31 U.S.C. § 5314 / FinCEN Form 114 / IRC § 1291 PFIC
US Expats in UK FATCA & FBAR Guide
An exhaustive legal and statutory breakdown of US expat reporting compliance in the UK—covering FBAR FinCEN 114, FATCA Form 8938, and IRC § 1291 PFIC ISA rules.
Statutory Compliance Code (BSA 31 U.S.C. § 5314)
Citizenship-Based Taxation & Overseas Accounts
The United States enforces worldwide citizenship-based taxation. Under the Bank Secrecy Act (31 U.S.C. § 5314), US citizens, Green Card holders, and dual nationals residing in the UK are legally obligated to report foreign financial accounts annually.
Accounts subject to FBAR include UK checking/savings accounts, UK pensions (SIPP / workplace), ISAs, and signatory authority accounts if the aggregate peak balance exceeds $10,000 USD at any point during the calendar year.
Statutory Key Thresholds:
| FBAR Authority | 31 U.S.C. § 5314 (FinCEN 114) |
| FBAR Threshold | $10,000 USD Aggregate |
| FATCA Form 8938 | $200,000+ (Single Expat) |
| PFIC Rules | IRC § 1291 (Form 8621) |
| UK ISA Tax Status | Taxable by IRS |
FBAR FinCEN 114 Threshold Evaluator
FBAR Compliance Checker
Enter your highest peak aggregate UK bank account balances to evaluate mandatory FinCEN 114 reporting requirements.
The UK ISA & PFIC Tax Trap (IRC § 1291 & Form 8621)
IRS Treatment of UK ISAs
- No IRS Tax Exemption: While ISAs are tax-free in the UK, the IRS does not recognize ISAs. All interest, dividends, and capital gains inside an ISA are fully taxable on Form 1040.
- Cash ISAs: Interest earned in Cash ISAs must be reported as foreign interest income on Schedule B.
Passive Foreign Investment Companies (PFIC)
- PFIC Definition (IRC § 1297): UK collective investment schemes (mutual funds, OEICs, unit trusts) are classified by the IRS as PFICs.
- Punitive Taxation (Form 8621): Gains on PFICs are taxed at the highest marginal income tax rate plus compounding interest charges over the holding period!
- Safe Alternative: Invest in individual stocks or US-domiciled ETFs rather than UK mutual funds.
Frequently Asked Questions (FAQ)
Yes. Under 31 U.S.C. § 5314 (Bank Secrecy Act), if the aggregate maximum value of your UK bank accounts, pensions, ISAs, and financial accounts exceeds $10,000 USD at any time during the calendar year, you must electronically file FinCEN Form 114 (FBAR).
No. The IRS does not recognize UK ISAs as tax-exempt accounts. Furthermore, investing in UK mutual funds or OEICs inside an ISA triggers punitive Passive Foreign Investment Company (PFIC) tax under IRC Section 1291 (Form 8621).
Willful failure to file FBAR can incur statutory civil penalties of up to $100,000 or 50% of the maximum account balance per violation under 31 U.S.C. § 5321(a)(5).