US Tax Return Preparation for Expats: Ask This in London
US tax return preparation for expats in London: the diagnostic questions a true specialist must ask you before quoting — and the red flags. Talk to us.
The questions that reveal real expertise
Most vetting guides tell you what to ask an expat accountant. The better signal runs the other way. In genuine US tax return preparation for expats, the diagnostic questions a preparer asks you before quoting reveal more about their competence than any credential list. If nobody asks about your pension, your ISA or your vesting dates, they are pricing a return they have not understood.
Why the usual vetting checklist fails sophisticated London filers
The standard advice is familiar: check the PTIN, ask about errors and omissions cover, confirm who actually prepares the return, ask how many expats they handle. All of it is reasonable, and all of it is answerable by a competent generalist who has never opened a UK payslip. A firm can hold every credential and still produce a return that quietly overstates your US liability by five figures because it treated an employer pension contribution as taxable, ignored a fund inside a stocks and shares ISA, or claimed a foreign tax credit against the wrong year.
For the readers we work with at Jungle Tax — executives on London packages, founders with a UK limited company, partners in professional firms, families with UK property and inherited assets — the failure mode is never a missing signature. It is a preparer who did not know what to ask. So invert the test. Sit through the onboarding call and score what they ask you. The ten questions below are the ones a genuine US-UK specialist cannot skip, why each one matters, and precisely what the silence tells you if it never comes.
The ten questions a specialist asks before quoting
1. “Who is your UK employer, and what is actually on your payslip?”
A London payslip is not a W-2 with different formatting. It carries PAYE income tax, employee National Insurance, salary-sacrificed pension, benefits in kind reported later on a P11D, private medical cover, and often a bonus taxed at a marginal rate that bears no relation to your effective rate. Each of these lands differently on a Form 1040.
Salary sacrifice is the sharpest example. A UK arrangement that reduces your gross pay for pension purposes reduces your UK taxable income — but the US may not follow, and the sacrificed amount can remain US-taxable compensation. A preparer who takes your P60 figure as gross wages and stops has already misstated the return. The follow-up question you want to hear is whether your employer operates a modified PAYE or net-of-foreign-tax-credit payroll arrangement, because that changes the reconciliation entirely.
If they never ask: they are treating your UK employment as a single number. Expect an overstatement of income, an understatement of creditable tax, or both.
2. “Which pension scheme are you in, and who contributes to it?”
This is the question that separates specialists from generalists most reliably. UK workplace pensions are among the best-drafted retirement vehicles in the world and among the most awkward assets a US citizen can hold. Absent treaty protection, employer contributions to a UK registered scheme can be treated as current US taxable income, and growth inside the scheme can be taxable as it arises rather than on distribution.
The US-UK double taxation treaty contains provisions designed to relieve exactly this, and the pension articles are the mechanism — but they operate scheme by scheme, they interact with the saving clause, and a position taken under them usually requires disclosure on the return. There is no universal answer that applies to every SIPP, every defined contribution workplace scheme and every legacy defined benefit entitlement. A preparer must know which one you have.
If they never ask: they are either silently ignoring the pension (understating income and exposing you) or silently taxing it (overstating it, sometimes badly). Either way, nobody has made a decision — the software made it.
3. “Have you had a share plan vesting, and where were you working during the vesting period?”
Equity is where cross-border returns break most expensively, and the reason is structural rather than technical. HMRC generally apportions an award over the period it was earned, by workday location, and taxes the UK-attributable slice through PAYE at vest. The IRS taxes the compensation element on the calendar-year basis, applying its own sourcing rules. Where your vesting period straddles a transatlantic move — or where you travelled substantially during it — the two systems are measuring different amounts, in different currencies, in different tax years.
The result is not an academic mismatch. It is stranded foreign tax credit: UK tax paid on income the IRS has already sourced to the United States, in a year where it cannot be used. A specialist asks for the grant date, the vesting schedule, your workday calendar across the vesting period, the exchange rate convention applied at vest, and whether your employer operated any UK net settlement. A generalist asks for the year-end statement.
If they never ask: assume the return will treat the entire vest as foreign-source or entirely US-source. One of those overpays the IRS; the other invites an examination.
4. “What is actually inside your ISA and your general investment account?”
The ISA wrapper is invisible to the IRS. Interest, dividends and gains arising inside it are reportable annually on your Form 1040 exactly as though the wrapper did not exist. That much is widely known. What is less well handled is the second layer: most UK, Irish and Luxembourg-domiciled funds, ETFs, unit trusts and OEICs meet the definition of a passive foreign investment company.
