Missed US Tax Returns: Non-Working US Spouse in London
Missed US Tax Returns as the non-working American spouse of a London earner? Your half of joint UK income counts. See how streamlined filing fixes it.
A US citizen with no salary of their own still has to file a US return if their share of the household's income is above the threshold. When interest, dividends, gains and rent come from joint UK accounts and a jointly owned London flat, about half of that income is normally theirs. For a spouse filing separately, the filing threshold is $5 of gross income. Missed returns for this spouse can usually be brought up to date through the Streamlined Foreign Offshore Procedures, without filing anything for the non-US spouse.
We see this file often. One spouse works in the City, the other is American, has not had a payslip since arriving in London, and has assumed for years that there was nothing to file. Catching up on Missed US Tax Returns for that spouse is usually straightforward to fix, but it is often mishandled. Some preparers report nothing for the American. Others report all of the household's income on their return. Both are wrong. This guide covers the part most guidance skips: how to split the joint income correctly, and how to do the catch-up without bringing the non-US spouse into the US system.
Why "I have no income" is the wrong starting point
US tax follows ownership, not who earned the money. A US citizen is taxed on their share of the worldwide income from assets they own, wherever they live and whoever paid in. Over a decade in London, a couple's joint holdings usually grow to include:
- joint current and deposit accounts paying interest;
- a joint general investment account that pays dividends and produces gains whenever holdings are sold or rebalanced;
- a buy-to-let flat, or a former home that is now let, held jointly.
Under English law, an account or property held in joint names by a married couple is normally treated as owned equally, unless the facts or a declaration show a different split. The US generally follows that local-law ownership. In most cases, then, half of each joint income stream belongs on the American spouse's return, even if every pound came from the other spouse's bonus. It is not 0%, and it is not 100%.
The UK starts from the same place. Under section 836 of the Income Tax Act 2007, income from property held jointly by spouses who live together is split 50:50 by default. A couple can choose an unequal split by filing HMRC's Form 17 declaration of beneficial interests, but only where their beneficial shares really are unequal. A Form 17 cannot be backdated. If one has been filed, it is a key document for the US return, because it records the ownership split the US will also want to follow.
Does a non-working American spouse have to file a US return?
Many non-filers believe they are below the US filing threshold because they compare their share of the income with the standard deduction. That comparison usually does not apply here. Where one spouse is a US citizen and the other is a nonresident alien, the American's default filing status is married filing separately. For that status, IRS Publication 501 sets the gross income threshold at $5.
Three consequences follow.
- Gross income, not taxable income, sets the threshold. A spouse whose share of interest alone is a few hundred dollars has to file, even if the standard deduction ($15,750 for married filing separately in 2025) means no tax is due.
- Gross rent and gross sale proceeds count. The threshold looks at gross receipts before expenses or basis. A half share of a London rent is almost always well above it.
- A nil-tax return still has to be filed. Without it, the FBAR and Form 8938 history is still open, and the statute of limitations on assessment does not start to run.
Should the spouse file separately or make the 6013(g) election?
Married filing separately is the default status, and for this household it is usually the right starting point for the catch-up. The American reports only their own share of the income. Where the form asks for the spouse's taxpayer number, the return shows "NRA" for a spouse who has no SSN or ITIN and is not required to have one. The banker's salary, bonus, deferred awards and personal accounts stay off the US return. The alternative is to elect under section 6013(g) to treat the nonresident spouse as a US resident and file jointly. That opens up wider tax brackets but puts the non-US spouse's worldwide income, including City compensation, on a US return, and the election continues until it is revoked. For a high-earning UK spouse, it rarely works out in the couple's favour. The comparison is set out in our guide on the non-US spouse election for dual-national couples. In this guide we assume separate filing.
FBAR and Form 8938 on joint accounts
Information returns are where the income split stops applying. Two rules matter.
- FBAR (FinCEN Form 114). The American reports the full maximum balance of every joint account, not half. The spousal joint FBAR on Form 114a is only available where both spouses have their own filing obligation, so it does not help when the other spouse is not a US person. The threshold is an aggregate of more than $10,000 across all foreign accounts at any point in the year.
- Form 8938. Under the Form 8938 instructions, when a jointly held asset is owned with a spouse who is not a specified individual, the American counts the entire value of that asset when testing the threshold. For a separate filer living abroad, the threshold is more than $200,000 at year end or more than $300,000 at any time in the year. A joint investment account of any meaningful size will usually pass it on its own.
