee is the amount charged in addition to the MRV application fee, so British applicants pay no extra issuance fee on top of the application fee for these visas.

The United Kingdom is a Visa Waiver Program country, and travel under the program began on 1 July 1988. For the UK, the program covers only British citizens with the unrestricted right of permanent abode.

To map your own move, from residence planning to your US company and visa, book a consultation with Mount Bonnell Advisors or ask the firm for its free potential analysis.