US Personal Tax Services: Schedule H for Americans in London

A US citizen living in London who employs a nanny, housekeeper or estate manager can carry a US household employment tax obligation on Schedule H alongside UK PAYE. Whether it bites depends on where the work is physically performed, whether you still count as a US resident employer, and whether the employee is a US citizen. Most households get this test backwards in both directions.

That single sentence is the reason this filing is so persistently mishandled. Generalist US guidance tells you that paying a housekeeper more than a few thousand dollars a year triggers Schedule H, full stop. Generalist UK guidance tells you to register a PAYE scheme and stop thinking about it. Neither is right for a transatlantic household, and the gap between them is where a five-figure catch-up exposure quietly accumulates. At Jungle Tax we see this most often inside a wider compliance clean-up, where a family engaging US personal tax services for the first time in years discovers that the household payroll they have run diligently through a UK bureau has an unexamined American shadow.

What Schedule H actually is, and why it travels with your citizenship

Schedule H (Form 1040) is the annual return by which an individual reports and pays employment taxes for domestic staff engaged in a private home. It is not a business payroll return. It replaces the quarterly Forms 941 and the annual Form 940 that a trading business would file, collapsing Social Security, Medicare and federal unemployment tax into a single schedule that rides along with your personal income tax return. The IRS sets out the mechanics in its guidance on Schedule H and in Publication 926, the Household Employer's Tax Guide.

Three separate taxes sit on the schedule:

• Social Security and Medicare (FICA) — a combined 15.3% of cash wages, split notionally 7.65% employer and 7.65% employee, once cash wages to any one household employee reach the annual threshold. For 2026 that threshold is $3,000, with Social Security applying up to a wage base of $184,500 and Medicare applying without limit.
• Additional Medicare Tax — 0.9% on wages above $200,000 in a calendar year, withheld from the employee only.
• Federal unemployment tax (FUTA) — 6% on the first $7,000 of cash wages per employee per year, triggered where total cash wages to all household employees reach $1,000 in any calendar quarter of the current or preceding year. State credits can reduce the effective rate substantially, but a household with no US state nexus has no credit to claim.

Because the schedule attaches to Form 1040, and because a US citizen's Form 1040 obligation is unaffected by where in the world they live, Schedule H follows you abroad in principle. The critical question is not whether the form can apply to a London household. It is whether the wages you pay are wages from employment as the Internal Revenue Code defines that term.

Does a US citizen in London actually owe Schedule H tax? The three-part situs test

This is the analysis that generalist household-payroll content omits entirely, and it is where the real answer lives. Under the FICA definitional rules, "employment" means services performed within the United States, plus a narrow extension for services performed outside the United States by a US citizen for an American employer. Services performed abroad that fall outside that extension are simply not employment for FICA purposes, and no Schedule H liability arises on them.

Rule one: where is the work physically performed?

For services performed inside the United States, the citizenship and residence of both employer and employee are immaterial. A day worked in the United States is a covered day. Conversely, services performed wholly outside the United States fall outside the general rule and must find their way back in through the citizen-and-American-employer extension, or they are outside the net. The location of the employment contract, the currency of payment and the bank from which wages are paid are all irrelevant. Only the physical place of work counts.

Rule two: are you an "American employer"?

For an individual, "American employer" means an individual who is a resident of the United States. Not a citizen — a resident. A US citizen who has genuinely relocated to London, taken up UK residence, and no longer maintains a US home or abode is not obviously a resident of the United States for this purpose. A citizen on a two-year secondment who retains a Manhattan apartment, a state driver's licence and a US domicile of choice looks very different. This is a facts-and-circumstances question that the household payroll industry never asks, and it is frequently the single determinative issue.

Rule three: is the employee a US citizen?

The extension covering work performed abroad reaches only services performed by a citizen of the United States. A British nanny working in a Kensington home for an American family is not a US citizen performing services abroad; even if the employer were plainly a US resident, the extension does not reach her. An American nanny brought over from Boston is another matter entirely.

Putting the three together

Fact pattern	Work performed	Employee status	Employer status	Schedule H position
British nanny, London home, family settled in the UK	UK only	UK national	Not a US resident	Generally outside FICA and FUTA — no Schedule H liability on those wages
British nanny, London home, family on a two-year posting retaining a US home	UK only	UK national	Arguably a US resident	Still outside — the abroad extension requires a US-citizen employee
American nanny relocated with the family	UK only	US citizen	Not a US resident	Generally outside — the extension needs an American employer as well
American nanny, family retains US residence	UK only	US citizen	US resident	Covered — Schedule H liability arises on the full wage
Any household employee travelling to a US property with the family	Partly in the US	Any	Any	US days are covered regardless — apportionment required

Read that table carefully, because the commercial consequence runs in two directions. Many London households have been told by a US preparer to file Schedule H and pay 15.3% on wages that were never covered wages at all. Others have been told nothing, and have accumulated genuine unreported liability on the fact patterns in rows four and five.