A London flat held directly in the couple's names is not a specified foreign financial asset, so it does not go on Form 8938. Its rent does go on Schedule E. How joint UK property works across both systems, including Form 17, is covered in our guide to jointly owned UK rentals with a non-US spouse.
A side-by-side view: how each joint asset is treated
| Joint asset | US treatment for the American spouse | UK treatment for the same spouse | Common catch-up error |
|---|---|---|---|
| Joint deposit accounts | Half the interest on Schedule B; full balance on the FBAR; full value counted for the Form 8938 threshold | Half the interest by default (s836); personal savings allowance and starting rate for savings may shelter it | Reporting half the balance on the FBAR |
| Joint general investment account | Half the dividends and realised gains; UK funds held inside may be PFICs, reportable on Form 8621 | Half the dividends and gains; £500 dividend allowance and £3,000 CGT annual exempt amount per person | Treating UK fund dividends as qualified dividends |
| Jointly owned London rental | Half the rent on Schedule E; depreciation required; mortgage interest deductible in full against the rent | Half the profit by default; mortgage interest given only as a 20% basic-rate tax reduction | Copying the UK rental figures onto the US return |
| Personal ISA in the American's own name | Fully taxable; not a tax-free wrapper in the US | Tax-free | Leaving it off because "ISAs are tax-free" |
| The banker's own accounts, pension and pay | Not reportable by the American, unless they hold signature authority over the accounts | Taxed on the banker alone | Including them "to be safe" |
A worked example: the Chelsea household
The figures below are illustrative, for one year, and use an exchange rate of $1.30 to £1.
Claire is a US citizen who moved to London in 2013 and has not worked since her first child was born. Her husband is British and works in investment banking. Over the years they have built up:
- joint deposit accounts averaging £180,000, paying £7,200 of interest;
- a joint general investment account of £600,000 holding directly owned UK and US shares, which paid £14,000 of dividends and produced £30,000 of realised long-term gains;
- a jointly owned flat in Fulham, let for £48,000 a year, with £8,000 of running costs and £12,000 of mortgage interest. The building element of its cost is £700,000.
Claire's half shares come to £3,600 of interest, £7,000 of dividends and £15,000 of gains. Her half of the rent is £24,000 gross, and after running costs and mortgage interest her share of the profit is £14,000. For US purposes she also deducts her half of the depreciation: £700,000 over 30 years is about £23,333 a year, so her share is roughly £11,667. That leaves a US rental profit of about £2,333.
Converted, her US gross income is far above $5. Her rent alone is about $31,200 gross. Her adjusted gross income, before the standard deduction, is about $36,300. Taking the $15,750 standard deduction and the 0% rate that applies to qualified dividends and long-term gains within the lower bands, her US tax for the year is likely to be small, possibly nil. In the UK, her half of the income uses her personal allowance and savings allowances, and leaves a modest UK liability that can be claimed as a foreign tax credit.
The final tax figure is not what matters most in Claire's case. Her joint accounts peak at well over $1 million, so she has had an FBAR and a Form 8938 obligation every year she failed to file. The penalty exposure comes from those information returns, not from income tax.
Change one fact and the result changes. If the £600,000 investment account had held UK collective funds such as OEICs instead of individual shares, her half of every fund would be a PFIC. The 0% rate would no longer apply, Form 8621 would be required for each fund, and the default excess-distribution regime could produce real US tax. Checking what is actually inside the joint investment account is the most important single task in a catch-up like this.
How the Streamlined Foreign Offshore Procedure works for one spouse
The Streamlined Filing Compliance Procedures let a US taxpayer whose failure to file was non-wilful catch up without the penalties that would otherwise apply. Someone living in London who meets the non-residency test uses the foreign version (SFOP), which carries no miscellaneous offshore penalty. The submission is made by the American spouse alone and contains:
- the three most recent US returns whose due dates, including extensions, have passed. For a submission made in late 2026, those are the 2023, 2024 and 2025 returns, each marked as a Streamlined Foreign Offshore filing;
- FBARs for the six most recent years whose due dates have passed, which currently means 2020 to 2025;
- Form 14653, the certification of non-wilful conduct, with a specific narrative explaining why the American did not file;
- payment of any tax and interest shown on the returns.
