UK Investors: US Investment Guide
Comprehensive tax treaty benefits, E-2 visa eligibility, and streamlined investment for British nationals
UK Investment Overview
Tax Treaty
Dividend Rate
Visa Eligible
Capital Controls
The United Kingdom maintains one of the most comprehensive tax treaties with the United States, providing British investors with significant advantages including reduced withholding rates, estate tax relief, and E-2 treaty investor visa eligibility. With no capital controls and established banking relationships, UK investors face minimal barriers to US investment.
UK-US Tax Treaty Benefits
Withholding Rate Reductions
The UK-US Income Tax Treaty significantly reduces withholding on investment income:
| Income Type | Standard Rate | Treaty Rate | Savings |
|---|---|---|---|
| Dividends (portfolio) | 30% | 15% | 50% reduction |
| Dividends (10%+ ownership) | 30% | 5% | 83% reduction |
| Interest | 30% | 0% | 100% reduction |
| Royalties | 30% | 0% | 100% reduction |
Estate Tax Relief
The UK-US Estate Tax Treaty provides significant protections:
Treaty Benefits
- Pro-rata unified credit available
- Effective exemption ~$5M+ (varies)
- Marital deduction available
- Credit for UK IHT paid
Without Treaty (Comparison)
- Only $60,000 exemption
- 40% tax on US assets
- No marital deduction
- Potential double taxation
Capital Gains Treatment
Capital gains are generally taxed only in the country of residence:
| Asset Type | US Tax | UK Tax |
|---|---|---|
| US stocks/bonds | None (treaty) | UK CGT applies |
| US real estate | FIRPTA applies | Credit for US tax |
| US business assets | If PE exists | Credit for US tax |
Capital Controls
No Restrictions on UK Capital
The UK imposes no capital controls on outbound investment:
Permitted Freely
- Unlimited foreign investment
- No approval requirements
- No foreign currency restrictions
- Full repatriation rights
Banking Considerations
- Standard AML checks for large transfers
- UK banks experienced with US wires
- Same-day GBP/USD conversion
- No reporting thresholds for personal transfers
Entity Formation
Recommended Structures for UK Investors
Structure choice depends on investment type and goals:
US LLC (Disregarded)
- Single member = pass-through
- Best for real estate
- No US tax if no US business
- UK taxes LLC income directly
US C-Corporation
- Required for active business
- 21% corporate rate
- 5-15% dividend withholding (treaty)
- Best for E-2 visa businesses
UK Ltd + US Sub
- UK holding company structure
- Additional liability layer
- 5% dividend rate (10%+ ownership)
- Good for multiple US investments
Check-the-Box Election
- LLC can elect corporate treatment
- Useful for treaty benefits
- Requires Form 8832 filing
- Complex UK tax implications
US Real Estate Investment
Tax Treatment for UK Investors
| Tax Type | US Treatment | UK Treatment |
|---|---|---|
| Rental income | Up to 37% (elect ECI treatment) | Credit for US tax paid |
| Capital gain (FIRPTA) | 15% withholding, then file return | Credit for US tax paid |
| Estate tax | Treaty relief available | Credit for US tax paid |
| State tax | Varies by state | Credit available |
Popular Markets for UK Buyers
Florida
- No state income tax
- Strong UK community
- Vacation rental potential
- Direct flights from London
New York
- Prime investment market
- High rental yields in boroughs
- Familiar to UK investors
- High state/city taxes
California
- Tech/entertainment hub
- Strong appreciation history
- High purchase prices
- State tax up to 13.3%
Texas
- No state income tax
- Growing markets
- Lower entry prices
- Strong rental demand
E-2 Treaty Investor Visa
E-2 Visa for UK Nationals
UK nationals are eligible for E-2 treaty investor visas with a 5-year initial term:
Requirements
- Substantial investment (typically $100K+)
- Active business (not passive investment)
- Majority ownership (50%+)
- Directing and developing the enterprise
- Create jobs for US workers
Benefits
- 5-year initial validity
- Unlimited renewals possible
- Spouse can work (EAD)
- Children can attend school
- Process at London Embassy
Qualifying Businesses
- Franchise operations
- Professional services firms
- Retail/restaurant businesses
- Tech startups
- Manufacturing operations
Non-Qualifying
- Passive real estate investment
- Stock portfolio management
- Marginal enterprises
- Investment held in trust
UK Reporting Requirements
HMRC Obligations
UK tax residents must report worldwide income to HMRC:
Income Reporting
- US rental income on SA return
- US dividends and interest
- Capital gains on US assets
- Claim foreign tax credit
Special Considerations
- LLC treated as transparent
- Report LLC income directly
- ATED for high-value UK property
- Non-dom rules may apply
Frequently Asked Questions
Do I need an ITIN to invest in US real estate?
Yes, you will need an Individual Taxpayer Identification Number (ITIN) to file US tax returns for rental income and when you sell the property. I help UK clients obtain ITINs as part of the investment process.
Can I get a US mortgage as a UK citizen?
Yes, several US banks offer mortgages to UK nationals. Typical terms include 30-40% down payment, interest rates 0.5-1% higher than US residents, and documentation including UK tax returns and bank statements. Some UK banks also lend on US properties.
What happens to my US investments if I become a US resident?
If you become a US tax resident, you will be taxed on worldwide income. Pre-immigration planning can minimize the transition impact. The treaty has provisions for dual residents. Consult both US and UK tax advisers before relocating.
How does Brexit affect US investment?
Brexit has no impact on UK-US investment relationships. The bilateral tax treaty remains in force, E-2 visa eligibility is unchanged, and there are no new barriers to UK nationals investing in the US.