Author: Jonathan Laws, ACA, Ch.FCSI.
Senior Financial Adviser, Cameron James.
Key Takeaways
- • US listed ETFs are not PFICs. The obstacle for a US person in the UK is a UK marketing rule (PRIIPs KID), not US tax.
- • Many large, low-cost US ETFs are HMRC reporting funds, so UK gains can be taxed at capital gains rates rather than higher income rates.
- • Across every wrapper, purchasing US listed ETFs requires an SEC authorised adviser because PRIIPs KID rules blocks them from being available on UK retail platforms.
- • PFIC only matters outside a pension. In a GIA or ISA, any non-US fund is a PFIC and a US listed ETF is the PFIC-free choice. Inside a SIPP, IRA or 401(k), PFIC does not apply at all, so fund choice there is about cost, availability, and expected performance, not PFIC.
If you are a US citizen or green card holder living in the UK, you have probably arrived here after a frustrating experience. You tried to buy a simple, low-cost US listed ETF, the kind that forms the backbone of most sensible portfolios, and your UK platform would not let you. Then you read about PFIC and started to wonder whether US funds were a problem too.
Here is the reassuring part. US listed ETFs are precisely what you want as a US person because they are not PFICs. The obstacle is not US tax. It is a UK rule about how funds are marketed. This article explains the barrier and, more importantly, the legitimate routes through it.
For the wider picture, our guide to investing as a US citizen in the UK sets out the whole landscape. This page focuses on one specific wall: getting hold of US ETFs.
Being a US person in the UK does not have to lock you out of US ETFs.
Our dual-regulated advisers can hold and manage US listed, non-PFIC, HMRC reporting ETFs in the right wrappers on your behalf.
The Two Sided Problem
A US person in the UK is squeezed between two regimes that point in opposite directions.
On the US side, funds domiciled outside the US are PFICs. UK and EU domiciled funds, including UCITS index funds and ETFs, fall into the punitive PFIC tax regime. We explain this in full in our article on PFIC rules for Americans in the UK. The natural conclusion is that you should hold US domiciled funds instead.
On the UK side, the PRIIPs Key Information Document (KID) rules say that retail investors can only be marketed packaged investments that publish a KID. No US domiciled fund publishes one. So UK retail platforms generally block US domiciled funds, which are precisely the funds that solve your PFIC problem.
The barrier to US ETFs is access, not tax. A US listed ETF is not a PFIC, and many are also HMRC reporting funds, so the UK tax treatment can be favourable too. The KID rules simply make these funds hard to buy through an ordinary UK retail account.
Two Things Worth Knowing First
Before the routes, two facts that reframe the whole problem.
1. US listed ETFs are not PFICs. PFIC status depends on where the fund is domiciled, and a US domiciled ETF is, by definition, not foreign to the IRS. So the very funds the UK blocks are the funds that keep you out of PFIC trouble.
2. Many US domiciled ETFs are HMRC reporting funds. HMRC maintains a list of reporting funds, and it includes many large, low-cost US ETFs. Holding a reporting fund means UK gains are taxed at capital gains rates rather than the higher income rates that apply to non-reporting offshore funds. So a US listed, HMRC reporting ETF can be efficient on both sides at once. The only question is how to access it compliantly.
JONATHAN LAWS — SENIOR IFA, CAMERON JAMES
“Clients come to me convinced they have done something wrong because their UK platform will not sell them a US ETF. They have not. The fund they want is the right fund. The block is a marketing rule, not a tax rule, and there are clean, compliant ways around it. The mistake I want people to avoid is reaching for an online workaround, such as a borrowed US address because that can force a taxable sale at the worst possible moment. Get the wrappers right first. Once your US ETFs sit inside a pension where they belong, the whole problem quietly goes away.”