Every return in the window has the full set of attachments: Schedules B and E, Form 8938, Form 1116 for the foreign tax credit, Form 8621 for any PFICs, and the currency translation workings.
The Form 14653 narrative needs particular care in this situation. "I had no income" is not a reason the IRS will accept, because the returns being filed show that she did. A persuasive narrative is factual and specific. It explains the belief that a non-earning spouse had nothing to report, how the joint holdings were managed in practice, when the obligation came to light, and what the American has done since. It should not read as though the American's spouse is to blame. If the non-working spouse has never filed at all, her accidental-American history, or the length of time since she last filed, also belongs in the narrative.
Where both spouses are US persons, the joint submission route applies instead. That case is covered in our separate guide on streamlined filing for dual-national couples making a joint submission. In the household described here, only one spouse is American, so it is a solo submission.
Which of the non-US spouse's documents are needed, and why?
This is the part no published guidance covers properly. The non-US spouse files nothing with the IRS, signs nothing, and needs no ITIN while the American files separately. Their records are still needed, because the American's half of each joint item can only be worked out from the joint total, and those records usually sit with the earning spouse. We ask for the following:
| Document from the non-US spouse | Why the American's return needs it | What we do not need |
|---|---|---|
| Joint account statements, or year-end certificates of interest | To calculate the half share of interest, and the full maximum balance for the FBAR | Statements for the non-US spouse's sole accounts |
| Annual tax packs and contract notes for the joint investment account | To split dividends and gains, establish cost basis in dollars, and identify any PFIC holdings | Their workplace share plan or deferred bonus records |
| Letting agent statements, mortgage interest statements and the completion statement for the flat | For gross rent, deductible expenses, and the depreciable basis | Their payslips or P60s |
| Land Registry title, and any deed of ownership shares or Form 17 | To confirm the ownership split, so the US return matches the actual shares | Their pension records |
| Their UK Self Assessment computations for the same years | To check that the UK split matches, and to work out the American's own UK tax for the foreign tax credit | Anything beyond the joint-income pages |
Keeping the request this narrow is reassuring for a spouse who is not American and may be wary of the process. Their compensation, sole holdings and personal finances stay out of the US filing entirely. The only thing that crosses over is the shared paperwork both spouses already hold.
Do not forget the UK side of the same income
The catch-up often reveals a UK gap too. HMRC taxes the American spouse on their half of the joint income as a UK resident in their own right. If a half share of rent has never been declared, or the earning spouse has been reporting all of the joint income on their own return, the UK position needs to be corrected alongside the US filing. Any UK tax correctly paid by the American also has to be identified, because it is what produces the foreign tax credit on the US returns. Our UK tax services team handles HMRC corrections and disclosures in parallel with the US work, so both countries end up with the same split and the same numbers.
A preparation checklist for the non-working American spouse
- List every account and asset held in joint names, plus anything in the American's sole name, including any ISA.
- Establish the ownership split for each asset from the title documents, and from Form 17 or a deed of ownership shares where one exists.
- Work out the maximum balance of every foreign account for each of the six FBAR years.
- Go through the investment account holding by holding and flag any non-US pooled funds as potential PFICs.
- Rebuild the rental history in dollars: when the property was placed in service, its basis, depreciation and mortgage interest.
- Reconcile against the UK returns for the same years, and correct the UK side if needed.
- Prepare the three returns with full attachments, the six FBARs, and a specific Form 14653 narrative.
- Calculate the tax and interest due, and submit everything as one coherent package.
Where the FBAR history looks serious, our FBAR penalty calculator gives a sense of the exposure that streamlined compliance is designed to close off.
Bringing the American spouse up to date
In a London household where one spouse earns and the other is American, the joint assets are usually where the US exposure lies, not either spouse's pay. Once the income is split on the correct ownership basis, the US tax for the non-working spouse is often modest. The bigger risk is the accumulated FBAR and Form 8938 history, and a well-prepared streamlined submission deals with it. At Jungle Tax we prepare these submissions in full: the split, the dollar computations, the PFIC review, the UK reconciliation and the certification narrative, keeping the non-US spouse's affairs out of it wherever possible. To discuss your position in confidence, contact our cross-border team and we will set out exactly what your catch-up involves.
