Form 8621 Instructions: A Line-by-Line Guide for UK Fund Holders

The Form 8621 instructions require a US person to file one Form 8621 for each passive foreign investment company they own, attached to their tax return. For Americans in the UK that means one form per UK fund. Part I reports the holding, Part II makes elections, and Parts III, IV and V calculate the tax under three different methods. This guide follows the December 2025 revision of the form from the header to Part VI, with the UK position at each step.

What is Form 8621 and who has to file it?

Form 8621 is the IRS information return for shareholders of a passive foreign investment company, or PFIC. A US person who owns PFIC shares, directly or through another entity, files it for any year in which one of five things is true. The Instructions for Form 8621 list them:

1. you receive certain direct or indirect distributions from a PFIC;
2. you recognize gain on a direct or indirect disposition of PFIC stock;
3. you are reporting information for a qualified electing fund (QEF) or mark-to-market election;
4. you are making an election reportable in Part II; or
5. you are required to file the annual report under section 1298(f).

A foreign corporation is a PFIC if 75% or more of its gross income for the year is passive income, or if at least 50% of its assets on average produce passive income or are held to produce it. An investment fund meets both tests almost by definition. That is why UK unit trusts, OEICs, investment trusts and exchange-traded funds domiciled outside the United States are usually PFICs, whatever they invest in. Our article on ISAs and PFICs explains how Americans end up holding them.

The form and instructions in force are both the December 2025 revision. The IRS About Form 8621 page, last reviewed on March 30, 2026, lists no later developments.

Which UK holdings need a Form 8621, and which do not?

Funds held in your own name, in an ISA or in a general investment account need a form each. Funds held inside a UK pension generally do not. A small total holding can also escape the annual report. The table summarizes the position; the exceptions come from the instructions for Part I.

Holding	Form 8621?	Why
UK unit trust, OEIC, investment trust or non-US ETF in a general investment account	Yes, one per fund	Each fund is usually a separate PFIC
The same funds inside a stocks and shares ISA	Yes, one per fund	The ISA wrapper has no US tax status
Funds inside a UK workplace pension or SIPP	Generally no Part I	The instructions exempt a member or participant in an arrangement treated as a foreign pension fund under a US income tax treaty
All PFIC stock worth $25,000 or less in total at year end ($50,000 on a joint return)	No Part I for a section 1291 fund	Only if that fund paid no excess distribution and you recognized no gain on it
PFIC stock held indirectly, worth $5,000 or less	No Part I for a section 1291 fund	Same two conditions
Individual shares in UK trading companies, or US-domiciled funds	No	Not PFICs in the ordinary case

Two cautions. The $25,000 exception removes the annual report only. Sell the fund at a gain, or receive an excess distribution, and Part V is due whatever the value. And the exception does not make the income tax-free: dividends and gains are still reported on the return.

Before the lines: the three ways a PFIC is taxed

Which parts of the form you complete depends on how the fund is taxed. There are three regimes.

Regime	How it works	Form 8621 parts	Realistic for UK funds?
Section 1291 fund (the default)	No tax until a distribution or sale, then the excess distribution is spread over the holding period and taxed at each year's highest rate plus interest	I and V	It applies automatically if you do nothing
Qualified electing fund	You include your share of the fund's ordinary earnings and net capital gain every year	I, II (Election A) and III	Rarely; the fund must supply a PFIC Annual Information Statement
Mark-to-market	Each year's rise in value is ordinary income; a fall is deductible only up to earlier inclusions	I, II (Election C) and IV	Often, where the stock is marketable under section 1296(e)

Both elections are made on Form 8621 itself, attached to a return filed by its due date including extensions for the first year the election is to apply. An election made in a later year does not erase the section 1291 history of the earlier years, which then has to be dealt with, usually through a purging election in Part II.

Form 8621 instructions, line by line

The header

The top of the form identifies two parties. For the shareholder: name, address, identifying number (your Social Security number), tax year and type of shareholder, which for most readers is Individual. For the fund: name, address, its tax year, and an employer identification number if it has one. UK funds almost never have a US employer identification number, so the instructions require a reference ID number instead. You create it yourself and must use the same one for that fund every year.

The header also has a box to check if the form reports assets that would otherwise go on Form 8938, and a rarely used election for qualifying insurance corporations.

