Do I owe US self-employment tax if I am self-employed and live in the UK?

Generally not, but only if you claim the exemption properly. Under the US-UK social security agreement a self-employed person is covered by the system of the country where they reside, so a UK resident pays UK National Insurance. The IRS expects a copy of a statement from the UK authorities confirming that coverage to be attached to each US return on which the exemption is claimed.

Does the foreign earned income exclusion remove self-employment tax?

No. The IRS Schedule SE instructions state that foreign earnings from self-employment cannot be reduced by the foreign earned income exclusion when computing self-employment tax. Publication 54 confirms that all self-employment income is taken into account, including excluded income. The exclusion reduces US income tax only, so a self-employed person abroad needs a social security agreement exemption instead.

How do I get a certificate of coverage from HMRC?

A UK-resident self-employed person applies to HMRC using the CA9107 route on GOV.UK, which lists the USA among the agreement countries and is open to self-employed applicants. The application is made online and asks for your name, National Insurance number, nationality, date of birth, ordinary residence and self-employment details. HMRC does not publish a fixed turnaround time on that page.

What do I write on the US return to claim the exemption?

The 2025 Schedule SE instructions say that if your self-employment income is exempt under a social security agreement you do not complete Schedule SE. You attach a copy of the foreign statement to Form 1040 and, on Schedule 2 line 4, check box 3 and enter Exempt, see attached statement. For earlier years, follow the line references in that year's instructions.

Did I need to file a US return in a year with very low profits?

Almost certainly. IRS Publication 54 states that if your net earnings from self-employment are 400 dollars or more, you must file a return even if your gross income is below the normal filing threshold for your filing status. Living in the UK does not raise that figure. A certificate of coverage removes the self-employment tax but not the requirement to file.

Can I use the streamlined procedures if most of what I owe is self-employment tax?

Yes, if your failure to file was non-willful and you meet the non-residency test. The Streamlined Foreign Offshore Procedures require three years of returns, six years of FBARs and Form 14653, with all tax and interest paid on submission and no offshore penalty. Attaching a UK certificate of coverage to each return can remove the self-employment tax before that payment is calculated.

Missed US Tax Returns: UK Self-Employed & NI Certificates

Missed US tax returns for a self-employed American living in the UK usually produce their largest potential bill from US self-employment tax, not from income tax, and that bill is normally removed by a certificate of coverage issued by HMRC. UK income tax paid at higher and additional rates tends to cover the US income tax through the foreign tax credit, but nothing on the income tax side of the return touches self-employment tax. The exemption comes from the US-UK social security (Totalization) agreement, and the IRS expects documentary proof of UK coverage to be attached to each return on which the exemption is claimed.

Why are Missed US tax returns more expensive for the self-employed?

Self-employment tax is the US social security and Medicare charge on net earnings from a trade or business carried on as a sole proprietor or partner. It is computed on Schedule SE and reported in the other taxes section of the return, separately from income tax. IRS Publication 54 at https://www.irs.gov/publications/p54 states that self-employed US citizens and residents generally follow the same self-employment tax rules whether they live in the United States or abroad. Living in London, invoicing UK clients in sterling and being paid into a UK account changes nothing on its own.

The size of the charge follows from how Schedule SE works. The social security portion applies up to an annual earnings ceiling, which the 2025 Schedule SE instructions at https://www.irs.gov/instructions/i1040sse give as 176,100 dollars of self-employment income for 2025. The Medicare portion has no ceiling, so it applies to all net earnings, a point Publication 54 makes directly. On top of that, the same instructions explain that a 0.9% Additional Medicare Tax, figured on Form 8959, may apply where self-employment income exceeds 250,000 dollars for a married couple filing jointly, 125,000 dollars for married filing separately, or 200,000 dollars for other filing statuses. A high-earning barrister or consultant is exposed to all three layers.

Does the foreign earned income exclusion reduce US self-employment tax?

No. The foreign earned income exclusion reduces income subject to US income tax and has no effect on self-employment tax. The Schedule SE instructions say that foreign earnings from self-employment cannot be reduced by the foreign earned income exclusion when computing self-employment tax. Publication 54 puts it the other way round: you must take all of your self-employment income into account when figuring net earnings from self-employment, including income that is excluded for income tax purposes. The publication illustrates the point with a consultant who qualifies for the exclusion and still owes self-employment tax on the whole of the net profit.

Can the foreign tax credit be used against self-employment tax?

