The FIG regime replaced the non-dom remittance basis — but for a US citizen the UK exemption removes the foreign tax credit too, handing the benefit to the IRS.
The UK's foreign income and gains (FIG) regime can take a qualifying new resident's foreign income and gains out of UK tax for up to four years. For a US citizen it does considerably less, because the United States taxes its citizens on worldwide income wherever they live — and where the UK collects no tax, there is no UK tax to credit against the US liability. The relief is frequently not saved at all: it is transferred from HMRC to the IRS.
Since 6 April 2025, all UK residents are taxed on the arising basis on their worldwide income and gains. The FIG regime sits on top of that as a time-limited relief for people newly arriving in the UK. HMRC's guidance describes a qualifying new resident as someone who is UK resident under the statutory residence test and still within their first four years of UK residence after at least ten consecutive tax years of non-UK residence (check if you can claim the 4-year FIG regime).
Three features matter here. The relief runs for a maximum of four consecutive tax years from the year UK residence begins, and unused years cannot be carried forward. It is not automatic — a claim must be made on the Self Assessment return for each year. And it is selective: you choose which foreign income and which gains to claim relief on.
Crucially, "foreign" here means foreign from the UK's point of view. For an American arriving in London, a great deal of what qualifies is US-source: dividends and interest from a US brokerage account, gains on a US portfolio, rental profits from a property in Florida. Hold that thought — it is where the problem becomes acute.
Eligibility turns on residence, which turns on the statutory residence test — if you are unsure which side of the line you fall, start with our UK and US residence tests explained.
Every other new arrival faces one tax authority on this income. A US citizen faces two, permanently, and only one of them can be persuaded to stand down.
The IRS position is unambiguous: US citizens are subject to tax on worldwide income from all sources and must report all taxable income under the Internal Revenue Code, whether they live in Ohio or Oxfordshire. Moving to the UK, claiming FIG, and becoming exempt in the UK does nothing to the US return. The dividends, interest and gains that the UK has agreed to ignore are still reportable, still taxable, and still due to be paid in dollars.
For a French, Australian or Emirati arrival, a successful FIG claim is money kept. For a US citizen, it is a question of which treasury receives it.
The mechanism most expat advice relies on is the foreign tax credit. The IRS allows the credit where you have "paid or accrued foreign taxes to a foreign country or U.S. possession and are subject to U.S. tax on the same income", claimed by individuals on Form 1116. Because UK tax rates on most income are meaningful, US citizens in the UK often find that UK tax fully absorbs the corresponding US liability, leaving little or nothing to pay to the IRS.
That logic contains a hidden dependency. The credit is not a credit for being taxed abroad in principle; it is a credit for foreign tax paid or accrued in fact. Claim FIG, and the UK charges nothing on that income. Nothing paid means nothing accrued, which means nothing to credit — and the US tax on that same income, previously invisible because it was covered, now becomes a real liability payable in full.
The consequence is worth stating plainly. Where a US citizen's foreign income would otherwise have borne UK tax broadly equal to or greater than the US tax on it, claiming FIG does not save the tax. It reallocates it. HMRC forgoes the receipt and the IRS collects it instead. The taxpayer's total bill is unchanged or, once the cost of the surrendered UK allowances is added, higher.
The position is starker still for US-source income. If your qualifying "foreign" income is a US portfolio, there was never any foreign tax on it to credit in the first place. FIG merely removes a UK charge that would, in many cases, have been creditable — while the underlying US charge is untouched. Relief on one side, unchanged liability on the other, and the difference goes to the IRS.
Two boundaries are frequently misunderstood.
The FIG regime addresses foreign income and gains. It does not exempt UK-source income — the salary from your UK employer, profits from a UK business, rent from a UK property. That income remains fully UK taxable, and the credit and exclusion mechanics on the US side continue to apply to it in the ordinary way. (A separate election exists for overseas workday relief for duties performed abroad, with its own conditions.)
The foreign earned income exclusion on Form 2555 is not a substitute either. It applies only to compensation for personal services performed abroad, subject to a foreign tax home and either the bona fide residence or the physical presence test. Investment income does not qualify. Since FIG is most valuable to people with substantial portfolio income and gains, the exclusion generally cannot rescue the position. Note too the interaction the IRS spells out: elect to exclude foreign earned income and you cannot take a foreign tax credit on the income you have excluded.
There is a second-order cost that rarely surfaces in UK-side commentary. Where UK tax on an item exceeds the US tax on the same item, the excess is not necessarily wasted — unused foreign tax credits can be carried and applied against US tax in other years, subject to the limitation and basket rules. For a new arrival, those years matter: the FIG window ends, and from year five onwards the UK taxes worldwide income in full.
Claiming FIG in the early years means no UK tax on that income, therefore no credits generated, therefore nothing banked for later. A taxpayer who forgoes FIG may pay UK tax during the window and build a carryover position that reduces US exposure afterwards. A taxpayer who claims FIG spends four years paying the IRS and arrives at year five with an empty credit account. We set out how the carryover works in foreign tax credit carryover for US expats.
This is not an argument that US citizens should never claim. There are real cases, and they share a common feature: the US tax on the income is low, zero, or lower than the UK tax would have been.
Because the claim is made per source and per year, these cases can be isolated. The correct approach is rarely all-in or all-out. It is a schedule of sources, each tested in both systems.
A FIG claim carries defined consequences under UK law. HMRC's manual confirms that a claimant loses entitlement to the personal allowance and to the capital gains annual exempt amount for the year of claim, along with the blind person's allowance and married couple's reliefs where they would otherwise apply. Foreign qualifying losses cease to be allowable, relief for pension contributions can be restricted, and relief for loan costs on overseas property businesses is affected (RFIG43000).
For most claimants that is a straightforward UK calculation. For a US citizen it is not, because losing the UK allowances increases UK tax on UK-source income — and additional UK tax on income the US also taxes may itself be creditable, softening the cost. So the cost side may be partly cushioned by the very mechanism that neutralises the benefit side. Neither effect can be assessed in one system alone, which is precisely why UK-only advice produces the wrong answer here so often.
Those questions are answerable, but only with both returns on the same desk. If you are weighing arrival planning or a first UK filing, our US-UK expat tax service is built around exactly this joint modelling, and a licensed CPA or Enrolled Agent reviews and signs off every filing.
The FIG regime is a genuine and generous relief, designed for people who answer to one tax authority. A US citizen answers to two, and the second does not recognise the first one's exemption. Read on its own terms, the regime looks like a four-year holiday; read across both systems, it is often a transfer of revenue from HMRC to the IRS, bought with the loss of UK allowances and a depleted credit position at the end of it.
That does not make it worthless — it makes it a modelling exercise rather than a default. Before any claim goes on an SA109, the same income should be run through the US return. Book a confidential consultation and we will model both positions before anything is filed.
This article is general information, not tax advice, and does not create a professional relationship. The FIG regime and the US rules described here have detailed conditions, and legislation changes; confirm the current position with a licensed professional before acting.
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Reviewed by a CPA / Enrolled Agent. Last updated: 9 September 2026.
Official sources: HMRC Residence and FIG Regime Manual RFIG41000 | Check if you can claim the 4-year FIG regime | RFIG43000 — effects of a claim | IRS — U.S. citizens and resident aliens abroad | IRS — Foreign tax credit (Form 1116) | IRS — Foreign earned income exclusion (Form 2555)