Part I: Summary of Annual Information

• Line 1 asks for a description of each class of shares, with a box for shares owned jointly with a spouse. For a fund, give the share or unit class shown on your statement, such as accumulation or income.
• Line 2 is the date shares were acquired during the tax year, if any were.
• Line 3 is the number of shares held at the end of the tax year.
• Line 4 is the year-end value, by checkbox: (a) $0 to $50,000, (b) $50,001 to $100,000, (c) $100,001 to $150,000, (d) $150,001 to $200,000, or (e) the actual value if more than $200,000. The instructions allow you to rely on periodic account statements unless you know they are not reasonable.
• Line 5 states the type of PFIC and the amount for the year: (a) section 1291, the excess distribution or gain; (b) section 1293, the QEF inclusion; or (c) section 1296, the mark-to-market inclusion or deduction.

Values are converted from sterling to dollars. Use one exchange rate source consistently across the return.

Part II: Elections

Part II is a list of eight checkboxes, A to H. Three matter to most individual investors:

• Election A treats the PFIC as a QEF. You then complete lines 6a through 7c of Part III.
• Election C marks marketable PFIC stock to market. You then complete Part IV.
• Election D is a deemed sale made alongside a QEF election for a fund you already held as a section 1291 fund. The gain goes on line 15f of Part V and is taxed as an excess distribution, after which the fund is a clean QEF.

Election B defers payment of tax on undistributed QEF earnings. Elections E to H are deemed dividend and deemed sale elections for controlled foreign corporations and former PFICs.

Part III: Income From a Qualified Electing Fund

• Lines 6a to 6c: your pro rata share of the fund's ordinary earnings, less any part already taxed under section 951 or excludable under section 1293(g). Line 6c goes on your return as ordinary income.
• Lines 7a to 7c: your pro rata share of the fund's net capital gain, with the same adjustment. Line 7c is a net long-term capital gain and goes to Schedule D.
• Lines 8a to 9c are completed only if you are making Election B for the year.

The figures for lines 6a and 7a come from the fund's PFIC Annual Information Statement. Without that statement the election cannot be supported, which is the practical barrier for most UK retail funds. Do not confuse it with UK reporting fund status, which is an HMRC regime with a different purpose; see our article on HMRC reporting funds for US citizens.

Part IV: Gain or Loss From Mark-to-Market Election

• Line 10a is the fair market value of the stock at the end of the tax year, and line 10b your adjusted basis. Line 10c is the difference. A gain is ordinary income on your return.
• Lines 11 and 12 apply to a loss. It is deductible as an ordinary loss only up to your unreversed inclusions, meaning mark-to-market gains you included in earlier years and have not yet offset.
• Lines 13a to 14c repeat the calculation for stock sold during the year. A gain on sale is ordinary income, not capital gain.

Your basis rises by each year's inclusion and falls by each deducted loss, so next year's line 10b is this year's line 10a after a gain year. Keep a running schedule per fund.

Part V: Distributions From and Dispositions of Stock of a Section 1291 Fund

This is the part that gives the PFIC rules their reputation. The form says to complete a separate Part V for each excess distribution and each disposition.

• Currency code. New in the December 2025 revision: above line 15a you enter the three-letter code of the currency used on lines 15a through 15e(1). The instructions say the excess distribution is generally calculated in US dollars, but if every distribution taken into account was made in a single foreign currency, it is calculated in that currency. For a UK fund paying only in sterling, that code is GBP.
• Line 15a: total distributions from the fund in the current year. If your holding period began in the current year there is no excess distribution, and you stop here unless you also sold.
• Line 15b: total distributions in the 3 preceding tax years, or your holding period before this year if shorter.
• Line 15c: line 15b divided by 3, or by the number of earlier years if fewer.
• Line 15d: line 15c multiplied by 125%.
• Line 15e(1): line 15a minus line 15d. If more than zero, this is the excess distribution. The part of the distribution that is not excess is taxed under the ordinary rules for corporate distributions.
• Line 15e(2): also new. The line 15e(1) amount in US dollars, converted if it was calculated in a foreign currency.
• Line 15f: gain or loss on a disposition. A gain is treated entirely as an excess distribution. A loss is shown in brackets and is not taken into account under section 1291. The instructions treat stock as disposed of if it is sold, transferred or pledged.
• Line 16a: attach a statement allocating the excess distribution or gain to each day of your holding period, and total the amounts by tax year.
• Line 16b: the amounts allocated to the current year, and to years before the company was a PFIC, are ordinary income on this year's return.
• Line 16c: the amounts allocated to each earlier PFIC year are multiplied by the highest tax rate in force for that year, whatever your own bracket was. The instructions list 37% for 2018 to 2025, 39.6% for 2013 to 2017 and 35% for 2003 to 2012.
• Line 16d: any foreign tax credit attributable to the excess distribution.
• Line 16e: line 16c minus line 16d, added to your return as additional tax.
• Line 16f: interest on each year's increase in tax, at the section 6621 underpayment rates, running from the due date of that year's return to the due date of this year's.

