State Tax Obligations US Expats UK Guide |

Introduction

You moved from San Francisco to London two years ago and now your former California tax accountant is still asking for your worldwide income to file your California Form 540 each year. You're paying full California state income tax at 13.3 percent top rate on your UK salary income with no California-source connection — on top of UK Income Tax at 45 percent top rate plus US federal tax at 37 percent top rate. Your integrated US-UK marginal tax rate is approaching 60+ percent because California operates as a "sticky state," requiring rigorous documentation of domicile abandonment that you never executed at departure. The state tax obligations US expats UK framework is the critically underappreciated layer of US-side tax compliance for UK-resident American expats — proper specialist coordination at departure substantially eliminates or minimizes continuing state tax exposure.

This guide is written for US expats moving from US states to the UK, US expats already resident in the UK with continuing state tax obligations to sticky states, US expats from clean break states evaluating proper severance documentation, US expats with state-source income continuing after UK relocation (state-source rental property, state-source business income, state-source partnership interests), and any US client requiring specialist evaluation of integrated state tax obligations alongside US federal and UK tax positioning. By the end, you will know exactly how state tax obligations for US expats in the UK operate in 2026. For our broader US-UK service overview, see our US-UK cross-border tax advisory service.

What Are State Tax Obligations for US Expats in the UK

State tax obligations US expats UK refer to the continuing US state-level tax compliance requirements that may apply to US expats living in the UK including state income tax filing obligations to former state of residence (where state tax domicile is not properly abandoned), state tax non-resident filing obligations on continuing state-source income, state tax part-year return filing for the year of UK relocation, and ongoing state tax compliance for any state-source income that continues after UK relocation. The IRS state tax reference sits at https://www.irs.gov/businesses/small-businesses-self-employed/state-and-local-tax.

The substantive state tax framework operates on two distinct concepts. First, state tax domicile — the concept of "permanent home" with the intent to return. Domicile is sticky under most state frameworks — the filer retains state domicile until they affirmatively establish a new domicile elsewhere AND abandon the prior state domicile through clear evidence of intent. Second, state tax residency — the concept of statutory residency based typically on days present in the state plus maintenance of permanent place of abode in the state.

The state tax exposure depends on the specific state of prior residence. States operate on a spectrum from "clean break" frameworks, which produce substantive state tax termination upon UK relocation, to "sticky state" frameworks, which produce continued state tax obligations on worldwide income for years or decades after UK relocation.

Clean break states include the nine no-state-income-tax states: Alaska, Florida, Nevada, New Hampshire (interest and dividends only; eliminated 2025), South Dakota, Tennessee (interest and dividends only; eliminated 2021), Texas, Washington, and Wyoming. US expats moving to the UK from these states face no state income tax obligations on departure or thereafter (subject to specific state-source income considerations where applicable). States such as New York operate as moderately sticky with the substantive 548-day rule under New York Tax Law Section 605 allowing termination of New York state tax residency upon departure with appropriate documentation. The HMRC reference for the integrated UK framework sits at https://www.gov.uk/.

Sticky states include California (CA Revenue and Taxation Code Sections 17014-17016 with a rigorous domicile retention framework), New Mexico (NM domicile retention framework), South Carolina (SC domicile retention framework), and Virginia (VA Code Section 58.1-302 with a multiple-prong domicile retention framework). US expats moving to the UK from sticky states face material continuing state tax exposure absent specific domicile abandonment execution including establishment of new permanent home (typically UK residence sufficient), abandonment of prior state ties (closure of state addresses, surrender of state driver's licence, surrender of state voter registration, closure of state bank accounts, removal of state-based professional licences), and clear documentation of intent to abandon prior state domicile.

The professional credential framework underpinning state tax obligations for US expats and UK evaluation typically includes US Certified Public Accountant (CPA) credentialing with state tax expertise, US IRS Enrolled Agent (EA) credentialing supporting US federal Form 1040 preparation, integrated state tax specialist expertise across multiple US states, and integrated cross-border specialist coordination with UK-side Self Assessment and Form 1116 Foreign Tax Credit positioning. The AICPA reference sits at https://www.aicpa-cima.com/.