No. The foreign tax credit claimed on Form 1116 is a credit against US income tax. Self-employment tax is a separate tax added to the return after the income tax has been computed and credited, so UK income tax paid through Self Assessment cannot be set against it, however large the surplus of credits. In practice this means a UK resident paying tax at 40% or 45% on professional profits can carry forward unused foreign tax credits year after year and still show a balance due made up entirely of self-employment tax.

What does the US-UK Totalization Agreement say about self-employed people?

A Totalization agreement is a bilateral social security agreement that assigns a worker's coverage to one country so that contributions are not paid to two systems on the same earnings. For self-employed people the assignment is by residence. Publication 54 states that, under these agreements, self-employed persons will only be covered by the social security system of the country where they reside, and the Schedule SE instructions say that under the agreements you must generally pay social security and Medicare taxes to only the country in which you live.

Applied to the United Kingdom, a self-employed US citizen who resides in the UK is covered by UK National Insurance and is exempt from US self-employment tax on those earnings. The Social Security Administration publishes its description of the UK agreement at https://www.ssa.gov/international/Agreement_Pamphlets/uk.html, and that pamphlet is the place to check the detailed coverage rules for unusual fact patterns. The exemption is not automatic in the sense of being applied by the IRS without evidence. It has to be claimed on each return, and it has to be supported.

What is a certificate of coverage and who issues it for a UK resident?

A certificate of coverage is an official statement from one country's social security authority confirming that a named person's earnings for a stated period are covered by that country's system, and therefore exempt from the other country's contributions. For a self-employed person resident in the UK, the covering country is the UK, so the certificate comes from HMRC and not from the US Social Security Administration. The SSA issues certificates in the opposite situation, where a person remains covered by the United States and needs to prove exemption from the foreign charge.

HMRC's current route is the form known as CA9107. The guidance page, last updated on 7 July 2026, is at https://www.gov.uk/guidance/apply-for-a-certificate-to-confirm-you-pay-uk-national-insurance-when-working-in-a-country-that-has-a-social-security-agreement-with-the-uk-ca9107. It confirms that employers, employees, self-employed people and agents can use the form, that the USA is one of the listed agreement countries, and that the application is made online, signing in either with existing HMRC sign-in details or with an email address and confirmation code. A different form covers the EU, EEA and Switzerland, and older commentary that points self-employed applicants to that other form is out of date for US purposes.

According to the same GOV.UK page, the application asks for the following information.

Your name and any previous names
Your National Insurance number, nationality and date of birth
Where you are ordinarily resident
Details of your employment or self-employment, including the relevant addresses
The period for which coverage needs to be confirmed, which in a late-filing case should match the US tax years being filed

The wording of the form is built around someone going to work in the other country, which does not describe a US citizen who simply lives and practises in the UK. In the applications we support, the explanation given is straightforward: the applicant is a US person, resident in the UK, self-employed there, paying UK National Insurance, and requires confirmation of UK coverage for the US-UK agreement so that exemption from US self-employment tax can be claimed. HMRC's page does not publish a fixed turnaround time. It links instead to HMRC's general tool for checking when a reply can be expected.

How is the exemption claimed on the US return?

The Schedule SE instructions set out the mechanics precisely. Under the exception for US citizens or resident aliens living outside the United States, a person whose self-employment income is exempt from self-employment tax under a social security agreement does not complete Schedule SE at all. Instead, a copy of the foreign statement is attached to Form 1040, 1040-SR or 1040-NR, and on Schedule 2 (Form 1040), line 4, box 3 is checked and the words Exempt, see attached statement are entered. That wording and line reference are taken from the 2025 instructions.

Three practical points follow for a multi-year catch-up.

Each year's return needs its own copy of the certificate attached. One certificate covering the whole period can be copied to every return, provided the dates on it cover that year.
Form layouts and line references change between years. A return for an earlier year should follow that year's Schedule SE and Form 1040 instructions for where the exemption notation goes, not the 2025 references.
The business income itself is still reported. Schedule C, or the partnership reporting for an LLP member, is completed in the normal way, and the profit flows into income tax. Only the self-employment tax computation is switched off.

Can HMRC issue a certificate of coverage retrospectively for past years?

This is the question every late filer asks, and the honest position is that HMRC's published guidance does not answer it either way. The CA9107 page sets out who can apply and what is needed, and it contains specific timing restrictions for one other country, but it says nothing about applications for periods that have already ended in relation to the USA. It neither promises retrospective certificates nor rules them out.

