US UK Tax Returns Preparation: HMRC Paper-Only Cases 2025-26
US UK tax returns preparation when HMRC can't take your 2025-26 return online: exclusion cases, the 31 January paper route and Form 1116. Speak to us today.
Some 2025-26 UK tax returns cannot go through HMRC's online channel because the calculation falls into a listed “exclusion”. In that case HMRC accepts a signed paper return delivered by 31 January 2027 as having a reasonable excuse for missing the 31 October paper deadline. The correct UK figure then becomes the foreign tax you claim on your US return.
For most people, an online rejection points to a mistake. For a small and fairly predictable group of internationally mobile filers it does not: the return is correct and HMRC's own calculation cannot handle it. Our US UK tax returns preparation work keeps running into the same few entries: non-residents with UK royalties, landlords claiming treaty relief, newcomers using the new foreign income and gains regime, and US addresses the online form will not accept. This guide works from HMRC's own 2025-26 documents, not general commentary. It explains what an exclusion is, which entries matter to a US-connected filer, how the paper route works in practice, and how the final UK number feeds Form 1116 on the American side.
What is an HMRC exclusion case, and why is it not your fault?
Every year HMRC publishes technical specifications for the developers who build Self Assessment filing products. The 2025-26 set sits on the Self Assessment technical specifications 2026 for individual returns page. Alongside the calculation rules are two short documents that most taxpayers never see: Individual Exclusions for online filing and Individual Special Cases for online filing.
An exclusion is a known situation where HMRC's online calculation gives the wrong answer, or the return cannot be submitted electronically at all. HMRC's wording is direct: where a personal return cannot be filed online for a listed reason, and a paper return arrives on or before 31 January after the end of the tax year, HMRC will accept that the taxpayer had a reasonable excuse for missing the normal 31 October paper deadline. A reasonable excuse claim should go in with the paper return.
Exclusions are therefore a recognised fault in the government's calculation engine. They are not a planning device, and they do not suggest anything is wrong with your affairs. The 2025-26 document (version 1.0) sorts them into two groups:
- Category 1, system-related exclusions (12 listed). Long-standing issues that would need significant changes to HMRC's core systems to remove.
- Category 2, “live” exclusions (5 listed). Issues active for the year that HMRC is reviewing, with a future fix under consideration.
How a special case differs from an exclusion
A special case is milder. HMRC expects most filing products to have absorbed it already, usually through a published workaround such as entering a figure in a different box and explaining it in the additional information space. The 2025-26 special cases document (version 1.1) lists 21 system-related specials and 9 live specials. Where a filer still cannot file online because of a special, HMRC says a reasonable excuse claim should accompany the paper return. HMRC also says that where its recommended workaround forces an entry that is not strictly correct, it will not act on that entry for that reason alone, as long as the inaccuracy follows the workaround and exists only to allow online filing.
The practical difference: an exclusion usually means paper, while a special usually means online with a documented workaround, and paper only if the workaround cannot be applied.
Which 2025-26 exclusions and special cases matter to US-connected filers?
Most entries on HMRC's lists concern farmers, Lloyd's underwriters, share fishermen and other niche groups. The table below picks out the entries we see in US-UK work, using HMRC's own reference numbers.