This matters in 2026 because the September 2025 US-UK FATCA Intergovernmental Agreement data feed transmitted approximately 2.4 million US-person UK account records, advancing IRS and state tax automated detection of US-person UK financial activity, several states have actively increased state tax enforcement on former residents living abroad, and the integrated state tax positioning materially affects the overall US-UK combined marginal tax rate for US expats living in the UK. The IRS reference sits at https://www.irs.gov/.

The real consequences of inadequate state tax obligations US expats UK evaluation include continued state income tax on worldwide income at state marginal rates ranging from 4 percent to 13.3 percent on top of US federal tax and UK Income Tax, missed state tax non-resident filing on state-source income with state tax penalties, missed state tax part-year return filing on the departure year producing residency disputes years later, state tax audit exposure with multi-year liability assessment, and combined US-UK-state marginal tax rates exceeding 60 percent in the worst cases.

Why State Tax Obligations US Expats UK Matters More Than Ever in 2026

The state tax obligations US expats face in the UK evaluation matter materially in 2026 for several distinct reasons. First, the September 2025 US-UK FATCA Intergovernmental Agreement data feed transmitted approximately 2.4 million US-person UK account records from HMRC to the IRS. The IRS's automated detection mechanism increasingly shares information with state tax authorities through state-level inter-agency cooperation, enabling materially more advanced state-level automated detection of US-person UK financial activity by former state residents. You can read our broader guidance on our US-UK cross-border tax planning service.

Second, several US states have actively increased state tax enforcement on former residents living abroad. California Franchise Tax Board (FTB) enforcement has materially increased since 2022, with audit notices issued to former California residents living abroad, including UK-resident former California residents — substantively challenging the domicile-abandonment position where documentation is incomplete. Virginia Department of Taxation enforcement on former Virginia residents has similarly increased.

Third, the integrated state tax regime materially affects the overall combined US-UK marginal tax rate for US expats. UK Income Tax at top rate 45 percent (plus the basic rate restriction on mortgage interest under ITTOIA 2005 section 272A for buy-to-let), US federal income tax at top rate 37 percent, and state tax at top rate 13.3 percent (California) combined with limited Form 1116 Foreign Tax Credit relief produce integrated marginal rates that can approach or exceed 55-60 percent for high-earning UK-resident American expats from sticky states without proper state tax positioning.

Fourth, state tax does not flow through to Form 1116, the US federal Foreign Tax Credit on Form 1040 — state tax is paid in addition to US federal tax, with no UK tax credit relief mechanism. Many US expats incorrectly assume that the Form 1116 FTC relief applies broadly to all US tax exposure, when, in fact, state tax exposure operates as an additional tax liability separate from the Form 1116 FTC absorption against US federal tax. The IRS reference sits at https://www.irs.gov/.

Core Section: The State Tax Domicile and Residency Framework for US Expats

State tax domicile framework

State tax domicile operates on the substantive concept of "permanent home" — the place where the filer has their permanent and principal home with the intent to return. Domicile is sticky under most state frameworks, producing continuing state domicile until the filer affirmatively establishes a new domicile elsewhere AND abandons the prior state domicile.

The substantive domicile abandonment framework requires three elements typically — physical presence in the new domicile location (UK residence sufficient for most state frameworks), intent to make the new location the permanent home (subjective intent demonstrated through objective evidence), and abandonment of the prior state domicile (specific severance of prior state ties). All three elements must be satisfied for domicile abandonment to operate effectively.

The objective evidence supporting domicile abandonment typically includes UK residency status under the UK Statutory Residence Test, UK home establishment (purchase or long-term rental), UK employment establishment, closure of US state-based bank accounts, surrender of US state driver's licence (replacement with UK driving licence or international equivalent), surrender of US state voter registration, change of address with US federal government and US institutions, removal of US state-based professional licences (where applicable), filing as US state non-resident or part-year resident on the departure year tax return, declaring on filed returns that the filer is no longer a state resident or domiciliary, and other consistent evidence demonstrating intent to abandon prior state domicile.

