Do I need to file both a US return and a UK Self Assessment if I work in London banking?

Almost certainly both. The United States taxes on citizenship, so a US citizen or green card holder files Form 1040 on worldwide income wherever they live. The UK taxes on residence, and a banker working full time in London will normally be UK resident under the automatic tests set out on GOV.UK, one of which is spending 183 or more days in the UK in the tax year. A Self Assessment return is separately required by triggers such as Capital Gains Tax being due, untaxed investment or foreign income, or a partnership interest, all common at this level.

Which tax year does my London bonus belong in?

For UK purposes, the year containing the payment date, since employment income is broadly charged on receipt with PAYE applied at payment. For US purposes, the calendar year containing that same date. Because the UK year ends 5 April, a bonus paid in February sits in the UK year ending that April but in the earliest weeks of a US calendar year that also holds the following April to December salary. The performance year the bonus was earned in is usually a third, earlier year, and deferred share tranches then vest in later years again.

Why is my foreign tax credit unusable when I paid more UK tax than US tax?

Two structural reasons. First, Form 1116 is computed separately for each category, and a general category credit from salary, bonus and equity can never offset US tax on passive income such as dividends and interest. Second, on the default cash basis UK tax is creditable in the US year it is paid, so PAYE, balancing payments and payments on account bunch into years that do not match the income. IRS Publication 514 confirms the tax year means the year of your US return, not your UK return. The result is excess credit in one year and a shortfall in another.

Can I claim a foreign tax credit for National Insurance contributions?

No. National Insurance is a social security contribution rather than an income tax, and IRS Publication 514 states that no deduction or credit is allowed for social security taxes paid to a country with which the United States has a social security agreement. The IRS position generally is that only income, war profits and excess profits taxes qualify. What the US-UK totalization agreement gives you instead is protection from being charged to both systems on the same earnings, with a certificate of coverage evidencing the position for a worker sent to the UK on a time-limited assignment.

Do I have to report my UK current account and share-plan account to the IRS?

Usually yes, on two separate forms. FinCEN Form 114 is required where the aggregate value of foreign financial accounts exceeded $10,000 at any point in the calendar year, filed through FinCEN's BSA E-Filing System, due 15 April with automatic extension to 15 October. Form 8938 applies where specified foreign financial assets exceed the threshold for filers abroad, which the IRS sets at more than $200,000 at year end or $300,000 at any time if unmarried, and $400,000 or $600,000 if married filing jointly. Filing one does not relieve the other.

How long can I carry an unused foreign tax credit forward?

IRS Publication 514 confirms unused foreign taxes carry back one year and forward ten years, and that carryovers stay within the same separate category. Absorption takes current-year taxes first and then the oldest carryover layer, so the oldest layer is always the one nearest expiry. Keeping it usable means preparing the carryover reconciliation every year, even in years with no new foreign income in that category, allocating deductions consistently, considering the accrual election to align UK tax with the right year, and planning which future years will actually produce US general category tax.

US UK Tax Returns Preparation: Investment Bankers

US UK tax returns preparation for an American working in London banking means building two returns out of one compensation package, on two different tax years, with the foreign tax credit as the only workable bridge between them. You file a Form 1040 with the IRS for the calendar year and a Self Assessment return with HMRC for the year ended 5 April, and the same salary, bonus and equity has to be re-cut for each. The compliance risk in these engagements is almost never the salary line. It is the timing: a bonus awarded for one UK performance year, paid in another, and deferred into share awards that vest across three later US years, with PAYE withheld on a schedule that matches neither filing calendar. Get the sequencing wrong and you generate a large foreign tax credit you cannot use in the year you need it. This is the highest-compensation, highest-complexity return we prepare, and what follows is the set of mechanics that actually break it.

Do Investment Bankers in London Have to File Both a US and a UK Return?

In almost every case, yes. The United States taxes on citizenship, so a US citizen or green card holder files a Form 1040 reporting worldwide income regardless of where they live and regardless of where the employer sits. The United Kingdom taxes on residence, and a banker working full time in a London office will normally be UK resident: GOV.UK sets out the automatic residence tests, one of which is simply spending 183 or more days in the UK in the tax year. Two live filing obligations therefore sit on the same income, reconciled by the US-UK income tax treaty and, on the US return, by the foreign tax credit claimed on Form 1116.