| HMRC reference | Type | What goes wrong | Who it catches | HMRC's route |
|---|---|---|---|---|
| Exclusion 47 | Category 1 | For a non-resident (box NRD1 ticked), “disregarded” income entered as other taxable income (box INC17), such as patent or royalty payments, is not treated as disregarded in the section 811 limit, so tax can be overcharged | US-resident inventors, authors and founders with UK royalty or similar income | Paper return, with the section 811 calculation (working sheet in helpsheet HS300) |
| Exclusion 135 | Category 1 | Where a dual or non-UK resident claims partial treaty relief on UK savings or dividends and also claims residential finance costs relief, savings and dividends are counted as non-savings income in adjusted net income, so finance costs relief can be too high | Non-resident landlords with UK mortgages who also make a partial treaty claim | Paper return |
| Exclusion 124 | Category 1 | A non-resident partner's share of a company loan written off (box FPS68) wrongly attracts the notional dividend tax credit | Non-resident partners in UK partnerships | Paper return for a manual calculation |
| Exclusion 100 | Category 1 | The calculation gives the personal allowance automatically, with no way to disclaim it | The rare filer who has a reason to disclaim it | Paper return, with a note in box 19 on page TR7 quoting exclusion 100 |
| Exclusion 6 | Category 1 | Online amendments are only accepted within 12 months of the 31 January online filing date | Catch-up filers correcting an older UK return | Late amendments on paper |
| Exclusion 1 | Category 1 | A return cannot be filed online before the tax year has ended | Executives leaving the UK who want a return filed early | Paper return |
| Exclusion 18 | Category 2 (live) | An entry in box CAL14 without an entry in one of the linked boxes fails validation, including where it reflects a foreign tax credit relief adjustment for overlap relief | Self-employed or partner filers with foreign tax and overlap relief | Paper return, explaining the CAL14 entry in the additional information box |
| Special 3 | Information | Where double taxation relief is due, the standard calculation may, in rare cases, not give allowances and reliefs in the most beneficial way | Anyone claiming foreign tax credit relief | Contact HMRC after submission |
| Specials 61, 62, 63 | Live (new for 2025-26) | How foreign income claimed under the new FIG regime interacts with foreign tax credit relief, and what “source by source” means | US arrivals claiming the four-year FIG regime | Online, following HMRC's column rules |
| Specials 7 and 12 | System | Foreign zip codes cannot go in the UK postcode box, and the # symbol is not accepted in addresses | Anyone with a US address (for example “Apt #12B”) | Online, putting the zip in the address line and dropping the # |
| Special 26 | System | UK residents reporting income from overseas partnerships | Members of US partnerships and LLCs taxed as partnerships | Online, entering your own UTR on the partnership pages |
Two caveats apply. First, these lists change, and HMRC revises them during the filing season (the specials document already records 2025-26 additions dated February and March 2026). Check the current version before relying on any entry. Second, an exclusion only applies if your return actually contains the entries it describes. Each listing includes identification criteria written for developers, and a well-prepared return should be checked against those criteria rather than assumed to qualify.
Exclusion 47: UK royalties and the non-resident limit
Non-UK residents are generally liable to UK tax on UK income, but section 811 of the Income Tax Act 2007 can limit the liability on certain “disregarded” income when that gives a better result. HMRC says that disregarded income under sections 825 and 826, with patent and royalty payments among its examples, is not picked up as disregarded income in the section 811 calculation if it is entered in box 17 (other taxable income). HMRC's own example shows £13,000 of patent income taxed at 20%, producing £2,600 of tax where the correct figure was nil. HMRC estimates about 100 customers are affected. The fix is a paper return with the section 811 working sheet from helpsheet HS300.
Exclusion 135: treaty relief meets the mortgage interest credit
This is the exclusion most likely to catch a wealthy non-resident landlord. Residential finance costs no longer reduce rental profit. They give a basic-rate tax reduction, capped by reference to adjusted total income. Where a dual or non-UK resident also claims partial treaty relief on UK savings or dividend income (reported on the residence pages, SA109), the calculation treats that income as non-savings income. The cap is then measured against a figure that is too large, so the tax reduction is too generous. HMRC puts the number affected at under 200. The online figure is too low, which matters on both sides of the Atlantic, as explained below.
Specials 61 to 63: the new FIG regime and foreign tax credit relief
With the remittance basis abolished from 6 April 2025, several older specials linked to non-dom status were removed for 2025-26. New ones were added for the foreign income and gains (FIG) regime. HMRC's position is that you cannot claim foreign tax credit relief against income for which FIG relief is claimed. You can still claim it on income outside the FIG claim, using a separate row for each type of income from each country. For a newly arrived US executive this is not a paper-return trigger, but it is a common source of wrong entries. US tax on FIG-relieved income has no UK tax to offset against it.
How do you file a paper Self Assessment return by 31 January?
HMRC's documents fix the core conditions. The paper return must arrive on or before 31 January following the tax year: 31 January 2027 for 2025-26. It must follow the normal rules for paper returns even if it is computer-generated, which in particular means it must carry a valid signature. A reasonable excuse claim should go with it. HMRC's internal guidance at SAM120550 tells officers that where a customer clearly had to fall back on a late paper return because of a specific problem with the online system, the claim should be accepted.
