Cross-Border Investor Tax Reporting: Brokerage Accounts on Both Sides

Cross border investor tax reporting means meeting two sets of rules for the same portfolio: the IRS wants non-US accounts disclosed and non-US funds reported as PFICs, while HMRC taxes UK residents on worldwide gains and treats non-UK funds as offshore funds. The holdings that work well in one system are often the ones that cause trouble in the other.

This guide is for anyone with a brokerage account (an investment platform or share-dealing account) on one side of the Atlantic and a tax connection to the other: Americans in the UK, Britons in the US, and UK residents buying US shares. It covers what each tax authority asks for, where the two systems collide, and how to build a portfolio that both treat sensibly.

Which investors need cross-border tax reporting?

Anyone whose investment accounts and tax residence, or citizenship, sit in different countries needs to report on both sides. The four common situations look quite different:

Who	Account	Main reporting issues
US citizen living in the UK	UK platform, general account or ISA	FBAR, Form 8938, PFICs on Form 8621; UK Self Assessment on gains and dividends
US citizen living in the UK	US brokerage account	US return as normal; UK tax on worldwide gains, with US funds treated as offshore funds
UK resident without US status	US brokerage account	W-8BEN and treaty withholding on dividends; possible US estate tax on US shares
Briton who has moved to the US	Accounts left in the UK	FBAR, Form 8938 and PFICs once US resident; UK temporary non-residence rules on return

For the first and last groups, cross-border investing is a US compliance problem as much as a tax one. For UK residents buying US shares, it is mainly about withholding and estate tax.

What does the IRS require for a non-US brokerage account?

The IRS requires a US taxpayer to disclose a non-US brokerage account on the FBAR, report the income and gains on Form 1040 in dollars, and file Form 8621 for any PFICs inside it.

FBAR and Form 8938

The FBAR (FinCEN Form 114, the Treasury report of foreign bank and financial accounts) applies once the aggregate value of non-US financial accounts exceeds $10,000 at any time during the calendar year. For shares and securities held in an account at a non-US institution, the IRS says the account itself is reported, "but the contents of the account do not have to be separately reported". The same rule applies on Form 8938.

Form 8938 has much higher thresholds. For a taxpayer living abroad, the IRS FATCA summary gives more than $200,000 at the end of the year or $300,000 at any time for an unmarried filer, and double for a joint return. Lower thresholds apply to taxpayers living in the US. Our post on the FBAR versus Form 8938 explains why the same account usually appears on both.

PFICs: the fund problem

Most non-US pooled funds are passive foreign investment companies (PFICs). Under the Form 8621 instructions, a foreign corporation is a PFIC if 75% or more of its gross income is passive, or if at least 50% of its assets produce passive income. That describes almost every UK unit trust, OEIC, investment trust holding a portfolio, and UK-listed ETF.

Each PFIC is reported on Form 8621, attached to the return. There is a limited exception from the annual Part I report where total PFIC stock is $25,000 or less ($50,000 on a joint return) and there is no excess distribution or disposal in the year. Without a qualified electing fund (QEF) or mark-to-market election, gains and excess distributions are taxed under the default regime, at the highest rate with an interest charge. The PFIC reporting service covers the elections, and our post on ISAs and PFICs on a US return shows how this lands on a typical UK portfolio.

Dollars, not sterling

Every sale is calculated in dollars. The IRS requires amounts to be translated at the exchange rate prevailing when the item is received, paid or accrued, so the dollar cost is fixed on the purchase date and the dollar proceeds on the sale date. A UK share that is flat in sterling can show a US gain or loss purely from currency movement. A non-US broker will not issue the US forms a US broker would, so the dollar figures have to be built from contract notes.

What does HMRC require from a UK resident investor?

HMRC taxes a UK resident on gains and dividends from investment accounts, subject to allowances and to the treatment of any funds held. The rates and allowances for 2026/27 are:

• Capital Gains Tax: 18% on gains within the basic rate band and 24% above it, with an annual tax-free allowance of £3,000.
• Dividends: a dividend allowance of £500, then 10.75% at the basic rate, 35.75% at the higher rate and 39.35% at the additional rate from 6 April 2026.
• ISAs: income and gains inside an ISA are free of UK tax, which does not carry over to a US return.

Americans who have recently moved to the UK should also check how the new residence-based regime affects their foreign income, covered in our post on the non-dom changes for Americans in the UK.

Offshore funds and reporting fund status

HMRC's version of the fund problem runs in the opposite direction. A fund based outside the UK is an offshore fund, and HMRC's helpsheet HS265 explains the consequence. A gain on a fund that does not have UK reporting fund status is an "offshore income gain", charged to Income Tax rather than Capital Gains Tax. Investors in a reporting fund are taxed on their share of its reportable income each year, even when it is not distributed.