Sticky state framework

California is the most aggressively sticky state under CA Revenue and Taxation Code Sections 17014-17016, with the California Franchise Tax Board (FTB) applying rigorous domicile-retention tests. The substantive California framework requires the filer to demonstrate domicile abandonment through clear and convincing evidence — the FTB typically presumes continued California domicile absent affirmative documentation of abandonment. The substantive California domicile abandonment factors include the nature of the new (UK) residence and connections, the closure of California connections (bank accounts, professional licenses, voter registration, driver's license), the disposition of California real property, the location of close family members, the location of business interests, and the intent to return to California.

New Mexico operates similarly under its domicile-retention framework, which requires affirmative documentation of domicile abandonment. South Carolina operates with a similar rigorous domicile retention policy. Virginia operates under VA Code Section 58.1-302, with a multiple-pronged domicile retention framework — Virginia is materially aggressive toward former Virginia residents.

Statutory residency framework

State statutory residency operates in parallel with state domicile, creating potential state tax residency even where state domicile is properly abandoned. The substantive statutory residency framework typically operates on two elements — days present in the state during the tax year (typically 183 days or more producing statutory residency), and maintenance of a permanent place of abode in the state.

New York operates the most well-known statutory residency framework under New York Tax Law Section 605. New York applies statutory residency where the filer spends more than 183 days in New York during the tax year AND maintains a permanent place of abode in New York for substantially all of the tax year. The 548-day rule under New York Tax Law Section 605(b) provides a safe harbor for former New York residents — the filer who spends at least 548 days during a continuous 24-month period outside New York (with no more than 90 days per year in New York during that period) is treated as a New York non-resident for the entire period, regardless of underlying domicile analysis. For UK-resident American expats from New York, the 548-day rule typically provides clearance, a substantive New York state tax exit upon relocation to the UK.

How US Expats Apply Integrated State Tax Departure and Compliance Workflow

The first step is the comprehensive pre-departure state tax diagnostic. The specialist documents the US expat's prior state of residence, state tax domicile, and residency positioning under the specific state framework, state-source income types likely to continue after UK relocation (state-source rental property, state-source business income, state-source partnership interests, state-source intangible income where applicable), and the integrated state tax exposure projection.

The second step is state tax domicile-abandonment planning. For US expats from sticky states, the specialist develops the comprehensive domicile abandonment documentation, including UK residency establishment evidence, US state bank account closure, US state driver's license surrender, US state voter registration surrender, professional license considerations, US state real property considerations (sale versus rental versus retention with non-resident positioning), and the integrated documentation package supporting the substantive domicile abandonment.

The third step is the departure year state tax return filing. The substantive departure year state tax return is typically filed as a part-year resident return reflecting the pre-departure state-resident portion and the post-departure non-resident portion of the departure year. The part-year return filing operates as the formal documentation establishing the state tax exit. California Form 540NR (non-resident or part-year resident return) is the substantive filing for the California departure year. New York Form IT-203 is the substantive New York departure year filing. Virginia Form 760PY is the substantive Virginia departure year filing. Other states operate similar part-year resident return frameworks. The AICPA state tax reference sits at https://www.aicpa-cima.com/.

The fourth step is the filing of the continuing state tax non-resident return, where applicable. US expats with continuing state-source income (state-source rental property, state-source business income, state-source partnership interests) typically face continuing state tax non-resident filing obligations for the state-source income portion only. The substantive non-resident return filing is limited to state-source income with no state tax on UK-source or other non-state-source income.

The fifth step is the integration of the US federal Form 1040 and the UK Self Assessment. State tax payments do not flow through Form 1116, the Foreign Tax Credit, on the US federal Form 1040; state tax is paid in addition to US federal tax, with no UK tax credit relief mechanism. The integrated planning evaluates the state tax exposure alongside the US federal tax exposure (with Form 1116 FTC absorption from UK Income Tax) and UK Income Tax exposure to project the integrated combined marginal tax rate.

The sixth step is the ongoing state tax monitoring and compliance. The post-departure ongoing engagement covers monitoring for any state tax notices or audit inquiries (particularly from sticky states such as California), responding to state tax automated detection notices, continuing state tax non-resident return filings where applicable, and integrated coordination of US federal Form 1040 and UK Self Assessment.

