IRS Exchange Rate for GBP: Which Rate to Use on a US Tax Return and When

There is no single IRS exchange rate for GBP. The IRS has no official rate and accepts any posted rate used consistently. In practice, use the IRS yearly average rate for income earned evenly through the year, the rate on the day for one-off transactions, and the Treasury year-end rate for the FBAR and Form 8938. This guide sets out which rate goes with which line, where to find it, and the mistakes that most often move the numbers.

Every amount on a US return has to be in US dollars. The IRS says so on its foreign currency page: your functional currency is generally the dollar, and you translate income and expenses using the exchange rate in effect when you receive, pay or accrue the item. An American paid, taxed and mortgaged in pounds still files a dollar return.

What is the IRS exchange rate for GBP?

The IRS does not set an exchange rate for GBP. Its yearly average currency exchange rates page states that the IRS has no official exchange rate and generally accepts any posted exchange rate that is used consistently. What the IRS does publish is a table of yearly averages, and the UK pound is on it.

Calendar year	IRS yearly average, UK pound (pounds per US dollar)
2025	0.759
2024	0.783
2023	0.804
2022	0.811
2021	0.727

Source: IRS yearly average currency exchange rates, as published on October 9, 2026. The 2026 average is published after the year ends.

The table runs in the opposite direction to the rate most people in the UK quote. It shows pounds per dollar, not dollars per pound. The IRS instruction is to divide the foreign currency amount by the rate to get dollars, and to multiply only when going from dollars back to foreign currency. Multiplying a sterling salary by 0.759 understates US income by more than 40%, and it is the single most common currency error on self-prepared returns.

Illustrative example: an American in London earns a salary of £80,000, paid monthly, in both 2024 and 2025. Using the IRS yearly average, the 2024 salary is £80,000 divided by 0.783, or about $102,171. The 2025 salary is £80,000 divided by 0.759, or about $105,402. Her pay did not change in pounds, and her US income rose by roughly $3,231 because the pound strengthened.

Which exchange rate do you use for each part of a US return?

The right rate follows the nature of the item. Money that arrives steadily across the year can share one average rate. A transaction that happens on one day takes the rate for that day. Information reports about account balances take a year-end rate set by the US Treasury. The table below is the working version.

Item	Rate to use	Where the rule comes from
Salary, pension, rent or interest received evenly through the year	Yearly average rate for the calendar year	IRS yearly average rates page; consistent use of a posted rate
A bonus, lump sum or other one-off receipt	Rate on the day it was received	IRS foreign currency page: translate at the rate when you receive the item
Sale of shares, funds or property	Purchase-date rate for the cost, sale-date rate for the proceeds	Same rule, applied to each leg of the transaction
UK tax claimed as a foreign tax credit, paid basis	Rate on the day the tax was paid	Instructions for Form 1116
UK tax claimed as a foreign tax credit, accrual basis	Average rate for the tax year the tax relates to	Instructions for Form 1116
FBAR (FinCEN Form 114) maximum account values	Treasury Reporting Rates of Exchange, last day of the calendar year	FinCEN and IRS FBAR guidance
Form 8938 maximum asset values	Treasury Bureau of the Fiscal Service rate, last day of the tax year	Instructions for Form 8938
Paying the IRS	US dollars only	IRS foreign currency page

Wages, pensions and other regular income

For income that comes in at a steady rate, the yearly average gives a fair result with one calculation, which is why the IRS publishes it. The important word is evenly. A salary paid in twelve equal instalments fits. A year with a large bonus in March, or six months of work followed by six months off, does not fit as well, and converting each payment at the rate for its own month is the more accurate method.

Two practical points catch UK employees. First, the US year is the calendar year, and a P60 covers April 6 to April 5. The figure to convert is what you were paid from 1 January to 31 December, built from payslips, not the P60 total. Our guide to the UK tax year versus the US tax year shows how to rebuild the calendar-year number. Second, the same rate should be applied to the deductions and exclusions that belong to that income. If you convert your salary at the yearly average, convert the pension contributions and housing costs tied to it the same way.

Sales of shares, funds and property

A capital gain is not the sterling gain converted at one rate. The cost is translated at the rate on the day you bought, and the proceeds at the rate on the day you sold. The two legs are then compared in dollars. A share sold for exactly what you paid in pounds can show a US gain or a US loss, depending on which way sterling moved in between.

This is also where currency itself becomes taxable. Converting a large sterling balance into dollars, or repaying a sterling loan, can produce a separate gain under the rules covered in our guide to the section 988 currency gain. The exchange rates used there are daily rates as well.