The situations that do create a live Schedule H for a London household

Staff who travel with the family to the United States

This is by far the most common genuine trigger, and almost nobody plans for it. A family with a house in the Hamptons, Aspen or Palm Beach who takes the nanny and the housekeeper for eight weeks each summer has eight weeks of services performed within the United States. Those days are employment irrespective of anyone's citizenship or residence. Once the apportioned US wages cross the annual cash-wage threshold, or once quarterly wages to all household employees reach the FUTA trigger, a Schedule H filing obligation exists for a family that has never considered itself a US employer.

Caretakers and estate staff at a retained US property

An American family in London who kept the Connecticut house and pays a caretaker, groundsman or property manager directly — rather than through a management company — is engaging a household employee performing services within the United States. Direct payment to an individual is the tell. Payment to a corporate management company that itself employs the staff is not.

Recently arrived families still resident in the United States

The year of departure is treacherous. A family that moves to London in September may well remain a US resident for the whole of that year on any sensible reading, and if the employee is also a US citizen, the abroad extension is fully engaged for the London months. Arrival-year and departure-year returns deserve specific attention on this point, exactly as they do on the residence and treaty issues we cover across our cross-border guides.

Employee or contractor? The classification question underneath everything

None of this matters if the person is genuinely self-employed. The US test turns on control: if you determine not only what work is done but how it is done, the worker is your employee, and it is immaterial that they invoice you, call themselves a freelancer or work for other families as well. A nanny in your home working your hours to your instructions is an employee under both the IRS analysis and, in almost every case, HMRC's. An agency-supplied cleaner who is employed and paid by the agency is not. A maternity nurse engaged for a fixed six-week placement through her own limited company sits in genuinely contested territory and deserves a written position before, not after, HMRC or the IRS asks.

What the UK side requires in parallel

Nothing in the US analysis reduces the UK obligation, and the UK obligation is unconditional. If you employ someone in your London home, you are an employer under UK law from the first payday. GOV.UK sets out the sequence: confirm employment status, register with HMRC as an employer before the first payday and obtain an Employer Reference Number, operate PAYE and report on or before each payday through Real Time Information, and deduct income tax and employee Class 1 National Insurance while paying employer Class 1 secondary contributions on top.

Alongside the payroll mechanics sit obligations that HNW households routinely overlook:

• Right to work checks before employment begins, with a compliant record retained.
• A written statement of employment particulars on or before day one.
• Employer's liability insurance, which is a legal requirement for domestic employers and is not automatically included in a standard household policy.
• Workplace pension auto-enrolment, which applies to household employers exactly as it applies to businesses. Assessing a nanny for auto-enrolment and completing the declaration of compliance is a duty, not an option.
• National Minimum Wage compliance, with particular care for live-in staff, where accommodation offset rules and on-call hours are a well-known source of underpayment findings.

One specific point catches families who assume domestic payroll is treated leniently: the Employment Allowance is not available to you. HMRC's National Insurance Manual is explicit that secondary Class 1 liabilities arising from employing someone for another person's personal, family or household affairs — naming a nanny, au pair, chauffeur or gardener — are excluded liabilities. There is a narrow exception for care and support workers. For an ordinary household, every pound of employer NIC is payable in full from the first pound above the secondary threshold.

US versus UK: how the two regimes actually compare

Feature	United States (Schedule H)	United Kingdom (PAYE)
Registration	Employer Identification Number required before filing	Register as an employer and obtain an ERN before the first payday
Reporting frequency	Annual, on Schedule H with Form 1040	Real Time Information submission on or before every payday
Entry threshold	$3,000 cash wages per employee for FICA in 2026; $1,000 in a quarter for FUTA	Reporting duties from the first payment; NIC and PAYE from the relevant thresholds
Employee documentation	Form W-2 to the employee and Form W-3 to the Social Security Administration; employee needs a valid SSN	Payslip on or before payday; P60 after year end; P45 on leaving
Employer social charge	7.65% FICA plus FUTA	Employer Class 1 secondary NIC, with no Employment Allowance for domestic staff
Pension duty	None arising from household employment	Auto-enrolment assessment and contributions
Territorial trigger	Where services are performed, plus the citizen-and-American-employer extension	Where the employee works, effectively unconditional for UK-based staff

Where both regimes are engaged — the American nanny working in London for a family that remains US resident — the US–UK Social Security Agreement is the mechanism that prevents genuine double contribution. Coverage is allocated to one system, evidenced by a certificate of coverage obtained from HMRC or the Social Security Administration depending on which way the allocation runs. This is not automatic. Without the certificate on file, both authorities can and will assess. Determining the correct allocation for a household employee, where the "employer" is an individual rather than a posting company, is materially harder than the standard secondment case, and it is precisely the kind of question our US–UK cross-border specialists resolve before a payroll year begins rather than after.

What a missed Schedule H actually costs

The exposure is larger than the headline tax, for a structural reason most people miss.

The tax itself compounds quickly. Consider a family that remained US resident during a two-year London posting and employed an American nanny at £65,000 a year. The FICA charge alone approaches $20,000 across the two years before interest, and because the employee's share was never withheld from her pay, it is the employer who funds it — with the further complication that paying the employee's share on her behalf is itself additional taxable compensation to her.