That catches US-domiciled ETFs and mutual funds bought by a UK resident, whether through a UK platform or a US broker, unless the fund holds reporting status. HMRC publishes the list of reporting funds, and checking it before buying is far easier than unwinding a position later.

The cross-border fund trap, and the holdings both sides accept

The same fund can be efficient in one country and penal in the other. This table sets out how common holdings are treated for a US citizen who is UK resident, the investor caught by both regimes.

Holding	US treatment	UK treatment
Individual listed shares (US or UK companies)	Capital gains and dividends as normal	Capital Gains Tax and dividend tax as normal
UK unit trust, OEIC or UK-listed ETF	PFIC: Form 8621, default regime unless an election is made	Normal UK fund treatment
US-domiciled ETF or mutual fund	Ordinary US fund	Offshore fund: gains taxed as income unless it has reporting status
Non-US fund with UK reporting status	PFIC	Capital Gains Tax on disposal; reportable income taxed yearly
Anything inside an ISA	Taxable as if held directly; funds still PFICs	Free of UK tax

The pattern is clear: directly held individual shares are the neutral ground, because neither country applies a special fund regime to them. Diversified exposure without PFIC or offshore fund problems is harder, and it is where advice pays for itself.

Illustrative example: an American living in London holds a UK stocks and shares ISA invested in a global tracker fund, plus a US brokerage account holding an S&P 500 ETF domiciled in the US. The ISA tracker is free of UK tax but is a PFIC on the US return, reported on Form 8621 each year. The US ETF is straightforward on the US return, but for UK purposes it is an offshore fund, so unless it has UK reporting status, the eventual gain is taxed as income rather than as a capital gain. Neither account is doing what the investor thought it was.

Investing in US shares as a UK resident: W-8BEN and estate tax

A UK resident without US citizenship or a green card deals with two US issues when using a US broker: withholding tax on dividends and US estate tax.

• Withholding. Form W-8BEN is given to the broker, as the withholding agent, not to the IRS, and certifies foreign status and treaty entitlement. Article 10 of the US–UK treaty limits US tax on dividends to 15% of the gross amount for a portfolio investor. The US tax withheld is then relieved against UK tax on the same dividend.
• Estate tax. For a nonresident non-citizen, the IRS requires an estate tax return where US-situated assets exceed $60,000 at death, and stock in US corporations counts even if held through a non-US nominee. The separate US–UK estate tax treaty can change the result for a UK-domiciled investor, so this needs checking against the actual estate.

What happens to investments when you move country?

Moving country changes which rules apply to the same account. Three points matter most:

1. Moving to the US. Once a Briton becomes US resident, UK accounts become non-US accounts for the FBAR and Form 8938, and UK funds become PFICs. Our tax guide for Brits moving to the US covers what to review before the move.
2. Leaving the UK. A non-UK resident does not normally pay UK tax on selling an asset, apart from UK property or land. However, under the temporary non-residence rules in HMRC's helpsheet HS278, certain gains made during a period abroad of 5 years or less are taxed in the year you return.
3. US citizens do not escape either way. A US citizen remains taxable by the US on worldwide gains wherever they live. Double tax on the same gain is relieved under the treaty; our guide to double taxation relief between the US and UK explains which country gives the credit.

What cross-border investors get wrong

• Treating the ISA as tax-free everywhere. It is tax-free in the UK only.
• Listing each holding on the FBAR instead of the account, or leaving a brokerage account off because it held no cash.
• Buying UK funds as a US citizen without planning for Form 8621.
• Buying US ETFs as a UK resident without checking reporting fund status.
• Calculating gains in sterling for the US return rather than in dollars.
• Forgetting the W-8BEN, so dividends are withheld at the full US non-treaty rate rather than the treaty rate.

A reporting checklist for cross-border investors

1. List every investment account, its country and the highest value in each calendar year.
2. Classify each holding: individual share, UK fund, US fund, or other.
3. For a US taxpayer, identify every PFIC and decide on elections before the first sale.
4. For a UK resident, check each non-UK fund against HMRC's reporting funds list.
5. Keep contract notes with dates, so dollar and sterling gains can both be calculated.
6. Confirm a current W-8BEN is on file with any US broker if you are not a US person.

Our page on cross border investor tax reporting sets out how we review a portfolio against both systems, and the foreign income and FBAR service covers the annual disclosures. US/UK Cross Border Tax is US CPAs and UK tax advisers working as one team, with offices in London, Manchester, New York and San Francisco, so the IRS and HMRC treatment of each holding is checked together. If you are about to open an account or move country, talk to us before you buy.