Your Situation, and the Realistic Options
Most readers are in one of two situations. Some already hold a US pension from before they moved to the UK. Others have money in a UK ISA or General Investment Account (GIA), or want to put money there, whether that is fresh cash to invest or existing holdings that may already be sitting in PFICs. The first group has comparatively little to resolve, as set out just below. The second group faces the real squeeze: in a taxable UK wrapper, any pooled UK or EU fund is a PFIC and carries punitive US tax, so if you already hold UK or EU funds in an ISA or GIA you are most likely already holding PFICs. The US listed ETFs that would solve that, being non-PFIC, are blocked from UK retail platforms by the KID rules. After the pension note, the rest of this section covers the options for ISA and GIA money, whether you are fixing existing holdings or investing afresh.
If You Have a US Pension
This applies only if you arrived in the UK with an existing US pension, an IRA or a 401(k), holding US listed ETFs. The reassuring part is that you keep your existing holdings, and you do not have to sell, and PFIC never applies inside a pension in any case. The constraint you are most likely to meet is that, once you are a UK resident, your US custodian restricts the account to its current positions: no new trades, no fund switches, and no further contributions to invest. The funds you already hold are fine to keep. You simply lose the ability to actively manage them inside that account. Several custodians, especially IRAs, even restrict access for US Expats even further, with some requiring transfers to new providers.
Deciding what to do about a frozen US account, whether to consolidate it or convert it, is the subject of our guides to 401(k) to IRA rollovers for Americans living in the UK and 401(k) to Roth IRA conversion tax for UK residents, both written for people in exactly this position.
If You Want a GIA or an ISA
Most UK platforms will not accept US-Connected Persons full stop, whilst some will, but only for pension wrappers, as those are not subject to FATCA. There are some options for US individuals, but most only allow Individual stock picking.
That is where specialist platforms come in. These platforms, such as Morningstar Wealth International, work with SEC authorised advisers who can purchase US listed ETFs on your behalf, even inside non-pension wrappers. Not only that these platforms provide full US reporting functionality, such as generated form 1099’s.
Option One: Buy Individual Stocks Only
You can buy individual company shares directly. A single share is not a pooled fund, so it is neither a PFIC nor caught by the KID rules, which is why a UK platform that accepts US persons will usually let them buy stocks even when it blocks funds. The drawback is diversification. Building and maintaining a portfolio out of hand-picked stocks concentrates risk, takes real ongoing effort, and is not a sensible substitute for a broad, low-cost fund for most investors. It is a legitimate option, but rarely a good one on its own.
Option Two: A US-Regulated Financial Adviser
The route that actually gives you the funds you want is a financial adviser who holds US regulatory authorisation. A US-regulated, SEC-authorised adviser can give you compliant access to US listed, non-PFIC, HMRC reporting ETFs inside your ISA or GIA because the retail KID block does not apply to professionally advised access the way it applies to a retail investor buying direct. For most US persons in the UK, this is the only practical way to hold a diversified, low cost, PFIC-free portfolio in a taxable wrapper. It also covers the more common starting point of unwinding existing PFIC holdings and rebuilding the portfolio in US listed ETFs, which needs handling with care because exiting a PFIC can itself crystallise tax. At Cameron James, we have advisers who hold individual SEC authorisation precisely so they can do this within a single coordinated UK and US plan.
A Narrow Alternative: Elective Professional Client Status
There is one self-directed alternative. Under the MiFID rules, the KID retail protections fall away if you qualify as an elective professional client. To qualify, you generally need to satisfy at least two of three tests: a financial instrument portfolio (excluding your main home) of at least 500,000 euros, a track record of frequent trading in significant size on the relevant market, or at least one year working in a role in the financial sector that requires relevant knowledge. Meeting this status lets you buy US domiciled funds directly. It is narrow: most people will not qualify, and qualifying means giving up the protections that apply to retail clients. For higher net worth, experienced investors it can work, but for most it will not.
What We Do Not Recommend
The Boglehead and overseas investor forums sometimes mention two further tactics. We mention them only to be clear about where we stand.
The first is using a US residential address you do not actually live at, to keep a US brokerage account open. This is generally contrary to the broker's terms of service, and we do not advise misrepresenting your country of residence. It also creates a real risk of account closure, which can force an unplanned and taxable sale of your holdings.