The two systems do not merely overlap; they measure different things. HMRC wants the UK tax year picture, including the UK-chargeable portion of internationally mobile equity. The IRS wants the calendar-year picture of worldwide income, split between US-source and foreign-source, with creditable foreign income taxes matched to the year the US return covers. Neither return is a translation of the other, and a preparer who builds one and then tries to derive the other from it will produce a credit position that does not hold up.

How Do the Two Tax Years Break a Banking Return?

The UK tax year runs from 6 April to 5 April, and GOV.UK confirms the current year runs from 6 April 2026 to 5 April 2027. The US return is for the calendar year. That single structural fact drives most of the work. A P60 reports pay and tax for a year ending 5 April, so no single P60 ever matches a US calendar year. One Form 1040 draws on two P60 periods: the tail of the year ended 5 April, covering January to early April, and the front of the following year, covering 6 April to 31 December. Producing a defensible calendar-year employment figure means working from monthly payslips, not from an annual certificate.

The same problem applies to the tax itself, and this is where the credit gets stranded. Under the default cash method, foreign income taxes are creditable in the US year they are paid. PAYE deducted from a March payslip is a UK tax paid in that US calendar year, even though it relates to a UK year that ends the following month. A Self Assessment balancing payment made on 31 January, and payments on account made on 31 January and 31 July, are UK taxes paid in a US year that is one or even two years after the income they relate to. Publication 514 is explicit that for foreign tax credit purposes the tax year means the year for which your US return is filed, not the year for which your foreign return is filed. Bunch several UK payments into one US year and you overload that year's credit while starving another.

The accrual election is the specific lever against this. The Instructions for Form 1116 on IRS.gov allow foreign income taxes to be accounted for on an accrual basis, in which case you generally use the average exchange rate for the tax year to which the taxes relate. That aligns UK tax with the income it belongs to instead of with the date the money moved. Two constraints matter in preparation. First, accrual treatment is not available where the taxes are paid more than two years after the close of the year to which they relate, which rules it out for genuinely stale UK liabilities. Second, the choice is a considered one that governs later years, so it is made at the file level with the multi-year credit position in view, not year by year on convenience.

Which Year Does a London Bonus Belong In?

The UK charges employment income broadly on receipt, with PAYE and Class 1 National Insurance applied at the point of payment. The US includes compensation when it is actually or constructively received. For a cash bonus the two countries usually agree on the calendar date, and then disagree on which tax year contains it, because their years are offset by more than three months. A bonus paid in February sits in the UK year ending that 5 April but in the earliest weeks of a US calendar year that also contains the following April to December salary. Deferral compounds this: a bonus earned in performance year one is awarded in year two, paid partly in cash in year two, and delivered partly as share awards vesting in years three, four and five.

Set against the calendars, a single London bonus cycle lands as follows, and this is the sequence we map before either return is drafted.

Performance year, ending 5 April: the bonus is earned. Nothing is taxable in either country yet, but this is the period that fixes the workday counts you will need years later.
Award date, typically the following January or February: the cash element is declared and the deferred element is granted as share awards. Grant is generally not itself a taxable event, but it starts the relevant period over which the UK charge on the eventual vest will be apportioned.
Cash payment date: PAYE income tax and Class 1 National Insurance are withheld. The payment falls into the UK tax year containing that date and into the US calendar year containing the same date, and those two years carry different numbers.
31 January following the 5 April year end: the UK Self Assessment for that year is filed and the balancing payment is due. On a cash basis that payment is a creditable UK tax of a later US year than the income it settles.
First tranche vest, usually a year after award: UK PAYE and National Insurance are applied to the vest value, and the same value is compensation on the US return. The UK charge is reduced to the UK-chargeable proportion of the relevant period; the US inclusion is not reduced at all.
Second and third tranche vests: the same event repeats, but the workday mix inside each relevant period has moved, so the UK-chargeable proportion changes tranche by tranche while the US inclusion remains the full vest value.
Sale of the vested shares: a separate capital transaction in both countries, with a US basis equal to the amount already taken into income and a UK acquisition cost that may not be the same figure.