The seventh step is the strategic state tax restructuring, where appropriate. For US expats with material state-source income continuing after UK relocation the specialist evaluates restructuring options, including disposal of state-source assets (where commercially appropriate), restructuring of state-source business interests (where commercially appropriate), and other strategic positioning to minimize continuing state tax exposure.

Real-World Example — State Tax Obligations US Expats UK in Practice

Case Study: A Former California Resident Establishing Integrated State Tax Domicile Abandonment Plus UK Compliance

Michael is a US citizen, aged 41, formerly a resident of San Francisco, and is currently a Director at a US-based investment management firm. In July 2024, Michael accepted a London-based role with the firm's UK affiliate at a £165,000 annual salary plus a £45,000 annual performance bonus. Michael relocated to London in August 2024, establishing UK residence in a rented flat in Kensington. Michael is married to Lisa (a US citizen, joint Form 1040 filer) and has two children, Sophie (age 8, US-UK dual citizen) and James (age 6, US-UK dual citizen).

Michael's pre-departure California position included retained San Francisco principal residence worth $2.4 million (Michael and Lisa rented out the property after relocation rather than selling), retained Charles Schwab US brokerage worth $485,000, retained Fidelity 401(k) worth $385,000, retained Vanguard US IRA worth $185,000, ongoing California-source rental income from the San Francisco property after relocation, California professional licences (Michael held a California CFA registration through CalSavers program), California voter registration, California driver's licence, multiple California-based bank accounts at Wells Fargo and Bank of America, and California domicile establishment from 2008 onwards.

Michael's family had maintained connections with extended family in California (Michael's parents and siblings continued to reside there). Michael had retained the intent in 2024 to potentially return to California in retirement (15-20 years hence), but was committed to substantive UK residence during the early-stage UK assignment period.

Michael's pre-departure planning had been handled by his California-based tax CPA, who filed a standard California Form 540 for the 2023 California tax year (full California resident return) and continued filing a California Form 540 (full California resident return) for the 2024 California tax year despite the August 2024 UK relocation. The California Franchise Tax Board issued an automated notice in late 2025 requesting documentation supporting the 2024 California domicile positioning.

In December 2025, Michael engaged US-UK Tax for comprehensive state tax obligations for US expats, UK evaluation, and integrated US federal and UK compliance.

The US-UK Tax diagnostic identified material substantive issues. The 2024 California Form 540 filing as a full California resident was substantively incorrect — Michael's August 2024 UK relocation should have triggered a California part-year resident filing on Form 540NR with substantdomicile-abandonment documentation. The 2024 California domicile abandonment had not been documented at departure — Michael retained substantial California connections, including the San Francisco principal residence (now operated as California-source rental property), California professional licenses, California voter registration, California driver's license, California bank accounts, and the California extended family connection, plus retained intent to return to California in retirement.

The substantive 2024 California domicile abandonment was retroactively analyzed. The substantive evidence supporting California domicile abandonment included UK residency establishment under the UK Statutory Residence Test from August 2024 onwards, UK home establishment in Kensington, UK employment establishment with the UK affiliate, and clear physical presence in the UK throughout the post-August 2024 period. The substantive evidence supporting continued California domicile included the retained San Francisco principal residence (operated as a rental rather than disposed of), California professional licenses, California voter registration, California driver's license, California bank accounts, and California extended family connections, plus retained intent to return in retirement.

The US-UK Tax assessment concluded the 2024 California domicile abandonment positioning was substantively defensible but materially weakened by the incomplete severance documentation — the California Franchise Tax Board would likely accept the 2024 California part-year resident positioning provided substantive remediation documentation was executed in 2025-26 supporting the substantive intent to abandon California domicile from August 2024 onwards.

The 2025 California remediation workstream was developed. Michael executed substantive California severance documentation including closure of California Wells Fargo and Bank of America accounts (consolidated UK and US banking through London-based UK accounts and US-based Charles Schwab with non-California correspondence address), surrender of California driver's licence (replaced with UK driving licence), surrender of California voter registration, removal of California-based CalSavers professional registration (transitioned to alternative US-based professional registration framework), and clear documentation of the substantive intent to abandon California domicile from August 2024 onwards.

