UK Citizen US Visa Tax: L-1, E-2 and O-1 Holders Are Taxed From Day One

UK citizen US visa tax works on one rule that surprises almost everyone: an L-1, E-2 or O-1 visa gives no tax exemption at all, so a UK citizen on any of them starts counting days toward US tax residence the moment they arrive and, once resident, is taxed by the United States on worldwide income. The visa decides whether you may work. The calendar decides how you are taxed.

This guide is for British citizens moving to the United States on an intracompany transfer (L-1), a treaty investor visa (E-2) or an extraordinary ability visa (O-1). It covers when US residence starts, what the first-year return looks like, who pays Social Security, and what the UK still expects from you. For the wider picture of the move, see our tax guide for Brits moving to the US.

How is a UK citizen on a US visa taxed?

A UK citizen on a US work visa is taxed according to US tax residence, not immigration category. A nonresident alien pays US tax only on US-source income, such as the salary earned for work done in the United States. A resident alien is taxed in the same way as a US citizen: on worldwide income, with the same forms and the same foreign account reporting.

There are two routes to resident status. The green card test does not apply to a temporary visa holder. The other is the substantial presence test, which is purely a count of days. You meet it when you are physically present in the United States on at least 31 days in the current year and 183 days over a three-year period, counting all the days in the current year, one-third of the days in the year before and one-sixth of the days in the year before that.

Some visa holders are allowed to ignore their days. The IRS calls them exempt individuals, and the list is short: foreign government staff on A or G visas, teachers and trainees on J or Q visas, and students on F, J, M or Q visas. L-1, E-2 and O-1 visas are not on it. That is the difference between a British student, who can spend years in the US as a nonresident (see our guide to Form 8843 for UK students), and a British executive, founder or performer, whose days count from the first one.

When does US visa tax residence start for a UK citizen?

For a UK citizen with no earlier US days, US tax residence under the substantial presence test starts on the first day of presence in the calendar year in which the test is met. The IRS states that the residency starting date is generally the first day you are present in the United States during that year. Residence is backdated to arrival; it does not begin on day 183.

Because the US tax year is the calendar year, the month you land matters more than most people expect.

Arrival (no prior US days)	Days in year one	Status for year one	Return
Early in the year, for example 1 March	More than 183	Resident from the arrival date; nonresident before it	Dual-status: Form 1040 with a Form 1040-NR statement
Late in the year, for example 1 September	Fewer than 183	Nonresident for the whole year, unless the first-year choice is made	Form 1040-NR on US-source income
Any date, staying on into year two	Test met in year two	Resident from 1 January of year two if present that day	Form 1040 on worldwide income

Illustrative example: a UK citizen starts an L-1 assignment in New York on 1 September 2026 and has not visited the US in the previous two years. They are present for 122 days in 2026, which is below 183, so they are a nonresident alien for 2026 and file Form 1040-NR reporting their US salary. They stay through 2027 and meet the test that year, so from 1 January 2027 their UK rental income, UK savings interest and UK share sales are all reportable on a US Form 1040.

Earlier business trips and holidays count too. A person who spent many days in the US in the two years before the move can meet the 183-day formula much sooner than a simple count of this year's days suggests. Our article on the substantial presence test for a UK citizen works through the arithmetic.

The first-year choice

A late-year arrival who will meet the substantial presence test in the following year can elect to be treated as a US resident for part of the arrival year. The IRS conditions include being present for at least 31 consecutive days in the arrival year and for at least 75% of the days from the start of that 31-day period to the end of the year. The election is made by a statement attached to the return. It is worth modelling when US resident treatment would unlock deductions or a joint return; it is not automatic and it is not always favourable.

What does the first US tax return look like?

For most British visa holders the arrival year is a dual-status year: part nonresident, part resident. The IRS guidance on dual-status aliens sets out the format. If you are a resident on the last day of the year you file Form 1040 with "Dual-Status Return" written across the top and attach a statement, normally a Form 1040-NR marked "Dual-Status Statement", covering the nonresident period.

Dual-status returns carry restrictions that catch people out:

• The standard deduction is not available; only itemized deductions are allowed.
• Head of household rates cannot be used.
• A joint return is not allowed unless you are married to a US citizen or resident and elect to file jointly, which brings both spouses' worldwide income for the whole year into the US return.

That last election can be valuable for a married couple who both moved, and expensive for a couple where one spouse sold a UK asset earlier in the year. Run the numbers both ways before choosing.