The mismatch bites in two places. Where only part of a vest is UK-chargeable but the whole vest is US income, the UK tax available to credit against that item shrinks while the US income it must cover does not. Where UK tax on an item was paid in a different US year from the year of US inclusion, the credit arrives in the wrong year entirely. Either way you finish with general category foreign tax exceeding the US tax on that year's general category income, and the excess goes to carryback and carryover rather than to the current bill.

How Are RSUs and Deferred Share Awards Sourced Across Dual Employment?

On the UK side, HMRC's Employment Related Securities Manual sets out the internationally mobile employee rules. The manual states that securities income is treated as accruing equally on each day of the relevant period under section 41H(2) of ITEPA 2003, and that a split based on overseas and UK workdays will be the most commonly used method of achieving a just and reasonable apportionment. The relevant period for a conditional share award normally runs from grant to vest. So a three-year deferred award granted while the employee had a period of non-UK duties is only UK-chargeable to the extent of its UK-duty proportion, and that proportion has to be computed award by award and tranche by tranche.

On the US side, the same award must be split between US-source and foreign-source compensation, because only the foreign-source portion enters the numerator of the Form 1116 limitation. The US approach is also a time basis across the period over which the services were performed. The two countries are therefore asking a very similar question and answering it from different records: HMRC from the UK workday count, the IRS from the full workday breakdown including US and third-country days. A reader who has been on secondment, or who transferred mid-award from a New York desk to London, has three buckets of workdays and cannot avoid counting them. Options behave similarly: a non-tax-advantaged option is generally charged in the UK by reference to the spread on exercise, apportioned across its relevant period, while the same spread is compensation on the US return.

One mechanical point is routinely missed. Where shares are sold to cover the UK PAYE and National Insurance liability on a vest, that sale is a disposal for US purposes and belongs on the capital gains schedule even though the gain is usually negligible. The basis is the amount already included in income at vest, and the broker's reported cost figure is frequently wrong or blank on a non-US plan. Reconciling the vest statement to the broker statement is part of the preparation, not an optional tidy-up.

Worked Example: A London M&A Vice-President's Bonus Cycle

Take a US citizen M&A vice-president in a London office, UK resident throughout, on a base salary plus a bonus that is sixty per cent cash and forty per cent deferred into share awards vesting in three equal annual tranches. Her salary is taxed through PAYE every month, and at her level the Personal Allowance is entirely gone: GOV.UK confirms it falls by £1 for every £2 of adjusted net income above £100,000 and is nil from £125,140, above which the additional rate of 45 per cent applies. Her Class 1 National Insurance is charged at 2 per cent on earnings above £967 a week for 2026-27. Her bonus for the performance year ended 5 April is declared the following February, and the cash element attracts PAYE at the additional rate on payment.

Her Form 1040 for that calendar year therefore reports three and a bit months of salary drawn from one P60 period, the balance of the year drawn from the next, the whole February cash bonus, and the sterling value of the share tranche that vested in September. Against that she claims a general category credit for UK income tax actually withheld across those twelve months, plus any Self Assessment balancing payment or payment on account she made inside the same twelve months for an earlier UK year. She claims nothing for National Insurance. If twenty per cent of the relevant period for the September tranche consisted of non-UK workdays, the UK charge on that tranche is reduced accordingly, but her US inclusion is the full vest value, so the UK tax attaching to that item falls while the US income it has to cover does not.

Netted out, she is still in excess credit for the year, because UK effective rates on this compensation exceed US rates. That excess is not a windfall. It is a balance that must be tracked by category and by year of origin, carried back one year and forward up to ten, and it disappears if no later year ever produces enough US tax on general category income to absorb it. In a career spent entirely in London, that is precisely what happens unless the position is managed deliberately.

How Form 1116 Categories Decide Whether Your UK Tax Is Usable

Form 1116 is not one credit. It is a separate computation for each separate category of income, and a credit generated in one category can never offset US tax arising in another. The Instructions for Form 1116 on IRS.gov identify the categories the form is prepared for.