Part VI: Status of Prior Year Section 1294 Elections

Lines 17 to 26 track deferred tax for shareholders who made Election B in an earlier year. If you have never made that election, leave Part VI blank.

How does the excess distribution calculation work in practice?

The calculation takes a gain that arose over several years, assigns it evenly to every day you held the fund, and taxes each earlier year's slice at that year's top rate with interest on top. Only the slice for the current year is taxed at your own rate.

Illustrative example: Hannah, a US citizen in Edinburgh, bought units in a UK index fund on January 1, 2021 for the sterling equivalent of $20,000 and made no election. The fund is an accumulation class and paid nothing out. She sells on December 31, 2025 for $30,000. Line 15f shows a gain of $10,000. On the line 16a statement the gain is spread across five years of holding, about $2,000 a year. The $2,000 for 2025 goes on line 16b as ordinary income. The $8,000 for 2021 to 2024 goes to line 16c at 37%, giving $2,960 of additional tax on line 16e, and line 16f adds interest on each year's $740 from that year's return due date. None of the gain is taxed as long-term capital gain. This is a simplified illustration that ignores exchange rate movements and foreign tax credits, and is not advice for any specific person.

Had the fund been marked to market from the first year, Hannah would have paid ordinary income tax on each year's rise as it happened, with no interest charge. That comparison is the reason the election decision belongs in the first year of ownership.

When and where do you file Form 8621?

Form 8621 is attached to your income tax return and filed by the due date of that return, including extensions. The IRS confirms on its page for taxpayers living abroad that a calendar-year filer living outside the United States has an automatic extension to June 15, and can extend to October 15 with Form 4868. A shareholder with no income tax return to file sends Form 8621 to the Internal Revenue Service Center, Ogden, UT 84201-0201.

Two related points:

• Form 8938. The Instructions for Form 8938 say an asset reported on a timely filed Form 8621 does not have to be listed again on Form 8938; you record the number of Forms 8621 filed in Part IV instead. For someone living abroad, Form 8938 applies when foreign financial assets exceed $200,000 on the last day of the year or $300,000 at any time ($400,000 and $600,000 on a joint return). Our guide to Form 8938 and FBAR thresholds has the detail.
• Time. The IRS Paperwork Reduction Act estimate for Form 8621 is 16 hours 58 minutes of recordkeeping, 11 hours 24 minutes learning about the law or the form, and 20 hours 34 minutes preparing and sending it. That is per form.

What happens if you did not file Form 8621?

The main consequence is that the tax year does not close. Section 6501(c)(8) of the Internal Revenue Code provides that where information required under section 1298(f) has not been reported, the time for assessing tax does not expire until three years after the IRS is given that information. If the failure was due to reasonable cause and not willful neglect, the extended period applies only to the items related to the missing form.

For past years there are two established routes. An American abroad whose failure was non-willful can include the missing Forms 8621 with the three returns filed under the Streamlined Foreign Offshore Procedures, which waive information return penalties; our Streamlined guide covers the package. Someone who filed returns but left out the form can use the delinquent international information return submission procedures, attaching the forms to amended returns with a reasonable cause statement.

What UK fund holders get wrong on Form 8621

• One form for the whole account. The form is per fund, not per platform or per ISA.
• Leaving out accumulation units. A fund that pays nothing out is still a PFIC and still needs Part I each year above the threshold.
• Treating a fund switch as nothing. Moving from one fund to another inside an ISA is a disposition of the first fund and goes on line 15f.
• Changing the reference ID number. The same number must be used for the same fund every year.
• Making the election late. A mark-to-market or QEF election made after the first year does not clean up the earlier years without a purging election and its tax cost.
• Using capital gains rates. Gains under section 1291 and under mark-to-market are not long-term capital gains.
• Skipping the form because no tax is due. The annual report in Part I is required whether or not the fund produced income.

How we help

US/UK Cross Border Tax is a firm of US CPAs and UK tax advisers working as one team, with offices in London, Manchester, New York and San Francisco. Our IRS Form 8621 and PFIC reporting service identifies which of your UK holdings are PFICs, chooses the regime for each one, prepares the forms and keeps the basis and inclusion schedules that later years depend on. Because the UK and US treat the same fund differently, we look at both returns together, which matters for cross-border investors deciding what to hold next; our guide to investing as an American in the UK sets out the alternatives. To have your portfolio reviewed, contact us.