The retained San Francisco principal residence (operated as a California-source rental property generating approximately $84,000 in annual rental income) was retained — disposal was not commercially appropriate given the substantial equity position and the family's contingent California reconnection considerations. The retained California-source rental property continued to operate as California-source income, triggering a continuing California Form 540NR filing obligation on the California-source rental income portion only (no California tax on Michael's UK salary or other non-California-source income post-August 2024).

The amended 2024 California return was filed as California Form 540NR (non-resident or part-year resident return) reflecting the August 2024 California departure with appropriate part-year resident positioning. The California Franchise Tax Board accepted the amended filing, resulting in a refund of approximately $ 5,000 in California state tax (representing the California state tax overpayment on post-August 2024 UK-source salary income that had been incorrectly subjected to California state tax under the original Form 540 filing).

The 2025 California state tax filing was prepared as California Form 540NR (non-resident return), reflecting Michael's 2025 California non-resident status and California state tax on the California-source rental income portion only ($84,000 California-source rental income, producing approximately $7,200 California state tax). The 2026 California state tax filing will continue on Form 540NR.

The integrated US federal Form 1040 positioning was reviewed. Michael's 2024 US Form 1040 (filed by 15 June 2025 expat automatic extension deadline) included worldwide income with Form 1116 Foreign Tax Credit positioning on UK Income Tax paid on UK salary income (UK Income Tax substantially exceeded US federal tax on UK salary producing material Form 1116 FTC carryforward of approximately $32,500). The 2025 US Form 1040 framework continued the same positioning as Form 1116 for FTC carryforward accumulation.

The integrated UK Self Assessment was filed for the 2024-25 UK tax year with a split-year treatment claim under RDR3 Case 5 (starting full-time work in the UK), reflecting Michael's August 2024 UK arrival, with the UK-resident portion from approximately 1 August 2024 onwards. The UK Self Assessment for the 2025-26 UK tax year was prepared as a full UK tax-resident year.

The total US-UK Tax engagement scope covered the comprehensive state tax remediation and integrated US-UK ongoing workflow at approximately £18,500 fixed fee covering the 2024 California amended return, 2025 California state tax filing, integrated US federal Form 1040 review for 2024 and 2025, integrated UK Self Assessment for 2024-25 and 2025-26, and going-forward integrated state tax compliance plus US federal plus UK coordination. The going-forward annual integrated workflow is approximately £6,500, covering ongoing integrated US-state-UK compliance.

The outcome was comprehensive state tax remediation with a $58,000 California state tax refund on the 2024 amended Form 540NR, established a California Form 540NR non-resident filing framework from 2024 onwards, limiting California state tax to California-source rental income only, integrated US federal Form 1040 with substantial Form 1116 FTC carryforward, integrated UK Self Assessment with split-year treatment, and a going-forward integrated US-state-UK annual workflow. The case study illustrates the state tax obligations US expats face in practical operation — the substantive state tax framework serves as a critical layer of US-side compliance for UK-resident American expats, requiring specialist coordination alongside US federal and UK positioning.

Common Mistakes People Make With State Tax Obligations:: US Expats, UK

The first mistake is filing the departure departure-year return as a full statefull-staterather than part-yearsa part-year Most US expats who relocate to the UK partway through a US calendar tax year continue filing the departure year state tax return as full state resident under the assumption that the state tax year framework mirrors the US calendar tax year framework — but the substantive state tax framework typically operates on residency-period basis with part-year resident filing on the appropriate state form (California Form 540NR, New York Form IT-203, Virginia Form 760PY, similar forms by state). The IRS state tax reference sits at https://www.irs.gov/businesses/small-businesses-self-employed/state-and-local-tax.

The second mistake is failing to execute proper state tax domicile abandonment documentation at departure. The substantive state tax domicile abandonment requires affirmative establishment of new domicile location plus abandonment of prior state domicile through clear evidence of intent — most US expats relocating to the UK fail to execute the substantive severance documentation (closure of state bank accounts, surrender of state driver's licence, surrender of state voter registration, removal of state professional licences) producing continued state tax exposure to sticky states for years after UK relocation.