Two exceptions worth knowing

The closer connection exception lets someone who meets the test stay a nonresident if they were present for fewer than 183 days in the year, kept a tax home in a foreign country for the entire year and had a closer connection to that country. It is claimed on Form 8840, and it is not available to anyone who has applied for, or taken steps toward, a green card. It helps a UK citizen in a short first or final year; it rarely helps in the middle of a full-time US posting.

The second is the treaty. Where a person is resident in both countries under each country's own rules, Article 4 of the UK/US Double Taxation Convention assigns residence to one of them by looking, in order, at where the permanent home is, where the centre of vital interests lies, where the habitual abode is, and finally nationality. A UK citizen who tie-breaks to the UK files Form 1040-NR and discloses the position on Form 8833. We explain the tests in our guide to the treaty tie-breaker rule.

Social Security, Medicare and the totalization agreement

Wages earned in the United States on an L-1, E-2 or O-1 visa are, in general, subject to US Social Security and Medicare taxes. The IRS list of visa classes exempt from those taxes covers certain A, D, F, J, M, Q, G and H-2 holders and does not include these three.

The exception comes from the US/UK totalization agreement. An employee sent by a UK employer to work in the US temporarily, for a period not expected to exceed five years, can stay in the UK National Insurance system and be exempt from US Social Security and Medicare. The proof is a certificate of coverage issued by HMRC, which the US employer keeps on file in case the IRS asks why it is not withholding. This fits many L-1 secondments. It does not fit someone hired locally by a US company, and an E-2 investor running their own US business needs specific advice on which country's system applies.

What changes once you are a US tax resident?

US resident status brings three things a British arrival has usually never dealt with.

1. Worldwide income. UK rent, interest, dividends and gains are reported on Form 1040, with a foreign tax credit for UK tax paid on the same income.
2. Foreign account reporting. An FBAR (FinCEN Form 114) is required when non-US accounts together exceed $10,000 at any time in the calendar year. Form 8938 applies to a taxpayer living in the US when specified foreign financial assets exceed $50,000 on the last day of the tax year or $75,000 at any time ($100,000 and $150,000 on a joint return).
3. UK wrappers lose their shelter. An ISA is tax-free in the UK and fully taxable in the US, and UK-domiciled funds and investment trusts held inside or outside an ISA are generally passive foreign investment companies. See ISAs and the PFIC rules before the move, not after.

A UK citizen who owns a UK company, which is common for E-2 investors and O-1 freelancers who traded through a personal service company, can also face US reporting on that company once resident. State income tax is separate again: each state sets its own residence rules, and a state is not bound by the federal treaty in the way the IRS is.

What does the UK still tax after you leave?

The UK side runs on its own test. UK residence is decided by the Statutory Residence Test, and a person who leaves to work full-time abroad can be non-resident for a tax year in which they spend fewer than 91 days in the UK and work more than three hours a day in the UK on fewer than 31 days, with no significant break from the overseas work, as HMRC's RDR3 guidance sets out. In the tax year of departure, split-year treatment can divide the year into a UK part and an overseas part.

You tell HMRC you have gone using form P85, or the SA109 residence pages if you already file Self Assessment, as GOV.UK explains. A non-resident does not pay UK tax on foreign income, but UK income such as rent from a let property stays within UK tax. HMRC's temporary non-residence rules can also tax certain gains and income on return where the period abroad lasts five years or less, which matters for anyone planning to sell assets during a short US assignment.

Because the UK tax year ends on 5 April and the US year on 31 December, the two residence periods never line up neatly. Income that falls in the overlap is where double tax is created and where foreign tax credits and treaty relief have to be claimed deliberately.

What people get wrong about tax on a US work visa

• "I am on a temporary visa, so I am a nonresident." Temporary immigration status and tax residence are unrelated for L-1, E-2 and O-1 holders.
• "My UK ISA is tax-free." It is tax-free in the UK only.
• "My employer handles my taxes." Payroll withholds on the US salary. It does not report UK rent, UK accounts or a UK company.
• "I will sort the UK out when I come back." The P85, the departure-year return and the residence analysis are done in the year you leave.

How we help UK citizens on US visas

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. For British citizens on US visas we model the arrival date, prepare the dual-status return and the UK departure return together, and deal with certificates of coverage, treaty positions and foreign account reporting. Start with our page for UK citizens facing US visa tax, read about individual tax returns and treaty relief, or contact us for a fee quote before you travel.