General category income, which is where salary, bonus and equity compensation sit, together with the UK income tax charged on them
Passive category income, which is where dividends, interest, royalties, rents and similar investment income sit
Foreign branch category income
Section 951A category income
Section 901(j) income from sanctioned countries
Certain income re-sourced by treaty
Lump-sum distributions

The IRS states that generally only income, war profits and excess profits taxes qualify for the credit at all. Within the qualifying taxes, the limitation in each category is US tax multiplied by the ratio of foreign-source taxable income in that category to total taxable income, which means the allocation and apportionment of deductions against foreign-source income directly reduces how much credit you can use. The Instructions also define high-taxed income as income on which the foreign taxes paid, after allocation of expenses, exceed the highest US tax that can be imposed on that income; the resulting reclassification moves income between categories and can change which pool a UK tax lands in. The final credit reaches the return through Schedule 3 of Form 1040.

The practical consequence for a London banker is stark. Enormous general category credits build up on employment and equity income, while the US tax that actually remains payable often arises on passive income. The general category pool cannot touch it. A client who paid materially more UK tax than US tax can still write a cheque to the IRS, and the explanation is almost always the basket separation plus the tax-year mismatch, not an error in the arithmetic.

Form 2555 is rarely the right instrument at these levels. The foreign earned income exclusion is capped far below a banking package, so most of the income remains taxable anyway, and Publication 54 states that no foreign tax credit is allowed for foreign taxes paid on income excluded under it. Electing the exclusion therefore strips the corresponding UK tax out of the credit computation while solving very little. On these files the credit is the instrument and the exclusion is usually noise.

How Do You Keep an Excess Credit Usable Instead of Letting It Expire?

Publication 514 confirms that unused foreign taxes carry back one year and forward ten years, and that carryovers apply within the same separate category. Absorption runs current-year taxes first, then carryovers beginning with the oldest layer, which is why the oldest layer is the one perpetually closest to expiry. A banker who spends a decade in London and never returns to a US-workday year can watch a substantial general category balance run out the far end of the ten-year window having never been usable for a single dollar.

Carryover management is a preparation discipline, not an annual afterthought, and it comes down to documentation and sequencing. The carryover reconciliation schedule attached to Form 1116 has to be prepared and rolled forward every single year, including years with little or no new foreign income in the category, because an undocumented balance is an unprovable balance when you finally need it. We keep a standing ledger by category and by year of origin, reconcile it against the prior year's filed return before the current return is drafted, and flag the layer approaching its tenth year so that the decision about it is made in advance rather than discovered afterwards.

The levers that keep a balance alive are limited but real. The one-year carryback is a live amendment opportunity: an earlier year in which US general category tax was paid can absorb the following year's excess, but only if the excess is identified while the amendment window is open. Consistency in expense allocation matters, because inconsistent apportionment moves the limitation numerator and makes the multi-year position indefensible. The accrual election can pull UK tax back to the year of the income it belongs to, sharply reducing the volume of excess created by pure timing. And the years in which US general category tax will genuinely arise, a return to a US desk, a heavy US-workday year, a year of lower UK tax, are the years to plan the oldest layers into. Identifying them in advance is the difference between a credit that works and a number on a schedule.

Is National Insurance Creditable Against Your US Tax?

No. National Insurance is a social security contribution, not an income tax. Publication 514 states plainly that no deduction or credit is allowed for social security taxes paid or accrued to a foreign country with which the United States has a social security agreement, and the IRS position on the credit generally is that only income, war profits and excess profits taxes qualify. National Insurance is therefore stripped out of the Form 1116 computation entirely, which surprises clients who see it as a large line on every payslip and assume it forms part of their creditable UK tax.

What the US-UK totalization agreement does instead is prevent the same earnings being charged to both social security systems. A US citizen employed by a UK entity and working in the UK is normally inside the UK system, paying Class 1 National Insurance at 8 per cent on weekly earnings from £242 to £967 and 2 per cent above £967 for 2026-27 per GOV.UK, and does not also pay US social security and Medicare tax on those earnings. A worker sent to the UK by a US employer on a time-limited assignment can remain in the US system for a period, evidenced by a certificate of coverage. For preparation purposes there are two consequences: the National Insurance figure never enters the credit calculation, and the coverage position must be documented on file so that the correct system is being charged and no US self-employment or employment tax exposure is asserted on the same earnings.