UK tax claimed as a foreign tax credit

The Instructions for Form 1116 set the rule for foreign tax. If you claim the credit for taxes paid, the conversion rate is the rate of exchange in effect on the day you paid the foreign taxes. For PAYE, that means tax withheld on each payday; many preparers apply the yearly average to tax withheld evenly through the year and daily rates to payments on account and balancing payments made to HMRC in January and July.

If you claim the credit on the accrual basis, you must generally use the average exchange rate for the tax year to which the taxes relate. The instructions list exceptions: the average rate cannot be used where the tax is paid more than two years after the close of the year it relates to, where it is paid before that year begins, or where the liability is in an inflationary currency. There is also an election to use the payment-date rate for all foreign taxes denominated in a foreign currency, which continues for later years unless the IRS consents to a change. How the credit itself is calculated is covered in our guide to double taxation relief between the US and the UK.

Which exchange rate do the FBAR and Form 8938 use?

The FBAR and Form 8938 do not use the IRS yearly average. Both use the US Treasury's rate for the last day of the year, applied to the highest value the account or asset reached during the year.

For the FBAR, the steps are:

1. Find the maximum value of each account during the calendar year, in the currency of the account. Periodic statements can be relied on if they fairly reflect that maximum.
2. Convert that figure using the Treasury Reporting Rates of Exchange for the last day of the calendar year, even if the peak balance occurred months earlier.
3. If no Treasury rate is available for a currency, use another verifiable exchange rate and state the source.
4. Round each account value up to the next whole dollar, and test the $10,000 filing threshold against the total of all accounts.

These steps come from FinCEN's page on reporting maximum account value and the IRS FBAR guidance. The Instructions for Form 8938 say much the same thing for specified foreign financial assets: use the Treasury Bureau of the Fiscal Service rate for purchasing US dollars on the last day of the tax year, even if you sold or closed the asset before then. Where no Treasury rate exists, another publicly available rate may be used and must be disclosed on the form.

Because the two reports share a rate source, the balances on them should reconcile. The differences between the two forms, including who must file each, are set out in FBAR versus Form 8938.

The US tax bill itself is paid in dollars

The IRS states that payments of US tax must be remitted in US dollars, and that the published exchange rates do not apply to tax payments. Where a payment begins in a foreign currency, the dollar amount is fixed by the rate the receiving bank uses on the date it converts the funds, not the date the IRS receives the payment. A payment sent from a sterling account can therefore arrive a few dollars short of the balance due. Paying from a US dollar account, or sending a small margin, avoids an underpayment notice for a trivial amount.

What people get wrong with the IRS exchange rate for GBP

• Multiplying instead of dividing. The IRS table is pounds per dollar. Sterling amounts are divided by it.
• Using the yearly average for a one-day event. A house sale or share disposal converted at the yearly average can be thousands of dollars away from the correct figure in a year when sterling moved sharply.
• Converting the sterling gain. Cost and proceeds are converted separately, each at its own date.
• Putting the yearly average on the FBAR. FinCEN asks for the Treasury year-end rate. The two rates can differ noticeably.
• Changing source from year to year. The IRS tolerance is for a posted rate that is used consistently. Switching between sources to get a lower number each year is the opposite of that.
• Converting the P60. The UK tax year is not the US tax year. Convert calendar-year pay.
• Keeping no record. The Instructions for Form 1116 ask for an explanation of how the conversion rate was worked out. A one-line note in your file naming the source and the rate is enough, and it is much easier to write at the time than three years later.

The UK side uses its own rates

The same problem runs in reverse on a UK Self Assessment return. An American in the UK with US dividends, US rental income or a US pension reports those amounts to HMRC in pounds, and HMRC publishes its own average and spot exchange rates for that purpose. The UK tax year also ends on April 5, so the UK average covers a different twelve months from the IRS calendar-year average.

The result is that the same dollar dividend rarely appears as the same sterling figure on both returns, and the same UK salary rarely appears as the same dollar figure. That is expected. What matters is that each return follows its own country's rule and that the working papers show which rate was used where.

Getting the conversions right on your return

For most Americans in the UK the method is settled once and then repeated: yearly average for regular income, daily rates for disposals and tax payments, Treasury year-end rates for the FBAR and Form 8938, and a note of the source of each. The difficulty comes in years with a property sale, a large bonus, a pension lump sum or a remortgage, where the choice of rate changes the tax by real money.

US/UK Cross Border Tax is a team of US CPAs and UK tax advisers working as one team, with offices in London, Manchester, New York and San Francisco. We prepare both returns from one set of figures, so the dollar and sterling numbers reconcile. If you want your return prepared with the correct IRS exchange rate for GBP on every line, or you are filing the FBAR alongside it through our foreign income and FBAR service, get in touch and we will give you a fixed fee quote. More background for Americans living in the UK is on our who-we-help pages.