The second is buying options on US ETFs and exercising them to acquire the underlying fund. This is an advanced tactic, carries its own risks, and is not suitable as a mainstream strategy.
Putting It Together: Asset Location
The thread running through all of this is asset location. The cleanest home for growth assets is a pension wrapper such as a SIPP, where PFIC cannot reach at all and where US listed ETFs can be held, which is why pensions, not taxable accounts, are usually the right answer when you still have allowance to use.
For money in an ISA or GIA, existing or new, the position is tighter: any non-US pooled fund is a PFIC, so the only PFIC-free fund choice is a US listed ETF, and accessing one there runs through the adviser route, since UK retail platforms block it. The ISA carries an extra catch because the IRS does not recognise it, so its UK tax-free status gives you no US benefit. Done well, a US person in the UK can still hold a globally diversified, low-cost and compliant portfolio. The work is in the structuring, not in any single clever product.
How Cameron James Helps
About Cameron James and how we are regulated
Cameron James is a financial planning firm authorised and regulated in the United Kingdom by the Financial Conduct Authority (FCA). Several of our advisers hold individual SEC authorisation in the US and all hold individual EU/EEA authorisations where applicable. This adviser level authorisation across both sides of the Atlantic is what allows us to advise on your US accounts and your UK accounts within a single coordinated plan, rather than leaving you to stitch together UK only and US only advice that does not join up.
For US ETF access specifically, that means we can build and manage globally diversified portfolios using US listed, non-PFIC, HMRC reporting ETFs inside the wrappers where they belong, coordinate the US and UK tax treatment, and do all of it within a compliant framework rather than relying on the workarounds that circulate online.
Speak to a Cameron James Adviser
If you are a US person in the UK and you want access to low-cost US ETFs without falling into a PFIC trap or relying on an online workaround, the answer is almost always in the structuring. We can review where your assets sit today and build a compliant, globally diversified portfolio across the right wrappers, with your US and UK tax treatment coordinated.
Frequently Asked Questions
Not through an ordinary UK retail platform because UK KID rules block US domiciled funds, and you cannot run a US account as a UK resident on your own. In practice the route is a cross-border adviser who holds UK regulation and individual SEC authorisation, who can hold US listed ETFs inside a US IRA or rolled over 401(k), or inside a GIA/ISA using the right provider. Qualifying as an elective professional client is the one narrow self-directed exception.
No. PFIC rules apply only to funds domiciled outside the US. A US domiciled ETF is not a PFIC, which is exactly why they suit US persons.
Because of the PRIIPs Key Information Document rules. US funds do not publish a KID, so UK retail platforms generally cannot offer them to retail clients. The restriction sits with the broker, not with you as the investor.
Yes, and PFIC does not apply inside a SIPP because it is a pension, whatever the fund. The barrier is access. PRIIPs KID blocks US listed ETFs on UK retail platforms and many UK providers will not open a SIPP for a US person, so this is normally arranged through a cross-border adviser using the right provider rather than on a standard retail account.
Inside an ISA, any non-US pooled fund is a PFIC, so a US listed ETF is the only PFIC-free fund choice, but UK KID rules mean you generally need a cross-border adviser, or elective professional client status, to access US ETFs there. The ISA also gives no US benefit, because the IRS does not recognise it and still taxes the gains. For most US persons, a pension is a better home for US ETFs than an ISA.
Many of the largest, lowest cost US listed ETFs are on the HMRC reporting funds list, although not all are. Holding a reporting fund means UK gains are taxed at capital gains rates rather than the higher income rates that apply to non-reporting offshore funds. You should check a specific ETF against the current HMRC list before relying on its status.
For most people, holding US listed, non-PFIC, HMRC reporting ETFs inside the right pension wrappers, arranged through an adviser who is regulated in both the UK and the US, is the simplest and most robust route. It avoids the workarounds that circulate online and keeps both tax systems coordinated.
Important information
This article is for general information only and does not constitute financial, tax or legal advice, nor a personal recommendation. Tax treatment depends on your individual circumstances and may change. The value of investments can fall as well as rise and you may get back less than you invested.