When Does a London Banker Actually Need to File a UK Self Assessment?

PAYE is built to collect the right tax on employment income without a return, and many UK employees never file one. A banker's affairs almost always defeat that assumption. GOV.UK lists the triggers, which include having Capital Gains Tax to pay, being a partner in a business partnership, and having untaxed income such as rental income, savings, investment and dividend income, or foreign income. Share sales, non-UK holdings and a tapered allowance interacting with irregular bonus-month withholding mean the return is usually genuinely required. It also matters for the other filing: the Self Assessment is where the UK tax figure is finally settled, and that figure is the input to Form 1116. UK income tax for England, Wales and Northern Ireland in 2026-27 runs at 20 per cent from £12,571, 40 per cent from £50,271 and 45 per cent above £125,140.

The combined calendar we work to for these clients is fixed, and the two sets of dates have to be planned together rather than handled as they arrive.

5 October following the end of the UK tax year: notify HMRC that a return is required if you have not filed before
31 October: deadline for a paper Self Assessment return
31 January: deadline for the online Self Assessment return, and for the balancing payment for the year ended the previous 5 April
31 January: first payment on account for the current UK year, where payments on account apply
31 July: second payment on account
15 April: US return due date, and the date from which interest runs on any unpaid US tax even where an extension is in place
15 June: automatic two-month extension for taxpayers living abroad, per Publication 54
15 October: extended US filing deadline where Form 4868 is filed, and the automatic extended deadline for the FBAR
15 December: discretionary further two-month extension available on written request

The date most often mishandled is 15 April. The extension to 15 June extends the time to file, not the time to pay, and Publication 54 is explicit that interest runs on any tax not paid by the regular due date. On a banking package where the UK Self Assessment position for the overlapping period is not yet final, that means producing a defensible interim credit estimate in April rather than waiting for HMRC certainty in January.

Which Information Returns Does a Banker's Balance Sheet Trigger?

A London banking package produces exactly the account profile that the US information return regime is aimed at: a UK current account taking a large monthly credit, a share-plan account with a non-US administrator, a UK brokerage account, and typically some non-US pooled funds. Each of these has its own form, its own threshold and its own deadline, and they do not substitute for one another.

FinCEN Form 114, the FBAR: required where a US person has a financial interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during the calendar year. It is filed electronically through FinCEN's BSA E-Filing System rather than with the tax return, is due 15 April with an automatic extension to 15 October, and supporting records should be kept for five years from the due date. Note that the test is aggregate and peak, not year-end, so one bonus payment can breach it on a current account alone, and signature authority over an employer account counts even with no beneficial interest.
Form 8938: required where specified foreign financial assets exceed the applicable threshold. For a specified individual living outside the United States the IRS thresholds are more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year if unmarried or married filing separately, and more than $400,000 on the last day or more than $600,000 at any time if married filing jointly. For a filer living in the United States the figures are $50,000 and $75,000, or $100,000 and $150,000. The form attaches to the annual return and is due with it, including extensions.
What Form 8938 captures: savings, deposit, checking and brokerage accounts held with a foreign bank or broker-dealer, stock of a foreign corporation, interests in foreign partnerships, and foreign-issued insurance or annuity contracts with a cash surrender value. Directly held foreign currency and directly held foreign property are outside its scope. The IRS states that filing Form 8938 does not relieve the separate FBAR requirement, and the reverse is equally true, so most of these clients file both on overlapping but non-identical data.
Form 8621: non-US pooled investments are the quiet problem. A UK authorised fund, an open-ended investment company or a UK-listed exchange traded fund will very often meet the passive foreign investment company definition. Form 8621 is filed by a US person who is a direct or indirect shareholder of a PFIC where they receive a distribution, recognise gain on a disposition, or report information with respect to a qualified electing fund election or a section 1296 mark-to-market election. The default regime is deliberately punitive, back-loading tax at ordinary rates with an interest charge, so the election position on each holding has to be determined and then reported consistently every year thereafter.

Do You Still Owe State Tax After Moving to London?

