Cross-Border Property
Form 1040, Form 1040-NR, Form 1116, SA100
US and UK tax on homes and rental property held across the two countries, including sales, currency gains, FIRPTA and UK reporting.
What does Cross-Border Property involve?
Property is taxed first where it stands and again where its owner lives or holds citizenship. The two computations use different reliefs, different depreciation rules and different currencies. We work out both before a sale or a letting begins, when there is still time to change the outcome.
Forms and filings involved
- Form 1040
The annual federal return for US citizens, green card holders and US residents, reporting worldwide income wherever the filer lives.
- Form 1040-NR
The federal return for people who are not US citizens or residents but have US-source income, a US business or a refund to claim.
- Form 1116
The form that turns UK income tax into a credit against US tax on the same income, with carryovers for unused amounts.
- SA100
The main UK Self Assessment return, with supplementary pages for foreign income, property, gains and residence.
- State Returns
Why a move to the UK does not always end a US state tax obligation, and how states decide who remains a resident.
One property, two tax computations
A UK home that qualifies for private residence relief can be sold free of UK capital gains tax.
The US does not mirror that relief. It applies its own section 121 exclusion, with its own ownership and use tests and its own cap, and it measures the gain in dollars. A house bought and sold for the same sterling price can still show a US gain if the pound strengthened in between. Repaying a sterling mortgage can produce a separate currency gain, which the exclusion does not cover.
Where UK tax is due on a residential property disposal, it must be reported and paid within 60 days of completion, well before the Self Assessment return. The rates are 18% and 24%, depending on the seller's income, after the £3,000 annual exempt amount. Non-UK residents report disposals of UK property within the same window, whether or not tax is due. Rent paid to a landlord living abroad has UK tax withheld under the non-resident landlord scheme unless HMRC has approved gross payment.
For British owners of US property, rent is US-source income. Left alone it is subject to withholding on the gross amount. An election to treat it as effectively connected income allows expenses and depreciation to be deducted on Form 1040-NR, and the state where the property sits will usually want a return too. On sale, FIRPTA requires the buyer to withhold from the gross price, and the seller recovers any excess through the return or reduces it in advance with a withholding certificate.
Property work on both sides
- 01
- Section 121 and private residence relief compared before a sale
- 02
- Dollar basis and currency gain calculations, including the mortgage
- 03
- UK property disposal returns filed inside the reporting window
- 04
- Net rental election and Form 1040-NR for UK owners of US property
- 05
- FIRPTA withholding certificates and refund claims on sale
Who this is for
Americans selling or letting a home in the UK
- UK residents letting or selling property in the US
- Landlords abroad receiving UK rent under the non-resident landlord scheme
- Families who have inherited property in the other country
Why US UK Tax Returns
Each return is prepared with the other country's return open beside it, so a credit, election or disclosure on one is supported by the other.
One File
US and UK returns prepared in the same engagement and reconciled line by line.
Primary Sources
Every position traced to the Code, the treaty, IRS instructions or HMRC guidance.
Scope First
Returns, forms, years and fee agreed in writing before work begins.
The Same People
The team that files this year carries the elections and credits into the next.
Questions we are asked
My UK home sale is exempt from UK tax. Why would the US tax it?
Because the US applies its own rules to its citizens' worldwide gains. The section 121 exclusion covers gain on a main home up to a cap, provided its ownership and use tests are met, and any gain above the cap is taxable. The gain is computed in dollars using the exchange rates at purchase and at sale, so currency movement alone can create or enlarge it. With no UK tax paid, there is no credit to offset.
I am British and own a holiday home in Florida. What US tax applies?
Rent is taxable in the US, and most owners elect to be taxed on the net figure by filing Form 1040-NR. On sale, the buyer generally withholds under FIRPTA and you file a return to settle the actual tax on the gain. US estate tax also applies to US property owned by a non-resident, with an exemption of only $60,000 before any treaty relief. The UK taxes the same rent and gain, with credit for the US tax.
I moved to the US and let out my old UK flat. How is the rent taxed?
The UK taxes it first, as the country where the property is. Your tenant or agent withholds tax under the non-resident landlord scheme unless HMRC approves gross payment, and you file a UK return. British nationals generally keep the £12,570 personal allowance. As a US resident you also report the rent on your US return, with depreciation under US rules, and claim a foreign tax credit for the UK tax.
Primary sources
What this page says is drawn from the official material below. Read it yourself; we would rather be checked than trusted.
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