The third mistake is assuming Form 1116 Foreign Tax Credit relief applies to state tax. Form 1116 Foreign Tax Credit on the US federal Form 1040 operates on US federal tax only — state tax is paid in addition to US federal tax, with no UK tax credit relief mechanism. Many US expats incorrectly assume that the broad Form 1116 FTC relief applies to all US tax exposure, including state tax, leading to a material misunderstanding of the integrated US-UK combined marginal tax rate.

The fourth mistake is failing to plan for sticky state exposure before relocation. US expats relocating to the UK from sticky states (California, New Mexico, South Carolina, Virginia) face material ongoing state tax exposure absent proactive domicile-abandonment planning at departure. Pre-departure planning materially affects the substantive state tax positioning — post-departure remediation is materially more complex and often yields partial outcomes rather than comprehensive pre-departure planning.

The fifth mistake is failing to file state non-resident tax returns for continuing state-source income. US expats with continuing state-source income after UK relocation (state-source rental property, state-source business income, state-source partnership interests) typically face continuing state tax non-resident filing obligations for the state-source income portion only — failure to file results in state tax penalties, interest, and potential automated detection escalation. The AICPA reference sits at https://www.aicpa-cima.com/.

The sixth mistake is engaging only state-only CPAs or only US federal CPAs without integrated UK coordination. The substantive integrated state tax obligations US expats UK evaluation requires coordination across the state tax framework, the US federal Form 1040 framework with Form 1116 Foreign Tax Credit positioning, and the UK Self Assessment framework — generalist state-only CPAs and US federal-only CPAs typically lack the integrated cross-border depth required for substantive coordination, producing material missed positioning opportunities.

How US-UK Tax Can Help You With State Tax Obligations for US Expats in the UK

US-UK Tax is a specialist US-UK cross-border advisory firm with comprehensive expertise on the integrated state tax framework for UK-resident American expats alongside US federal Form 1040 and UK Self Assessment positioning. Our team holds UK Chartered Tax Adviser (CTA) credentials under the Chartered Institute of Taxation supporting UK Self Assessment and HMRC compliance, US IRS Enrolled Agent (EA) credentialing supporting substantive US federal Form 1040 preparation and IRS representation, US state tax specialist coordination across the principal sticky states (California, New York, Virginia, New Mexico, South Carolina) and moderate-framework states (Massachusetts, Illinois, Maryland, others), and integrated cross-border specialist expertise across federal, state, and UK frameworks simultaneously. The CIOT reference sits at https://www.tax.org.uk/.

For US expat clients we deliver comprehensive integrated state tax obligations US expats UK engagement including pre-departure state tax diagnostic and domicile abandonment planning, departure year state tax part-year resident return filing (California Form 540NR, New York Form IT-203, Virginia Form 760PY, and equivalent state forms), ongoing state tax non-resident return filing on continuing state-source income, state tax audit response and remediation where applicable (California Franchise Tax Board notices, New York Department of Taxation notices, Virginia Department of Taxation notices, similar state inquiries), integrated US federal Form 1040 preparation with Form 1116 Foreign Tax Credit positioning under IRC Section 904(c), integrated UK Self Assessment preparation with split-year treatment under HMRC RDR3 framework and UK Foreign Income and Gains regime positioning where applicable, Form 8833 treaty election under Article 18(5) on UK workplace pensions and SIPPs, Form 8621 PFIC analysis on UK fund holdings, Form 8938 FATCA filing, FBAR via FinCEN BSA E-Filing, and ongoing integrated US federal plus state plus UK annual workflow coordination. You can read our broader guidance on our US-UK cross-border tax advisory service .

Standard integrated US-UK state tax obligations for US expats; UK engagement fees vary by complexity. Pre-departure state tax diagnostic and domicile abandonment planning typically costs £2,500 to £8,500, depending on the complexity of the state framework. Departure year integrated state tax plus US federal plus UK coordination typically £5,500 to £18,500 depending on substantive scope. Going forward, the annual integrated state-federal-UK workflow typically costs £3,800 to £14,500+, depending on complexity. State tax audit response engagement typically ranges from £6,500 to £25,000+, depending on the substantive scope. Get in touch with our team today at or visit https://www.us-uktax.com/ to discuss your situation.

