The **1% remittance transfer tax** applies only to international transfers funded with physical money — cash, a money order, a cashier's cheque or a similar instrument handed over at a counter. If you fund a transfer from a US bank or credit union account, or with a debit or credit card, the tax does not apply. It took effect for transfers made after 31 December 2025 under section 4475 of the Internal Revenue Code, added by the One Big Beautiful Bill Act, and it is collected by the transfer provider rather than reported on your Form 1040.
That single funding distinction is the whole answer for most readers of this site. A US citizen in London wiring $200,000 from a Chase account to a Barclays account pays nothing under section 4475. Someone walking into a storefront with $500 in notes pays $5. The rule is about the instrument, not the amount and not the destination.
What section 4475 actually says
Section 4475 imposes an excise tax equal to 1% of the amount of any taxable remittance transfer initiated by a domestic sender and received by a designated recipient outside the United States. There is no de minimis threshold and no annual cap: a taxable transfer of $50 carries 50 cents of tax, and a taxable transfer of $50,000 carries $500.
The tax is imposed on the sender. The remittance transfer provider collects it at the time of the transfer and pays it over to the Treasury, with secondary liability falling on the provider if the sender does not pay. In practice you will see it as a line on the receipt, not as a bill later.
The only question that matters: how did you fund it?
A transfer is taxable when the sender provides cash, a money order, a cashier's cheque or any similar physical instrument to the provider. That is the trigger. Transfers funded from an account held at a financial institution, or paid for with a debit or credit card issued in the United States, sit outside the charge.
The design intent is transparent enough: the charge was aimed at the storefront cash-remittance market, not at ordinary electronic banking. The practical consequence is that the overwhelming majority of cross-border transfers made by internationally mobile professionals — bank wires, ACH transfers, the funding legs used by Wise, Revolut, OFX and the rest when drawn from a linked account — are simply not within scope.
What is outside the charge
- Bank-to-bank wire transfers funded from a US checking or savings account.
- ACH transfers and standing orders from a US account.
- Transfers paid for with a US-issued debit or credit card.
- Domestic transfers, and transfers where the recipient is in the United States.
- Moving money between two accounts you own, where the funding leg comes from an account rather than physical cash.
Who counts as a domestic sender
The charge attaches to transfers initiated by a domestic sender, which is a question of where the transfer is initiated rather than of citizenship or tax residence. A US citizen living permanently in the UK who walks into a bureau in London and sends money onward is not initiating a transfer from the United States, and section 4475 has nothing to say about it.
The reverse case is the one that catches expatriates: a US citizen back in the States for the summer, handing cash to a provider to send to a family member in Europe. That is a domestic sender making a cash-funded transfer, and 1% applies even though the person lives abroad and files as an expat.
The April 2026 proposed regulations
Treasury and the IRS published proposed regulations on the new excise tax on 13 April 2026 under REG-114499-25, with comments due by 12 June 2026. The proposals fill in the definitional gaps left by the statute — what counts as a remittance transfer provider, how the tax interacts with the Electronic Fund Transfer Act framework the term borrows from, when a transfer is treated as initiated, and how providers document that a transfer was account-funded and therefore outside the charge.
Nothing in the proposals changes the headline: cash-funded transfers are taxed, account-funded and card-funded transfers are not. Because the regulations are still proposed rather than final, providers are working to the statute plus the proposals, which is why documentation requests at the counter have become noticeably more insistent since the spring.
Collection, Form 720 and the penalty relief for providers
Providers report and pay the tax quarterly on Form 720, the federal excise tax return, with semi-monthly deposit obligations. The IRS recognised that the industry was being asked to build collection systems for a brand-new tax on a short runway, and issued transitional penalty relief: for the first three calendar quarters of 2026, a provider that makes timely deposits and settles any underpayment by the Form 720 due date is treated as meeting the reasonable cause standard for failure-to-deposit penalties, as set out in IRS Notice 2025-55.
That relief runs to the provider, not to you. If you are the sender of a taxable transfer, the 1% is due whether or not the provider's systems worked. Details of the return itself are on the IRS Form 720 page.
