Is the FTC better than the FEIE for UK residents?

Usually yes. UK income tax rates exceed US rates at most income levels, so FTCs generate excess credits that carry forward — giving you future flexibility to offset US-source income (e.g., US bonuses, RSU vests).

Can I carry forward unused FTCs?

Yes, up to 10 years forward and 1 year back. We track the carryover pool year over year so nothing expires unused.

What's the 'separate category' rule on Form 1116?

Credits must be segregated by income category (passive, general, branch, Section 901(j), certain income resourced by treaty). Mixing categories isn't allowed — which is why multi-source expats often need two or three 1116s.

Can FTC offset NIIT or Additional Medicare Tax?

No. Both sit on Schedule 2 and the FTC doesn't reach them — a common surprise for UK-resident investors with investment income. This often becomes the residual US tax cost even after UK tax is high.

What documentation do you need?

P60s, self-assessment tax-year summaries, HMRC tax-paid receipts, and for the self-employed, proof of UK tax paid in the relevant year. We send a tailored checklist at intake.

◉ Foreign Income & Credits

Foreign tax credits

Offset UK income tax paid against your US liability. Often more beneficial than the FEIE for higher earners.

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Short answer

The Foreign Tax Credit (Form 1116) offsets UK income tax you have already paid against your US liability on the same income, category by category. For most Americans in the UK, where UK rates exceed US rates, it eliminates US tax on employment income and creates carry-forward credits — which is why it often beats the FEIE.

Overview

Why this filing matters

Offset UK income tax paid against your US liability. Often more beneficial than the FEIE for higher earners.

Note — Offset UK tax against US liability.

◉ Who this is for

•UK-resident Americans paying UK income tax
•Expats with mixed UK/US income

✓ What you get

✓Multi-category Form 1116 computation
✓FTC vs. FEIE comparison to choose the optimal position
✓Carryover tracking

At a glance

Key forms: 1116
Category: Foreign Income & Credits
Turnaround: 2–3 weeks once documents are complete
Filed by: ACCA-qualified IRS Enrolled Agent

Our approach

Relief claimed deliberately, not by default.

The Foreign Earned Income Exclusion and the Foreign Tax Credit both reduce US tax on income you have already been taxed on in the UK — but they pull in different directions. FEIE can strand foreign tax you could have credited; the credit can leave earned income exposed that FEIE would have removed. Switching between them carries a five-year lock-out most people only discover afterwards.

We model both routes against your real income mix and your plans for the next few years, claim the one that holds up over time rather than just this filing, and carry unused foreign tax credits forward so nothing you have already paid expires unused.

FEIE and Form 1116 credit compared on your numbers before either is claimed
The FEIE revocation lock-out flagged before you trigger it by accident
Foreign tax credit carryovers tracked year-on-year so paid tax is not wasted

Reviewing a multi-year tax plan across US and UK obligations

Our process

How we handle your filing

Four steps from first email to filed return. Fixed fee confirmed in writing before any work begins.

Intake

Send us your situation by email or the enquiry form. We come back with the questions we need answered — every source of income for the year, filing history, accounts and entities — and a tailored document list.

Review

We analyse your position, flag any cross-border risks, and confirm the scope and fixed fee in writing before any work starts.

Prepare

Draft returns and schedules are prepared with plain-English commentary on key positions for your review.

File

You sign electronically; we e-file with the IRS / FinCEN and send you the acceptance confirmations for your records.

Pricing

Fixed fees — no surprises

Form 1116 preparation is usually bundled with your 1040 fee. Complex multi-category FTC analysis (carrybacks, basket recharacterisations, high-tax kick-outs) is priced separately after the intake call.

Prices are indicative starting points and exclude UK VAT, which applies to UK-resident clients only. We quote in writing once we have confirmed every source of income and your filing history for the years involved.

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FAQs

Common questions

Sources

Rules, thresholds and penalties are as published by the IRS and FinCEN at the time of our last review (2026-09-08); always check the current instructions for the year you are filing.

Related services

Others in Foreign Income & Credits

Foreign Earned Income Exclusion (Form 2555)

Exclude up to ~$130,000 of foreign earned income (2025 tax year) if you qualify under the bona fide residence or physical presence test.

Learn more →

Treaty positions (Form 8833)

Claim benefits under the US-UK double tax treaty — residence tie-breaker, pension sourcing, and more.

Learn more →

Who this is for

Situations where this filing usually applies

Guides from our team on this topic

Ready to get this filed?

Tell us your situation and we’ll reply by email within 2 working days with our questions, then a written scope, fixed fee and document list.

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