Conclusion

Three takeaways matter most for US expats evaluating state tax obligations US expats UK positioning in 2026. First, the substantive state tax framework operates as a critical layer of US-side compliance for UK-resident American expats — state tax domicile and state tax residency rules vary materially by state,e with "sticky states" (California, New Mexico, South Carolina, Virginia) applying rigorous domicile retention tests producing continued state tax obligations on worldwide income for years or decades after UK relocation. In contrast, the "clean break states" (Florida, Texas, Nevada, Wyoming, no-state-income-tax states, and states such as New York with the 548-day safe harbor rule) allow substantive state tax termination upon UK relocation, provided proper severance documentation is provided. Second, state tax does not flow through Form 1116 Foreign Tax Credit on the US federal Form 1040 — state tax is paid in addition to US federal tax, with no UK tax credit relief mechanism producing materially elevated integrated US-UK combined marginal tax rates for US expats from sticky states without proper state tax positioning (integrated marginal rates can approach or exceed 60 percent in the worst cases). Third, proper state tax domicile abandonment at departure including UK residency establishment, US state bank account closure, US state driver's licence surrender, US state voter registration surrender, removal of US state professional licences, and integrated departure year state tax part-year resident return filing (California Form 540NR, New York Form IT-203, Virginia Form 760PY, or equivalent state form) is materially important to terminate state tax exposure on the substantive worldwide income basis — many US expats continue paying state tax to sticky states for years after UK relocation simply because they failed to execute proper domicile abandonment at departure. Speak to a US-UK Tax adviser today — contact us at or visit https://www.us-uktax.com/.

Frequently Asked Questions About State Tax Obligations for US Expats in the UK

Q: Do I still have to pay US state tax after moving to the UK?

A: It depends on the specific US state of prior residence and whether you executed proper state tax domicile abandonment at departure. US expats from "clean break states" (Florida, Texas, Nevada, Wyoming, no-state-income-tax states) face no continuing state tax exposure on departure. US expats from moderate-framework states (New York with a 548-day safe harbor rule, Massachusetts, Illinois) typically achieve a clean state tax exit with a proper part-year resident return filing on the departure year and substantive severance of state ties. US expats from "sticky states" (California, New Mexico, South Carolina, Virginia) face ongoing state tax exposure on worldwide income, absent rigorous documentation of domicile abandonment at departure. The substantive analysis requires an evaluation of the specific state framework and the individual filer's circumstances. The IRS state tax reference sits at https://www.irs.gov/businesses/small-businesses-self-employed/state-and-local-tax.

Q: What is California's "sticky state" framework for former residents?

A: California operates as the most aggressively sticky US state under California Revenue and Taxation Code Sections 17014-17016, with the California Franchise Tax Board (FTB) applying rigorous domicile retention tests on former California residents. The substantive framework presumes continued California domicile absent affirmative documentation of domicile abandonment — former California residents face material continuing California state tax exposure on worldwide income unless they execute clear and convincing evidence of California domicile abandonment including establishment of new permanent home elsewhere (UK residence sufficient), abandonment of prior California ties (closure of California bank accounts, surrender of California driver's licence, surrender of California voter registration, removal of California professional licences, disposition of California real property where commercially appropriate), and clear documentation of intent to abandon California domicile. California's top state tax rate is 13.3 percent, creating material exposure for high-earning UK-resident American expats from California who have not properly abandoned their domicile.

Q: How does New York's 548-day rule work for UK-resident American expats?

A: New York Tax Law Section 605(b) provides a safe harbor rule for former New York residents living abroad. The substantive 548-day rule treats the filer as a New York non-resident for the entire 548-day period (or more) where the filer spends at least 548 days during a continuous 24-month period outside New York AND spends no more than 90 days in New York during any year of that period. For UK-resident American expats from New York, the 548-day rule typically provides a clean, substantive New York state tax exit upon UK relocation — the filer becomes a New York non-resident for the entire 548-day period, regardless of underlying domicile analysis. The 548-day rule operates as one of the most expat-friendly state tax frameworks in the US, providing a substantively favorable position for UK-resident American expats from New York.