What the 1% remittance transfer tax means for Americans in the UK
For the typical TaxStone client — a US citizen or Green Card holder living in the UK, moving salary, investment proceeds or property funds between two banked accounts — the answer is that section 4475 costs nothing. The transfers are account-funded and the charge does not reach them.
The exceptions are narrow but real. Cash brought into the United States and handed to a remittance provider before flying back. Cashier's cheques used to settle a family obligation abroad. Money orders, still surprisingly common for tuition and small property payments. In each case the instrument, not the intention, creates the charge.
The 1% is not where the real cost is
Focusing on the excise tax misses the more expensive parts of moving money across the Atlantic. A retail bank's foreign exchange spread on a large transfer routinely runs to 2% or 3% of the amount — several times the excise tax, and payable on the electronic transfers that section 4475 never touches. On a $500,000 property deposit, a 2.5% spread is $12,500 against a remittance tax of nil.
Then there is the tax that genuinely does attach to the underlying money. Selling US securities to fund a UK purchase creates a capital gain reportable in both countries. Repatriating funds while claiming the four-year foreign income and gains regime can convert a clean transfer into a remittance with UK consequences. And a transfer that is in substance a gift brings its own reporting.
Gifts, Form 3520 and the reporting that does bite
If money you send abroad is a gift rather than a movement between your own accounts, the US gift tax rules apply on the way out, and if money you receive from abroad is a gift, Form 3520 applies on the way in. Gifts from a non-resident alien individual or a foreign estate must be reported once the aggregate for the year exceeds $100,000, and the penalty regime there is severe in a way that a 1% excise tax simply is not.
We set out the mechanics in Form 3520 and foreign gifts, and the annual exclusion arithmetic can be modelled with the US gift tax calculator. If the person on the other end of the transfer is a non-citizen spouse, a different and much larger exclusion applies — see US gift tax and the non-citizen spouse.
Funding a UK property purchase
The most common large transfer we see is a US-to-UK property purchase. Section 4475 is irrelevant to it — the money moves between accounts — but three other things are not. First, the source-of-funds evidence your UK solicitor will demand, which is now materially more detailed than it was five years ago. Second, the capital gains position on whatever you sold to raise the deposit. Third, Stamp Duty Land Tax, including the surcharge for anyone who has been outside the UK for the relevant period.
Our note on SDLT for Americans buying UK property covers the surcharge and the refund route where residence is subsequently established.
How to make sure you never pay the 1% by accident
- Fund every international transfer from an account or card, never with notes at a counter.
- Avoid money orders and cashier's cheques for cross-border payments — both are within the charge.
- Check the receipt: providers must show the excise tax as a separate line, so a charge you did not expect is visible immediately.
- If you must send cash, consider depositing it into your own US account first and transferring electronically — the deposit is not a remittance transfer.
- Keep the funding evidence. If a provider treats an account-funded transfer as taxable in error, the documentation is how you get it corrected.
What is still unresolved
Because the regulations remain in proposed form, several edges are untested: how prepaid cards and stored-value products are treated, whether certain fintech funding flows count as account-funded when the intermediate step involves a pooled account, and how providers should evidence the funding source where a customer uses mixed methods in one transaction.
None of these affect the mainstream case. All of them matter if you are running a business that makes frequent outbound payments, and they are worth watching as the final regulations emerge.
Worked example
A US citizen resident in London sells a US brokerage position for $400,000 and wires the proceeds from her US bank to her UK bank to complete on a flat. Section 4475 tax: nil, because the transfer is account-funded. Her actual costs are the FX spread on $400,000 and the US capital gains tax on the disposal, with a UK capital gains position to reconcile alongside it.
The same person, home in Boston for two weeks, hands $3,000 in cash to a storefront provider to send to a relative in Italy. Section 4475 tax: $30, collected at the counter. Total exposure across both transactions: $30 — on the transfer that mattered least.
The short version
Section 4475 is a narrow, mechanical charge on cash-funded outbound transfers, effective from 1 January 2026, collected at the point of sale and reported by the provider on Form 720. If you bank electronically, it will never touch you.
What should occupy your attention instead is the tax on the money itself — the gains realised to fund the transfer, the gift reporting if it is not your own money on both ends, and the UK consequences of bringing funds into a country whose remittance rules changed materially in April 2025. If you would like that mapped before a large transfer rather than after, contact us.