Each PFIC brings its own Form 8621 and a choice between the default excess distribution regime under section 1291 — which allocates gain back over your holding period, taxes it at the highest ordinary rate and adds an interest charge — and the qualifying electing fund or mark-to-market alternatives, where available. The IRS sets out who must file at its Form 8621 guidance. There is no de minimis exemption you can rely on casually, and elections made in the first year of ownership are far more valuable than elections made later.
If they never ask: for a holdings list rather than a value, they will miss the PFICs entirely. This is the single most common defect we find when reviewing returns prepared elsewhere for London clients.
5. “What was your exact arrival date, and did you claim split-year treatment?”
The UK tax year runs from 6 April to 5 April. The US runs on the calendar year. Nothing you receive from a UK institution aligns with a Form 1040 without being rebuilt. In your arrival year — and again in any departure year — you may qualify for split-year treatment under the Statutory Residence Test, which divides the UK tax year into a UK part and an overseas part. HMRC sets out the mechanics in its residence manual.
Whether you claimed it, and which case you claimed under, changes what UK tax exists to credit and in which period. A preparer who does not establish your arrival date to the day cannot correctly allocate UK tax to US calendar years, cannot properly apply the physical presence or bona fide residence test for exclusion purposes, and cannot sensibly advise on the first-year foreign tax credit position.
If they never ask: the return will almost certainly use the UK tax year figures as though they were calendar-year figures. It is a rounding error in a simple case and a serious distortion in a year with a bonus, a vest or a property disposal.
6. “What elections were made on your prior three returns?”
This is the question almost nobody asks, and the one with the longest tail. Your prior returns are not merely history — they contain binding choices you have inherited.
- Foreign earned income exclusion: once revoked, you generally cannot re-elect it for five tax years without IRS consent. A preparer who switches you off Form 2555 to simplify the file has made a decision with a half-decade of consequences.
- Foreign tax credit basis: the choice between claiming credits on the paid basis and the accrued basis is, in practice, a one-way door. For UK filers whose Self Assessment liability is settled long after the US year closes, this choice determines whether credits ever line up with the income they relate to.
- Credit carryforwards: unused foreign tax credits carry back one year and forward ten. Those balances are an asset. They are also routinely lost when a client changes preparer and the schedules are not carried across.
- PFIC elections: a mark-to-market or QEF election made in an earlier year must be maintained, and abandoning it has consequences.
- Treaty positions: a position taken under the treaty in an earlier year should be disclosed consistently. Silent reversal is a red flag on examination.
If they never ask: for copies of prior returns before quoting, they intend to prepare your return as though this were year one. Everything above will be re-decided by default, not by judgement.
7. “Do you own or control a UK limited company, LLP or partnership interest?”
For founders and consultants who incorporated in the UK, a personal service company is a routine and sensible UK structure. To the IRS it is a controlled foreign corporation, bringing Form 5471, the subpart F and GILTI regimes, and a set of entity classification choices that are materially better made deliberately than discovered later. An LLP interest raises separate questions about US classification and self-employment tax.
If they never ask: and you have a company, the omission is not a mispricing — it is a missing information return with its own penalty exposure. See our notes on cross-border tax planning for how these structures interact.
8. “What UK tax have you actually paid, and on what dates?”
Not what you owe — what left your account, and when. PAYE deducted through the year, payments on account made in January and July, balancing payments, and any repayment received all sit at different points on the calendar. On the paid basis, only tax actually paid in the US calendar year is creditable in that year. A preparer working from a Self Assessment calculation rather than a payment record will place credits in the wrong period.
If they never ask: expect timing mismatches that either waste credits or create phantom liabilities.
9. “List every foreign account you can sign on, including ones you do not own.”
The FBAR threshold is an aggregate US$10,000 across all foreign accounts at any point in the year, and signature authority counts even without a beneficial interest — a parent's account, a company account, a club treasury. Form 8938 sits alongside it with higher, residence-dependent thresholds and a broader definition of specified foreign financial assets, including certain pension and investment interests that never appear on a bank statement.
These are different forms with different thresholds, different definitions and different filing systems. A preparer who conflates them, or who asks only about “bank accounts,” will miss the assets that matter.
If they never ask: in this level of detail, you are carrying unquantified penalty exposure. Our FBAR penalty calculator illustrates the scale.
10. “Who prepares your UK Self Assessment, and may we speak to them?”
The correct answer is either “we do” or “please introduce us.” The UK liability drives the US credit; the US treatment of pensions, funds and equity depends on UK figures. Where the two returns are prepared in isolation, the errors do not cancel out — they compound, and they surface years later when amendment windows are closing. Coordinated US and UK preparation is not a convenience; it is the control that prevents double taxation.