Penalties stack. Failure to file and failure to pay penalties run on the underpaid Form 1040 liability, with interest accruing from the original due date. Separate information-return penalties apply for each Form W-2 not furnished to the employee and not filed with the Social Security Administration, and further penalties apply where a return omits the employee's Social Security number or reports it incorrectly.

And the clock may never have started. This is the point that changes the risk profile. The assessment limitation period runs from the filing of a return. Where household employment taxes were never reported at all, there is a serious argument that the period for assessing them has not begun to run and does not expire. Unlike an understated investment gain that ages out of exposure after three years, an unreported household employment liability can sit open indefinitely. Families who assume that a decade-old nanny arrangement is safely historic are relying on a limitation period that may not exist.

How a missed Schedule H is corrected inside a catch-up

The remediation route depends on what else is outstanding.

Where US returns were filed but Schedule H was omitted, the correction is a Form 1040-X for each affected year with a corrected Schedule H attached, marked as instructed by the IRS. Late Forms W-2 and W-3 are filed for the same years. Because the underlying returns exist, ordinary amendment mechanics apply and the exposure is quantifiable.

Where US returns were never filed at all, the household employment liability is folded into the wider catch-up. For a non-willful taxpayer resident abroad, the Streamlined Foreign Offshore Procedure delivers three years of income tax returns and six years of FBARs with the miscellaneous offshore penalty at zero — but note carefully that the streamlined framework addresses the income tax and information return failures. Employment tax reported on Schedule H rides on the Form 1040 and is paid with it; it is not penalty-relieved in the same way, and it must be disclosed and funded. We deal with the interaction between household employment tax and a streamlined submission regularly as part of IRS streamlined filing engagements, and the Form 14653 narrative needs to address it explicitly rather than leave it as an unexplained figure on a schedule.

The practical blocker is documentation, not tax. A Form W-2 requires the employee's valid Social Security number. An ITIN cannot be used. A British nanny who has never worked in the United States has no SSN and, in most cases, no route to obtaining one — which means that where the covered-wage analysis genuinely does bite for a non-US-citizen employee (US days worked while travelling with the family), the reporting mechanics require careful handling. A household employee who left your employment five years ago and has since moved on is not obliged to help you reconstruct her records. Evidence preservation is therefore urgent: retain payroll bureau reports, bank transfers, contracts, travel records establishing which days were worked where, and any correspondence about the engagement.

The traps that catch sophisticated households

• Assuming the foreign earned income exclusion covers it. It does not. Schedule H taxes are employment taxes, not income tax. Form 2555 reduces your income tax and touches household employment tax not at all. The same is true of foreign tax credits — UK PAYE and NIC paid on your nanny's wages generate no US credit against your Schedule H liability.
• Assuming a UK payroll bureau has covered the US side. A UK nanny payroll provider operates PAYE competently and has no visibility of, or responsibility for, your US position. The two run entirely in parallel.
• Paying "cash in hand" or through a personal service company for convenience. This converts a compliance question into an enforcement question in two jurisdictions simultaneously, and in the UK it exposes the employer to National Minimum Wage, RTI and pension penalties as well as tax.
• Ignoring the state layer. Where staff work at a retained US property, state unemployment insurance registration and state household employer obligations can follow the days worked in that state. Families who have carefully severed state residence for income tax purposes are frequently surprised to find an employment-tax nexus at a house they still own — a theme that runs through our wider US tax services work.
• Forgetting the reverse case. A UK-resident non-American employing staff at a US holiday home has a US household employer obligation with no Form 1040 to attach it to, and must consider how the schedule is filed and where.

A practical review sequence for a London household

• List every individual paid directly for domestic services in the last six years — nanny, housekeeper, cook, driver, gardener, house manager, maternity nurse, tutor — and note who paid them, from which account, and in which country the work was done.
• For each, establish employee or contractor status on the facts, in writing.
• Map any days worked in the United States, including travel with the family, and quantify apportioned US wages by year.
• Determine your own US residence status for each year — not citizenship, residence — and the employee's citizenship, to run the three-part test above.
• Confirm the UK position: PAYE scheme registered, RTI filings complete, auto-enrolment assessed and declared, employer's liability insurance in force, right to work records held. Our UK tax services team reviews these alongside the US analysis.
• Where a liability is identified, quantify it before choosing a disclosure route, and preserve the evidence base while it still exists.

None of this is exotic. It is simply an area where two competent single-country advisers, each doing their job properly, leave a gap between them — and where the cost of that gap grows silently because the limitation period may never start running. The families most exposed are precisely those who have done everything else well: a proper UK payroll, a proper contract, a properly paid nanny, and no reason at all to suspect that an American form was sitting unfiled in the background.

Speak to us in confidence

If you employ household staff in London and hold US citizenship or a green card, a short review will establish in a single conversation whether you have a live Schedule H position, an over-filed one to unwind, or nothing to do at all. Where a historic liability exists, we quantify it, choose the correct remediation route and manage the submission end to end alongside any wider catch-up. To discuss your household arrangements privately and without obligation, contact our cross-border team for a confidential consultation, or explore how our private client tax services support internationally mobile families. Every discussion is privileged, discreet and led by a senior cross-border specialist.