The UK FIG Regime and Its Effect on Your U.S. Tax Bill

A person using a tablet displaying financial charts, with a glowing digital globe and stacks of coins in the foreground.

The United Kingdom’s foreign income and gains regime, often called the FIG regime, changed how certain new UK residents are taxed on foreign income and gains. The FIG regime replaced the previous remittance basis beginning 6 April 2025. GOV.UK explains that qualifying new residents may claim UK tax relief on foreign income and gains arising during their first four years of UK residence.

For Americans moving to the UK, this can be important. The FIG regime may reduce or eliminate UK tax on certain foreign income and gains for eligible taxpayers during the first four years. However, it does not remove U.S. filing requirements.

Who May Qualify for the FIG Regime?

The FIG regime is generally designed for individuals who become UK tax resident after a period of non-UK residence. GOV.UK guidance explains that the regime applies to qualifying new residents and is connected to the individual’s UK residence history.

Eligibility should be reviewed carefully before relying on the regime. Important questions include:

  • When did you become UK tax resident?
  • Were you non-UK resident for the required period before arrival?
  • What foreign income and gains do you have?
  • Are you making the required UK tax return claim?
  • Do you have trusts, foreign companies, or investment accounts?
  • Are you remitting older income or gains to the UK?

The FIG regime is not automatic in every situation. It may require a valid claim and careful reporting.

Why the FIG Regime Does Not Eliminate U.S. Tax Filing

U.S. citizens and resident aliens generally continue to report worldwide income to the IRS, even when they live abroad. That means an American in the UK may still need to report foreign wages, investment income, capital gains, business income, rental income, pension distributions, and other income on a U.S. tax return.

This is where the FIG regime can create confusion. Income may be relieved from UK tax under the FIG regime, but that does not necessarily mean it is ignored by the IRS.

For example, an American who qualifies for UK FIG relief may still need to report:

  • U.S. brokerage income
  • Foreign investment income
  • Capital gains from foreign accounts
  • Rental income outside the UK
  • Business income from another country
  • Trust or company income
  • Foreign pension activity

The UK and U.S. tax results may be very different.

How the FIG Regime Can Affect Foreign Tax Credits

Many Americans in the UK use the Foreign Tax Credit to reduce double taxation. The basic idea is that U.S. tax may be reduced when qualifying foreign tax is paid on the same income.

However, if FIG relief means little or no UK tax is paid on certain income, there may be less foreign tax available to claim as a credit on the U.S. return. That could increase the U.S. tax bill in some situations.

This does not mean the FIG regime is bad. It means the UK and U.S. calculations should be reviewed together before assuming the overall result.

The Remittance Basis and Transitional Issues

The FIG regime replaced the older remittance basis rules. Under prior rules, some UK resident non-domiciled individuals were taxed on certain foreign income and gains only when remitted to the UK. The new system is residence-based and changed the treatment for many taxpayers starting 6 April 2025. GOV.UK notes that UK residents are generally taxable on the arising basis, subject to FIG relief for qualifying new residents.

Americans with older foreign income or gains should be careful. Pre-6 April 2025 income, gains, trusts, and remittances may still require special review.

U.S. Reporting Forms May Still Apply

The FIG regime does not remove U.S. international reporting obligations. Americans in the UK may still need to review:

  • FBAR
  • Form 8938
  • Form 8621 for certain foreign funds
  • Form 3520 or 3520-A for certain trusts
  • Form 5471 for foreign corporations
  • Form 8865 for foreign partnerships
  • Form 8858 for foreign disregarded entities

Even ordinary UK or foreign accounts may create U.S. reporting requirements.

Plan Before Moving to the UK

The best time to review the FIG regime is before moving to the UK or early in the first tax year of residence. Investment accounts, trust structures, foreign businesses, capital gains, pensions, and state tax residency may all need attention.

Expatriate Tax Returns helps Americans in the UK understand their continuing U.S. filing obligations and coordinate tax planning around foreign income, foreign accounts, and international reporting.

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