If they never ask: nobody is reconciling the two returns. That is the structural defect behind most of the remediation work we take on.
How the same facts are treated on each side
The table below shows why a single-jurisdiction preparer cannot get these right in isolation.
| Item | UK / HMRC treatment | US / IRS treatment | Where it breaks |
|---|---|---|---|
| Stocks & shares ISA | Fully tax-exempt; no reporting on Self Assessment | Wrapper ignored; income taxable annually; funds usually PFICs on Form 8621 | No UK document exists to tell the preparer what is inside |
| Workplace pension contributions | Relief at source or net pay; employer contributions not taxed | Potentially current income absent a treaty position | Treaty relief must be identified and documented, not assumed |
| RSU vesting | Apportioned by workday location over the vesting period; PAYE at vest | Compensation in the calendar year of vest under US sourcing rules | Different amounts, years and currencies — credits strand |
| Main residence disposal | Private residence relief typically exempts the gain | Section 121 exclusion capped; currency movement on any mortgage taxable | A tax-free UK sale can generate a real US liability |
| Tax year | 6 April to 5 April | 1 January to 31 December | Every UK figure must be rebuilt before it touches Form 1040 |
| Filing deadline | 31 October paper / 31 January online for Self Assessment | 15 April, automatic extension to 15 June for those abroad, then October | UK liability often unknown when the US return is due |
What has changed for 2026, and what a current preparer should raise unprompted
Two shifts matter for London filers this year, and a preparer who is genuinely current will raise them without being asked.
First, the abolition of the remittance basis and its replacement with the four-year foreign income and gains regime from April 2025 has changed the planning landscape for recent arrivals — including Americans, who were never the archetypal remittance-basis user but frequently benefited from it. If you arrived recently, whether you fall within the new regime materially affects your UK liability and therefore your US credit position. Second, the domicile-based inheritance tax rules have moved to a residence-based test, which reaches US citizens in London who assumed their US domicile insulated them.
Neither is a US filing issue in isolation. Both change the numbers that flow onto your Form 1040. A preparer who has not mentioned either is working from last decade's model.
The questions you should put back to them
Once they have asked their questions, ask yours. These four are the ones that discriminate.
- “How many Form 8621 filings did your practice prepare last season?” A firm serving UK-resident Americans at any volume prepares them constantly. A vague answer means the PFICs are not being caught.
- “Walk me through how you would treat my employer pension contribution.” You are listening for a scheme-specific answer with a stated treaty basis, not a reassurance that pensions are “covered by the treaty.”
- “What is your process when the UK Self Assessment liability is not known by the US filing deadline?” A real answer involves extensions, the paid-versus-accrued decision and, where appropriate, a further extension for those abroad. No answer means they have not met the problem.
- “Who reviews the return, and what is their US-UK background?” Preparation can be delegated. The cross-border judgement cannot.
On the US side, the IRS publishes the baseline rules for citizens abroad, including the tests for the foreign earned income exclusion. A specialist should be able to explain, in your specific circumstances, why the exclusion or the credit is the better route — and what the choice costs you in later years.
What if the diagnostic uncovers missed years?
It frequently does. The questions above are precisely the ones that surface an unreported ISA, an FBAR that was never filed, a pension nobody disclosed, or a UK company that generated no Form 5471. That discovery is uncomfortable but not dangerous, provided the sequence is right.
For non-wilful taxpayers who meet the non-residency requirement, the Streamlined Foreign Offshore Procedures generally allow three years of returns and six years of FBARs to be filed with a non-wilfulness certification and without the offshore penalty. Eligibility must be assessed before anything is filed — submitting a single current-year return in the ordinary way can prejudice the position. This is why a competent preparer pauses at the diagnostic stage rather than pressing on. Our streamlined filing team handles this sequencing routinely, and for clients with substantial UK investment and pension positions the work sits alongside our private client practice.
The short version
A quote that arrives before the questions is not a quote — it is a guess about a life the firm has not examined. Ten minutes of diagnostic questioning about your payslip, pension, share plan, funds, arrival date and prior elections tells you more than any brochure. The firms that ask are the firms that have been surprised before and built a process around it.
If you are an American in London and no adviser has asked you what is inside your ISA, which pension scheme you joined, or what elections sit on your last three returns, your return has been prepared on assumptions. We would rather test them. Contact our cross-border team for a confidential consultation: we will run the full diagnostic, tell you plainly what we find in your prior filings, and quote only once we understand what your London life actually generates.