Leaving the United States does not automatically end a state filing obligation, and this is the exposure that most often survives an otherwise clean federal position. State residency turns on state law concepts of domicile and statutory residency, and no state is a party to the US-UK income tax treaty. A banker who keeps a home, a driving licence, voter registration and close family ties in a high-tax state can remain a resident of that state for income tax purposes while being UK resident for HMRC purposes. Some states allow no credit at all for foreign income tax, which means UK tax that entirely absorbs the federal liability can still leave a bare state liability standing. Others operate a safe harbour for extended assignments abroad, with conditions on days and on the permanence of the overseas arrangement. We scope the state position at the start of an engagement, because the answer determines whether a state return belongs in the annual filing set and whether state estimated payments are needed during the year.

Document Checklist for US UK Tax Returns Preparation on a Banking Package

Generic expat document lists do not work here, because the driver of the return is not the salary certificate but the timing and apportionment evidence behind the bonus and the equity. This is the list we work from, with what each item actually feeds.

Both P60s that straddle the US calendar year. Each covers a period to 5 April, so neither matches the US year alone; together they let us build the calendar-year pay and calendar-year UK income tax figures. GOV.UK requires employers to issue the P60 by 31 May.
Every monthly payslip for the calendar year. The payslips are the only record that places income tax and National Insurance in a specific month, which is exactly what the calendar-year re-cut and the cash-basis credit computation both need.
The P11D, which GOV.UK requires by 6 July, for benefits in kind. Medical cover and similar benefits are UK-taxable and are also compensation on the US return.
The bonus award letter and the payment advice. The letter fixes the performance period and the deferral schedule; the advice fixes the payment date, which is what determines both the UK year and the US year the cash element falls into.
Share-plan vest statements for every tranche: grant date, vest date, share count, market value at vest, the sterling amount taken to PAYE, shares withheld or sold to cover, and the administrator's stated cost basis.
A workday record covering the relevant period of each award, split into UK workdays, US workdays and third-country workdays. Without it, both the UK apportionment under the ITEPA daily accrual rule and the US foreign-source split are estimates rather than positions.
Broker consolidated statements for the calendar year, including every sell-to-cover disposal and whatever acquisition cost the broker is reporting, so the basis can be corrected to the amount already taken into income.
Statements for every non-US account showing the maximum value during the calendar year, covering current accounts, savings, brokerage and share-plan accounts, for the FBAR and for Form 8938.
Fund holding statements with purchase and disposal dates for each non-US pooled investment, for the Form 8621 analysis and any election.
The prior year US return with its Form 1116 computations and carryover reconciliation, plus the prior UK Self Assessment and the payments on account position.
A schedule of the actual dates and amounts of UK Self Assessment payments made during the US calendar year, because on the cash basis those are the payments that are creditable in that year.

How We Prepare the Filing

We prepare the UK Self Assessment and the US Form 1040 as a single engagement, in a fixed order, because the returns share one dataset and the second one cannot be built correctly from the first one's output. The first step is a reconciled compensation build: monthly payslips, both P60s and the P11D are used to produce two views of the same pay, one for the UK year to 5 April and one for the calendar year, each tying to the other. Only then do we apportion each equity award over its relevant period using the workday record, producing the UK-chargeable proportion under the ITEPA daily accrual approach and the US foreign-source proportion in parallel.

The UK return is settled next wherever the calendar allows it, because the Self Assessment determines the creditable UK income tax and the payments on account profile. From there we prepare Form 1116 by separate category, decide and document the cash or accrual position on foreign taxes, allocate deductions consistently with prior years, and roll the carryover reconciliation forward with the ledger by category and year of origin. The information returns follow: FinCEN Form 114 through the BSA E-Filing System, Form 8938 with the return, Form 8621 for each non-US pooled holding, and the capital gains schedule reconciled to the vest statements. The state position is determined last but scoped first.

Where earlier years were filed without the apportionment, without the information returns, or with a carryover schedule that was never maintained, we scope the correction before the current year goes out, using amended returns or the appropriate IRS compliance procedure, so that the carryover ledger starts from a base that can be defended. Our US tax services and UK tax services teams work the same file rather than exchanging outputs, which is the only way the two returns stay consistent on the same compensation. Every figure traces to a source document and every position is written up in the file, so that if HMRC or the IRS asks how a vest was split or why a credit landed in a given year, the answer is already on paper.