When one spouse is American and the other is British, taxes, investments, and long-term planning can quickly become a high-stakes enterprise. Living together, whether in the United States, the United Kingdom, or both, comes with a complex web of tax and financial considerations. The logistics of tax systems, financial regulations, and cross-border rules are complex, and the consequences of misinterpreting the rules can be substantial.

Living in the U.K. has consequences for the American

When the couple is based in the U.K., the American spouse never truly leaves the U.S. tax system. The United States is one of the few countries that taxes its citizens on worldwide income regardless of residence. So even as the couple adapts to the U.K. system, where tax is largely residence-based, the American spouse must still file annually with the IRS, disclosing foreign accounts, trusts, pensions, and other assets. Without proper planning, the American spouse may end up paying more taxes overall or risk violating U.S. filing requirements, which carry heavy penalties. We find that working with tax preparers who are knowledgeable about both the U.S. and U.K. returns is a great help. Cerity Partners maintains an extensive network of these professionals who specialize in cross-border financial planning.

U.K. investments can trigger U.S. headaches

At a practical level, investments that are straightforward for most British couples, such as opening an individual savings account, investing in a U.K. mutual fund, or contributing to a pension, can have unexpected consequences for the American spouse. Many British tax-efficient vehicles are treated unfavorably under U.S. rules. Joint accounts in the U.K. can also complicate matters. If the British spouse is not a U.S. citizen or green card holder, the IRS treats them as a nonresident alien. That classification restricts the ability to transfer assets freely between spouses without raising U.S. gift tax concerns. Even simple gestures, such as covering a partner’s expenses or gifting a portion of savings, may require special attention to ensure they fall within annual U.S. limits and are properly reported. The U.K. Government publishes a list of approved reporting funds for U.S. citizens residing in the U.K.  

Financial reporting requirements

U.S. citizens are required to disclose foreign financial accounts once their total value exceeds $10,000 at any point in the year. This includes accounts in the American spouse’s name, joint accounts in the U.K., and, in some cases, even accounts solely in the British spouse’s name if the American has signatory authority. This information is recorded using an FBAR (Foreign Bank and Financial Accounts), a report that U.S. citizens must file annually to disclose their financial interest in, or signature authority over, foreign financial accounts. The report is officially known as FinCEN Form 114. Choosing a bank can also be challenging, as some U.K. institutions refuse to deal with U.S. clients due to the complexity of U.S. reporting rules. Fortunately, some international branches of U.S. banks are willing to work with U.S. expatriates, and we maintain an updated list of other institutions that can accommodate the reporting requirements.

Pensions, treaties, and cross-border retirement planning

Pensions add another layer of complexity. The American spouse may have a U.K. workplace pension, a self-invested personal pension, or entitlement to the U.K. state pension. The IRS often treats these as taxable, even if they are tax-deferred in the U.K. The U.S.-U.K. tax treaty offers some relief, but reporting is usually still required. The U.K. state pension, for example, is taxable in the U.S., which often surprises those planning to use it as a supplement to retirement. Pension regulations on both sides of the pond are ever changing, and planning must adapt accordingly. For instance, following the U.K. Finance Act of 2004, since 2006, pension holders in the U.K. age 55 and older have been able to take a 25% tax-free lump sum. An American with a U.K. pension will need to decide whether to elect the lump sum. The U.S. tax treatment will be determined by several factors, including whether the contributions were originally made on a pre- or post-tax basis. Additionally, U.K. pensions were historically exempt from Inheritance Tax (IHT) in most cases; however, this exemption is set to change in 2027. The new rules will include pension funds and death benefits in a person’s estate for IHT purposes.

Social Security coordination and totalization

Fortunately, the U.S. and U.K. have a totalization agreement, which generally allows individuals to avoid double contributions and, in some cases, combine periods of coverage to qualify for benefits. However, this agreement only applies in certain circumstances and usually requires coordination with Social Security agencies in both countries. Knowing how to claim benefits and how they will be taxed under each country’s rules requires foresight and professional guidance.

Estate planning for international couples

Estate planning is particularly important when one spouse is not American. A U.S. citizen can leave an unlimited amount to a U.S. spouse tax-free, but this is not the case when the spouse is British and not a U.S. citizen. In that situation, the amount that can be passed tax-free is much lower unless specific planning tools, such as a qualified domestic trust, are used. Without planning, couples may expose assets to unnecessary U.S. estate tax. Separate wills in each country are also advisable, as local laws vary and one may not suffice to cover both jurisdictions.

Planning for children: Dual citizenship and education funding

Children born to Anglo-American couples often qualify for dual citizenship, which can be beneficial but comes with obligations. If residing in the U.K., registering the child’s birth with the U.S. consulate is an essential early step. However, U.S. citizenship means a lifetime of potential U.S. tax filing requirements, regardless of where the child lives. For education, U.S.-based 529 savings plans can be powerful tools, and many U.K. universities are eligible institutions. But families must still plan for currency fluctuations and confirm eligibility on a case-by-case basis.

Moving to the U.S.: New rules, new risks

If life leads you back to the U.S., the challenges evolve. For the American spouse, returning home means their U.K. assets and pensions must be reviewed under U.S. tax law. Some U.K. retirement savings are eligible for favorable treaty treatment, while others are not. For the British spouse, establishing U.S. residency means adapting to a completely new tax regime, including filing federal (and possibly state) returns, understanding how foreign income is treated, and ensuring proper credits or treaty relief are applied to avoid double taxation.

Navigating complexity together

Beyond the legal and tax challenges, there is the emotional side of navigating these transitions. Couples often find themselves explaining their situation to banks, investment platforms, and even advisors unfamiliar with cross-border issues. It can be frustrating to feel that your life does not fit neatly into either country’s systems. That is why proactive financial planning is not just helpful but essential. With clear communication, early professional advice, and a long-term view, couples can align their financial lives across borders and build a secure foundation for the future. Learn more about our cross-border financial planning capabilities.

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