Q: Does Form 1116 Foreign Tax Credit relief apply to state tax?

A: No. Form 1116 Foreign Tax Credit on the US federal Form 1040 operates on US federal tax only — state tax is paid in addition to US federal tax, with no UK tax credit relief mechanism. Many US expats incorrectly assume that the broad Form 1116 FTC relief applies to all US tax exposure, including state tax. Still, the integrated framework treats state tax as an additional liability separate from the Form 1116 FTC absorption against the US federal tax. The integrated US-UK combined marginal tax rate for US expats from sticky states without proper domicile abandonment can approach or exceed 60 percent, including UK Income Tax at the top rate of 45 percent, US federal tax (after Form 1116 FTC absorption) at residual rates, and state tax at the state top rate of 13.3 percent (California).

Q: What evidence supports state tax domicile abandonment?

A: The substantive state tax domicile abandonment evidence typically includes establishment of new permanent home in the UK (purchase or long-term rental), UK residency status under the UK Statutory Residence Test, UK employment establishment, closure of US state-based bank accounts, surrender of US state driver's licence (replacement with UK driving licence or international equivalent), surrender of US state voter registration, change of address with US federal government and US institutions, removal of US state-based professional licences (where applicable), filing as US state non-resident or part-year resident on the departure year tax return, declaring on filed returns that the filer is no longer a state resident or domiciliary, disposition of US state real property where commercially appropriate (or rental positioning with non-resident landlord status), and other consistent evidence demonstrating intent to abandon prior state domicile. The AICPA state tax reference sits at https://www.aicpa-cima.com/.

Q: How is the departure year state tax return filed?

A: The departure year state tax return is typically filed as a part-year resident return on the applicable state form — California Form 540NR (non-resident or part-year resident return), New York Form IT-203 (non-resident and part-year resident return), Virginia Form 760PY (part-year resident return), and equivalent forms by state. The substantive part-year resident return reflects the pre-departure state-resident portion (with state tax on worldwide income during that portion) and the post-departure non-resident portion (with state tax on state-source income only during that portion). The departure year part-year resident return filing serves as the formal documentation establishing the state tax exit. It is materially important for terminating state tax exposure on worldwide income going forward.

Q: What state-source income continues after I move to the UK?

A: State-source income that continues after UK relocation typically includes state-source rental property income (where former US state residence is retained as rental property), state-source business income (where business operations continue in the former US state), state-source partnership interests (where the partnership operates in the former US state), state-source intangible income (limited categories under most state frameworks), and state-source compensation for services performed in the former US state. UK-resident American expats with continuing state-source income typically face continuing state tax non-resident filing obligations on the state-source income portion only, with no state tax on UK-source or other non-state-source income. The substantive non-resident return filing is limited to state-source income.

Q: Can US-UK Tax help me with my state tax positioning?

A: Yes. Our standard integrated US-UK state tax obligations US expats UK engagement covers pre-departure state tax diagnostic and domicile abandonment planning, departure year state tax part-year resident return filing across California Form 540NR, New York Form IT-203, Virginia Form 760PY, and equivalent state forms, ongoing state tax non-resident return filing on continuing state-source income, state tax audit response and remediation where applicable, integrated US federal Form 1040 preparation with Form 1116 Foreign Tax Credit positioning under IRC Section 904(c), integrated UK Self Assessment preparation with split-year treatment under HMRC RDR3 framework and UK Foreign Income and Gains regime positioning where applicable, Form 8833 treaty election under Article 18(5) on UK workplace pensions and SIPPs, Form 8621 PFIC analysis on UK fund holdings, Form 8938 FATCA filing, FBAR via FinCEN BSA E-Filing, and ongoing integrated US federal plus state plus UK annual workflow coordination. Pre-departure state tax diagnostic and domicile abandonment planning fees typically £2,500-£8,500; departure-year integrated coordination typically £5,500-£18,500; and going-forward annual integrated state-federal-UK workflow typically £3,800-£14,500+,, depending on complexity. Contact to discuss your situation.