A checklist for filing an exclusion case on paper
- Build the return in full first. Prepare every schedule as if you were filing online. The calculation, not the data, is what fails.
- Match the return against the published criteria. Take the exclusion's identification criteria (for exclusion 135, savings or dividends in NRD20 alongside finance costs, plus the adjusted net income test) and confirm your return meets them. Keep that analysis on file.
- Record the exclusion number. Write the HMRC reference (for example “Exclusion 47, 2025-26 Individual Exclusions v1.0”) for the covering letter and the additional information box.
- Prepare a manual tax calculation. For exclusion 47, complete the section 811 working sheet from HS300. For the others, set out the correct computation so the HMRC caseworker can see the intended figure.
- Use the current year's forms. Download the 2025-26 SA100 and the relevant supplementary pages. A computer-generated paper version is acceptable if it follows paper-return rules.
- Write the reasonable excuse statement. Keep it short and factual: the return cannot be filed online because exclusion X applies, and it is being delivered on paper by 31 January under HMRC's published exclusion arrangements.
- Sign and date in ink. An unsigned return is not a valid return, however accurate it is.
- Send it with proof of delivery well before the deadline. Use a tracked service and leave margin for international post if you are signing abroad. The test is delivery by 31 January, not posting.
- Pay on time regardless. The paper route moves the filing deadline. It does not move the 31 January balancing payment or the first payment on account. Interest runs on late tax whatever channel you file through.
- Diarise the US follow-through. Note when HMRC confirms or adjusts the calculation, because that figure drives Form 1116.
What if 31 January has already passed?
The exclusion arrangement protects a paper return only up to 31 January. A paper return delivered later is late, and a late filing penalty applies unless a separate reasonable excuse is accepted. For filers catching up several missed years, our view is to prepare the missing years in order and treat the exclusion analysis as one part of the review. It is not a defence for returns that were never filed. Older amendments outside the online window fall under exclusion 6 and go on paper.
How does the UK figure feed your US Form 1116?
This is where generalist guidance stops and the cross-border work begins. A US citizen or green card holder claims credit for UK income tax on Form 1116. The amount allowed depends on the UK tax you are actually liable to pay. Three points follow.
1. An overcharge is not a creditable tax
Under US rules, foreign tax you could have reduced, or which is refundable because you overpaid, is generally not a creditable tax. If you accepted an online computation that overcharges you under exclusion 47, the excess is not an extra US credit. It is a UK refund you have not yet claimed. The paper route sets the UK liability at its correct level and keeps the Form 1116 figure defensible.
2. An undercharge reduces your credit, later
Exclusion 135 runs the other way. The online calculation gives too much finance costs relief, so the UK tax looks lower than it should be. If that figure goes onto Form 1116 and HMRC later corrects the liability, your foreign tax has changed. US rules treat a change in foreign tax after you have claimed it as a foreign tax redetermination, which can require an amended US return. Filing correctly on paper the first time avoids that cycle.
3. Timing: one UK year, two US years
The UK year runs from 6 April to 5 April. The US year runs from 1 January to 31 December. Your 2025-26 UK liability therefore relates to income across two US returns. When it counts depends on your method:
- Cash method. Credit is claimed for the US year in which UK tax is paid. For most Self Assessment filers that means a mix of payments on account and balancing payments landing in different calendar years.
- Accrual method (an election). Foreign tax generally accrues at the end of the foreign tax year, so UK tax for 2025-26 belongs to the US 2026 return. That return is due in 2027, after the 31 January 2027 paper deadline, so the correct UK figure is usually known in time.
Currency translation rules differ between the two methods, and the credit also has to be split between Form 1116 categories (general category for earnings, passive category for investment income). We prepare the UK and US returns from one reconciled workbook so that the sterling liability, its income-type split and its dollar conversion stay consistent.
Worked example: a US-resident author with UK royalties
The figures below are illustrative and simplified. They ignore treaty claims, personal allowance entitlement and tax deducted at source, to isolate the exclusion.