What a late filer can control is the quality of the request. The certificate is a statement of fact about where contributions were due and paid, and HMRC holds the records that establish that fact: the date self-employment was registered, the Self Assessment returns filed, and the Class 2 and Class 4 contributions charged in each year. An application that states the exact start date needed, explains that the certificate is required to support US returns for specified earlier years, and is consistent with HMRC's own records is the one most likely to produce a certificate with useful dates. An application that asks only for the current year produces a certificate that does not help the oldest return in the package.

What should you do if the certificate is still pending when the late returns are ready?

Sequence matters more here than anywhere else in the project. The certificate application should be the first step taken, before the bookkeeping is converted to dollars and before the returns are drafted, because it is the one item whose timing is outside the preparer's control. In most engagements the certificate arrives while the returns are still being prepared and the question never arises.

Where it has not arrived, there is no published IRS procedure for a pending certificate, so the choice is between positions that each carry a cost. The instructions tell the filer to attach a copy of the foreign statement, and a return claiming the exemption without one does not meet that instruction. The options, as we set them out to clients, are these. First, hold the filing for a short and defined period if nothing else forces the date. Second, file claiming the exemption, with a dated explanatory statement, evidence that the application to HMRC has been made, and UK Self Assessment records showing the National Insurance charged for each year, and then send the certificate when it is issued, accepting that the IRS may question the claim in the meantime. Third, file with Schedule SE completed and the tax paid, and reclaim it later on an amended return once the certificate is in hand, accepting the cash cost and the wait for a refund.

How do UK Class 2 and Class 4 National Insurance fit in?

UK coverage for the self-employed is delivered through Class 2 and Class 4 National Insurance, both of which most people pay through Self Assessment. The current rules are at https://www.gov.uk/self-employed-national-insurance-rates. For the 2026 to 2027 tax year, Class 2 contributions are treated as paid where profits are 7,105 pounds or more a year, so nothing is actually payable; below that level a person can choose to pay voluntary Class 2 contributions at 3.65 pounds a week. Class 4 is charged at 6% on profits between 12,570 pounds and 50,270 pounds and at 2% on profits above 50,270 pounds.

Those are the figures for the current year only. Rates and the structure of Class 2 have changed more than once in recent years, so for each late year the amounts should be read from that year's Self Assessment calculation and not assumed from today's table. The calculations themselves are worth keeping in the file. They are the plainest evidence that UK contributions were due on the same profits the IRS would otherwise charge, and they support both the certificate application and any later query on the US returns.

Were US returns required even in low-profit years?

Yes, almost always. Publication 54 states that if your net earnings from self-employment are 400 dollars or more, you must file a return even if your gross income is below the filing threshold for your filing status. The Schedule SE instructions express the same test as 400 dollars or more on line 4c of the schedule. There is no higher threshold for people living abroad.

For a late filer this has two consequences. A start-up year, a pupillage year, a sabbatical year or a year of part-time consultancy alongside other work was very likely a year in which a US return was due, even though the income looked too small to matter. And the certificate of coverage removes the self-employment tax, not the filing obligation. A year with UK coverage and no US tax due is still a year for which a return should exist, with the exemption properly claimed on it.

How does the certificate interact with a streamlined submission?

Most non-willful late filers resident in the UK use the Streamlined Foreign Offshore Procedures, described by the IRS at https://www.irs.gov/individuals/international-taxpayers/us-taxpayers-residing-outside-the-united-states. The procedure calls for returns for the most recent 3 years for which the due date has passed, FBARs for the most recent 6 years for which the FBAR due date has passed, and a certification of non-willful conduct on Form 14653. The full tax and statutory interest must be paid with the submission. Eligible filers who follow the instructions are not charged failure-to-file, failure-to-pay, accuracy-related, information return or FBAR penalties, and the foreign procedure carries no offshore penalty.

Because the tax shown as due must be paid in full with the package, the self-employment tax position decides the size of the cheque. Three returns with certificates attached and the exemption claimed may show nothing to pay beyond any residual income tax. The same three returns without certificates show three years of self-employment tax plus interest. That is why the certificate belongs at the start of a streamlined project and not at the end. Each return in the package is marked Streamlined Foreign Offshore in red at the top, as the IRS page requires, and the certificate copy is attached to each one.

