Remitting Pre-2025 Foreign Income as a US Citizen

The remittance basis ended for every UK resident from 6 April 2025, but US citizens who used it still hold pre-2025 foreign income that HMRC taxes when it reaches the UK. The IRS taxed that income years ago, so the UK tax often finds no US credit. The Temporary Repatriation Facility changes the UK cost, not the US position.

Plenty of Americans in Britain claimed the remittance basis, or had it apply to them automatically, without ever thinking about what it meant for their US return. For years it seemed harmless: the IRS taxed the income anyway, and the UK left it alone so long as it stayed offshore. Now the regime is gone, and the money that was kept outside the UK is the problem. This guide explains why a remittance today lands awkwardly on two returns, what the Temporary Repatriation Facility does, and the order in which to work the decision.

Key takeaways

• No one can claim the remittance basis for 2025-26 or later. HMRC's manual states: "From 6 April 2025 it is no longer possible to use the remittance basis of taxation."
• Old unremitted income is still taxable in the UK. Pre-6 April 2025 foreign income and gains that arose while you were on the remittance basis remain "capable of being remitted and taxed in the future".
• The IRS already taxed that income in the year it arose, because US citizens are taxed on worldwide income regardless of where it is kept.
• The mismatch is timing. UK tax on a remittance today generally falls into a US year in which the underlying income is not on your US return, so the foreign tax credit on Form 1116 may have nothing to offset.
• The Temporary Repatriation Facility (TRF) lets former remittance basis users designate that income and pay a reduced UK charge in the 2025-26, 2026-27 and 2027-28 tax years. HMRC gives no foreign tax credit against the TRF charge.
• Model before you move money. The order is: identify what is pre-2025 income, decide whether to designate, and only then remit.

Why did the remittance basis never reach your US return?

The remittance basis was a UK concept. A UK resident who was not UK-domiciled could choose — or, below a small threshold, have it apply automatically — to pay UK tax on foreign income and gains only when they were brought into the UK. In exchange, a claimant lost their personal allowance and capital gains annual exempt amount, and longer-term residents paid an annual remittance basis charge (gov.uk: non-domiciled residents).

The United States never recognised any of this for its own citizens. A US citizen reports worldwide income in the year it arises, wherever it is held. So the interest on a US brokerage account, the dividends on an offshore portfolio and the gain on a sold investment all went onto Form 1040 in the year they happened, and US tax was paid then — usually with no UK tax to credit, because the UK had not taxed anything yet.

That is the root of the problem. For every pound of unremitted income, the US account was settled in the year it arose. The UK account was left open.

What happens when you remit pre-2025 income now?

HMRC's position is set out in the Residence, Domicile and Remittance Basis Manual at RDRM71000: former remittance basis users "may have amounts of pre-6 April 2025 foreign income and gains which arose during a period in which they were subject to the remittance basis, which are capable of being remitted and taxed in the future". Bring that money into the UK — transfer it to a UK account, use it to pay a UK supplier, spend a foreign card in London — and, unless it has been designated under the TRF, it is taxed as income or gains of the year of remittance at your ordinary UK rates.

On the US side the remittance is not a new income event. Moving money you already own, and were already taxed on, from one account to another does not create US income. The question is what happens to the UK tax you pay as a result.

Can you claim a US foreign tax credit for UK tax on a remittance?

Sometimes, but often less than people expect. Three rules on Form 1116 drive the answer.

Timing. A cash-method taxpayer — which is most individuals — "can claim the credit only in the year in which you pay the tax" (IRS Publication 514). The UK tax on a 2026-27 remittance is paid when that UK return is settled, which places the credit in a US year that may be years after the income was taxed.

Limitation. The credit in any year is capped by the US tax on foreign-source income in the same category in that year. The remitted income is not on that year's US return, so it adds nothing to the cap. The UK tax has to find room against whatever other foreign income you have that year.

Carryover. Credit that exceeds the limit can be carried back one year and forward up to ten, but only into years with spare limitation in the same category. A US citizen resident in the UK usually pays UK tax at rates at or above US rates on their UK salary or business income, which typically leaves excess credits already. In that position, extra UK tax from a remittance often has nowhere to go.

