Moving Back to the US From the UK: The Tax Year You Come Back

Moving back to the US from the UK puts two part-years on one tax return. Your foreign earned income exclusion is cut to the days you qualified, UK split-year treatment ends your UK exposure on foreign income, and the reporting obligations you built up abroad all survive the move. US–UK specialists plan the year before you fly.

The repatriation year is the most error-prone return an expat ever files. It is the only year in which both systems apply for part of the time, both currencies matter, and one date — the day you land — changes several numbers at once.

What moving back does to your US tax year

You stay a US taxpayer throughout: citizenship, not residence, decides that. What changes is your access to expat relief. Bona fide residence in the UK ends when you move home, and the physical presence test needs 330 full days abroad in any twelve consecutive months, which a mid-year return usually breaks.

If you qualified for only part of the year, the exclusion is prorated. The IRS sets out the arithmetic on its page for figuring the foreign earned income exclusion: multiply the year's maximum by your qualifying days and divide by 365.

The figures assume a full-year 2026 limit of $132,900 and a qualifying period running to the move. Income earned after you land is US-source and cannot be excluded at all.

The physical presence test can be moved

The twelve-month window for the 330-day test does not have to be a calendar year. Choosing a period that ends shortly after your return often captures more qualifying days than a calendar-year window, and the choice is yours to make on Form 2555 — explained in Form 2555 explained.

Where the exclusion shrinks, the foreign tax credit usually picks up the slack, because UK tax on the same salary is typically higher than the US tax on it. The trade-off between them is set out in FEIE versus the foreign tax credit, and revoking the exclusion has a five-year consequence worth checking before you do it.

UK split-year treatment

On the UK side the year is usually split in two when you leave: a resident part and a non-resident part, so UK tax on foreign income only covers the time you were living there. GOV.UK explains the principle on its residence page, and the cases that apply on departure are covered in split-year treatment when leaving the UK.

Split-year treatment is not automatic in the sense of being optional — you either meet one of the statutory cases or you do not, and you claim it on your Self Assessment return. Leaving part way through also means a final UK return is still due after the April year-end, months after you have gone.

Your last year of foreign reporting

Reporting follows the year, not the address. If your UK accounts exceeded $10,000 in aggregate at any point before you moved, the FBAR is still due for that year, and Form 8938 may be too — though the thresholds drop sharply once you are no longer living abroad, which catches people in the following year.

Closing accounts does not remove the obligation for the year they existed. Keep the peak balances before you close anything, and remember pensions and joint accounts count. The detail is in FBAR and FATCA reporting.

The state you move to starts taxing you

Federal tax was never in doubt; state tax is where the change bites. Most states tax residents on worldwide income and do not recognise the foreign earned income exclusion in the same way, so the part-year state return can produce tax on income the federal return excluded.

If you never properly severed ties with a state before you left, you may have been filing there all along — see state taxes for US expats before you assume the clock starts now.

Timing decisions worth making first

• Pick the move date with the 330-day window in mind; a few weeks can be worth thousands.
• Decide whether to sell the UK house before or after — the section 121 tests still run for three years, as covered in selling a UK home as a US citizen.
• Take a UK pension distribution, if you plan to, in the year the treaty position is clearest rather than the year you move.
• Repay a sterling mortgage deliberately: the foreign currency gain is a separate item of ordinary income.
• Start US estimated payments once UK withholding stops, or the first US quarter will be underpaid.
• Record every exchange rate for the year as you go; rebuilding them later is slow.

Tranzesta prepares the US return and the final UK return together, so the split-year claim, the prorated exclusion and the credit all rest on the same figures. Book a consultation before you set a moving date.

Frequently Asked Questions

Do I still get the foreign earned income exclusion in the year I move back?

Partly. The exclusion is prorated by qualifying days: multiply the year's maximum by the number of days you met the bona fide residence or physical presence test and divide by 365. Income earned after you return to the United States is not foreign earned income and cannot be excluded at all.

Can I choose the twelve-month period for the 330-day test?

Yes. The physical presence test uses any twelve consecutive months, not just the calendar year, so a period ending shortly after your return often captures more qualifying days than a calendar-year window. You select the period on Form 2555 and it can straddle two tax years.

What is UK split-year treatment when I leave?

It divides the UK tax year into a resident part and a non-resident part, so UK tax on foreign income covers only the time you were living in Britain. You must meet one of the statutory cases for leaving, such as starting full-time work overseas or ceasing to have a UK home, and you claim it on your Self Assessment return.

Do I still file an FBAR for the year I moved back?

Yes, if your foreign accounts exceeded $10,000 in aggregate at any time during that calendar year, including the months before you moved. Closing the accounts does not remove the obligation for the year they were open, and the report is due 15 April with an automatic extension to 15 October.

Will my new state tax income I earned in the UK?

It can. Most states tax residents on worldwide income for the part of the year they are resident, and many do not follow the federal foreign earned income exclusion. A part-year state return may therefore tax income the federal return excluded, so check the rules of the state you are moving to before you arrive.

Is returning from Dubai treated the same way?

The US rules are identical: the exclusion is prorated by qualifying days, the FBAR is still due for the year, and state residency restarts on arrival. The difference is that there is no foreign tax credit to fall back on, because the UAE levies no personal income tax, so the shrinking exclusion is not replaced by anything.