Eleanor is a US citizen who left London in 2023 and is non-UK resident for 2025-26. She keeps a London flat let for a £34,000 profit after allowable expenses but before £8,000 of mortgage interest. She also receives £18,000 of UK royalties she reports as other income. Her preparer establishes that the royalties are disregarded income within the section 811 rules and that the limit is the better result.
| Step | Online calculation (exclusion not handled) | Paper return with section 811 working |
|---|---|---|
| Royalties included in the section 811 limit | £18,000 taxed (not recognised as disregarded) | £0 (correctly disregarded) |
| Tax attributable to royalties at 20% | £3,600 | £0 |
| Effect on UK liability | Overstated by £3,600 | Correct |
| Creditable on Form 1116 | Only the correct liability; the £3,600 is a refundable overpayment | The full correct liability |
| Deadline | 31 January 2027 online | 31 January 2027 on paper, quoting exclusion 47 |
Filed online, Eleanor would pay £3,600 too much to HMRC and could not treat it as a creditable US tax. She would then have to file a UK amendment and possibly revisit her US return. Filed on paper with the HS300 working, the UK liability is right first time. If she has elected the accrual method, that liability goes onto her 2026 Form 1116 with no redetermination needed.
US and UK filing mechanics compared
| Point | UK (HMRC Self Assessment 2025-26) | US (IRS Form 1040) |
|---|---|---|
| Normal paper deadline | 31 October 2026 | 15 April, with an automatic two-month extension for filers abroad and a further extension to 15 October on request |
| Normal electronic deadline | 31 January 2027 | Same as paper |
| When the online system cannot calculate | Listed exclusion: paper by 31 January accepted with a reasonable excuse claim | Paper filing remains available for any return |
| Signature | Valid signature required on paper, including computer-generated returns | Signature required; paper returns signed in ink |
| Correcting a filed return | Online within 12 months of 31 January; later amendments on paper (exclusion 6) | Form 1040-X; foreign tax credit claims have an extended refund period |
| Payment | 31 January balancing payment and payments on account, whatever the filing channel | Tax due by 15 April even where the filing date is extended |
Where exclusion cases meet compliance catch-up
Many of the filers who hit these exclusions are also catching up elsewhere. A US citizen who has been non-UK resident for years may never have reported UK royalties or rental profit correctly. They may also have missed US information returns on the same UK accounts: an FBAR for the bank account receiving the rent, or Form 8938 for the pension or investment account alongside it. Where the US side needs regularising, the IRS Streamlined Filing Procedures, including the Foreign Offshore Procedure for qualifying non-residents, are usually the first route to assess. The UK exclusion analysis then feeds the amended or late US returns. For the US side generally, see our US tax services.
Sequencing matters. The UK liability should be settled first, because the US foreign tax credit depends on it. US returns prepared on an estimated UK figure tend to need reopening.
Common mistakes we see in exclusion-case returns
- Filing online anyway and fixing it later. This creates a wrong liability, a UK amendment and a possible US redetermination, where one correct paper filing would have done.
- Missing 31 January. The exclusion arrangement does not extend beyond it.
- Leaving out the manual calculation. Without the section 811 working or an explanatory computation, the caseworker has nothing to compare against.
- Treating the paper route as a payment extension. It is not one.
- Carrying the online figure to Form 1116. The creditable amount is the correct liability, not whatever a calculation engine produced.
- Using last year's list. Entries are added, removed and fixed every year.
Bringing it together
Exclusion cases are uncommon, but they are concentrated among the people we act for: non-residents with UK royalties, landlords with treaty claims, partners in UK and US partnerships, and executives moving between London and New York. The answer is rarely complicated. Identify the exclusion from HMRC's current list, file a signed paper return with a manual calculation by 31 January, and make sure the US return uses the correct figure. Jungle Tax prepares both sides together through our US-UK tax accountants, with particular depth for high-net-worth filers whose returns tend to reach the edges of HMRC's systems.
If your 2025-26 return will not go through online, or you think last year's online figure was wrong, contact our cross-border team for a confidential consultation. We will check your return against HMRC's current exclusion and special case lists, prepare the paper filing and the reasonable excuse statement before 31 January 2027, and carry the corrected UK liability through to your US return.