Self-employed people also tend to have more reportable accounts than employees: a business current account, a tax reserve account, a client or chambers account over which they have signature authority. The FBARs for the six-year period are filed electronically through FinCEN's BSA E-Filing System at https://bsaefiling.fincen.gov with the late-filing reason given there, and the account list should be reconciled to the business records used for Schedule C so the two sets of filings tell the same story.

What if a year includes both UK employment and self-employment?

Mixed years are common and are poorly covered in most guidance. A consultant who left a salaried role in September and began invoicing in October, a barrister with a part-time judicial or teaching post, or an LLP member who also draws a salary from a separate company all have two streams with different treatment. The UK salary is reported on the US return as wages. It is subject to Class 1 National Insurance through payroll in the UK and is not self-employment income, so it does not appear on Schedule SE and needs no exemption notation of its own.

The self-employed profits for the same year are the earnings that need the certificate. When applying to HMRC, the period requested should begin on the date self-employment started, and the certificate should describe the self-employment and not the earlier job. Two errors recur in returns we are asked to correct: the whole year's income, salary included, entered on Schedule C and pushed through Schedule SE, and the opposite error of treating consultancy fees as wages because they came from a former employer. Either makes the return inconsistent with the UK Self Assessment record and with the certificate.

For LLP members the outline is brief, because the detailed profit-share mechanics are covered in a separate post on this site. A member's share of UK LLP profits is charged to Class 4 National Insurance in the UK as self-employed income, and on the US side a partner's distributive share of trading income is generally net earnings from self-employment. The certificate therefore does the same job for an LLP member as for a sole practitioner, and should be requested from the date of admission to membership.

What if part of the year was spent working in the United States?

The second gap is the self-employed person who is resident in the UK but physically works in the US for part of a year: a consultant on a three-month New York engagement, or counsel instructed on a US arbitration. Because the agreement assigns self-employed coverage by residence and not by where the work is done, a person who remains resident in the UK throughout continues to look to UK coverage, and the certificate should span the whole year. The income tax analysis does change, since income earned for work performed in the United States is US-source and does not qualify for the foreign earned income exclusion, but that is a separate question from social security coverage.

The harder case is a genuine change of residence during the year, such as a move to the UK in May or a return to the US in the autumn. Coverage then belongs to each country for its own part of the year. US self-employment tax is due on the earnings of the US-resident period, the certificate from HMRC should cover only the UK-resident period, and the return has to split the profits between the two with a clear statement of the dates. Days spent in the US also matter for a separate reason: the streamlined non-residency test for citizens and green card holders requires no US abode and at least 330 full days outside the United States in at least one of the three years, so a long US engagement in every year can put eligibility for the foreign procedure in doubt.

Worked illustration: a London barrister with three unfiled years

The following is an illustration only, with invented figures and an assumed exchange rate of 1.27 dollars to the pound used purely for the example. A US citizen has practised at the London Bar for ten years and has never filed a US return. Net profits are 160,000 pounds a year, which at the assumed rate is 203,200 dollars. UK income tax and Class 4 National Insurance have been paid in full through Self Assessment every year. She qualifies for the Streamlined Foreign Offshore Procedures and will file the three most recent years and six years of FBARs.

On the income tax side, the UK tax paid on these profits exceeds the US income tax on the same income in each year of the illustration, so the foreign tax credit reduces the US income tax to nil and leaves credits to carry forward. Without a certificate of coverage, each return would then add self-employment tax: the social security portion on net earnings up to the annual ceiling, which for 2025 is 176,100 dollars, the Medicare portion on all net earnings, and potentially the 0.9% Additional Medicare Tax on any net earnings above the 200,000 dollar threshold for a single filer. Three years of that, with interest, would have to be paid with the submission.

With the certificate, the result is different. She applies to HMRC through the CA9107 route at the outset, asking for confirmation of UK coverage from a start date that covers the earliest of the three years. Each return reports the profits on Schedule C, omits Schedule SE, carries the notation required by that year's instructions, and has a copy of the certificate attached. In this illustration the amount due with the streamlined package falls to nil, and the cost of becoming compliant is the cost of preparing the filings properly.

What should a self-employed late filer do first?

Our work in these cases is preparation and compliance: the returns, the FBARs, the certification and the supporting attachments, assembled so that the submission is complete on the day it is posted. If you are self-employed in the UK with unfiled US returns, the certificate of coverage is the first document to ask for and the last one to leave out.