The result is that the same income can be taxed in full by both countries: by the IRS when it arose, and by HMRC when it arrived. The exact outcome depends on your categories, your carryover history and how much other foreign income you have in the remittance year, which is why it should be computed rather than assumed. Our guide to foreign tax credit carryovers explains how the carry mechanics work in practice.

What does the Temporary Repatriation Facility change?

The TRF was introduced by the Finance Act 2025 to encourage former remittance basis users to bring their pre-2025 income and gains into the UK at a low rate. HMRC describes it as "a temporary measure, available for a fixed period of 3 years: the 2025-26, 2026-27 and 2027-28 tax years". The key features, from RDRM73100 and the pages around it:

• You designate, not remit. You pay the TRF charge on amounts you designate in your Self Assessment return. You "do not have to remit the amount" during the TRF window to benefit, and designated amounts can later be remitted "without incurring any further tax charges".
• Eligibility is narrow. You must be UK resident in the year of designation and have been subject to the remittance basis for at least one tax year.
• Designation dates back. A designation in a return is treated as made at the start of that tax year.
• No foreign tax credit. HMRC states that "no credit for foreign tax paid is available against a TRF charge"; the charge is levied on net capital after foreign tax paid or payable.
• Mixed funds get priority. Designated amounts in a mixed fund are treated as remitted ahead of other income and capital in it.

For a US citizen, the TRF's attraction is simple: a reduced, known UK charge replaces a full-rate UK charge that the IRS may not credit. What it does not do is make the TRF charge creditable in the US. We have found no IRS guidance on whether a TRF charge is a creditable foreign income tax, so the prudent planning assumption is that it may not be — and that it is a cost, not an offset.

Which option fits your position?

Leaving funds offshore is not neutral for a US citizen. Every year the account keeps generating worldwide income for your US return and keeps its place on your FBAR, and the TRF window closes after 2027-28. If you expect to retire in the UK, the deferral eventually runs out.

How do you prove what is pre-2025 income?

Mixed funds are where these cases are won or lost. An offshore account that received salary, dividends, sale proceeds and clean capital over many years has to be analysed to show what each remittance is made of.

US citizens have an advantage here that is rarely used: you have been filing US returns every year. Each Form 1040, Schedule B and Form 8938 records the income each account produced, year by year. Those returns, alongside bank statements, are a ready-made audit trail for HMRC's mixed fund rules — and an independent check that the figures you designate match what you already reported to the IRS. Where the two do not match, fix that before designating anything, because an inconsistency between your US and UK returns is exactly what a reviewer will notice.

If the US returns for those years are incomplete — foreign accounts left off, FBARs missed — that is a separate problem to resolve first, usually through the streamlined procedures. Discovering it while preparing a TRF designation is common, and it is far better caught by you than by either tax authority.

In what order should you work through it?

1. List every offshore account and its balance on 5 April 2025.
2. Classify each balance as clean capital, pre-2025 income or gains, or of uncertain origin, using your US returns and statements.
3. Check your US return history is complete for the accounts concerned.
4. Model the three options for each tranche, including your Form 1116 position in the expected remittance years.
5. Decide what to designate in the 2025-26 return, due 31 January 2027, or a later TRF year.
6. Remit only after the designation decision, in the order the mixed fund rules favour.

The UK Budget on 28 October 2026 may touch the TRF or the wider foreign income rules, so recheck the position after it before committing large sums. For how this fits with the regime that replaced the remittance basis for new arrivals, see our analysis of the UK FIG regime for US citizens, and for the treaty background, how the US-UK treaty prevents double tax on income.

How Next Tax Source helps

This is a two-return problem, and it has to be solved on both returns at once. Our US-UK cross-border tax specialists prepare the mixed fund analysis, the TRF designation and the matching Form 1116 position together, to a ready-for-sign-off state. The work is reviewed by an IRS Enrolled Agent who is also ACCA-qualified, and you sign and file your own returns. If you have money offshore from your remittance basis years, book a consultation before you transfer any of it.