A plain-English guide to PFIC rules, UK disclosure rules, pensions, and the legitimate way through
By Jonathan Laws, ACA, Ch.FCSI | Senior Financial Adviser, Cameron James | Updated June 2026
If you are an American living in the UK and you have tried to invest, you have probably run into a wall. A UK platform greys out the US funds you actually want. A US broker sends a letter saying it can no longer hold your account now that you live abroad. You open a stocks and shares ISA and find that the sensible index funds are somehow off limits. It can feel as though the system is designed to stop you doing the one responsible thing you are trying to do, which is to invest for your future.
You are not imagining it, and you are not doing anything wrong. You have walked into the gap between two tax systems that were never built to work together. This guide explains, in plain English, why the walls are there and how to invest properly around them.
Key Takeaways
- • Two rules collide: US PFIC rules make UK and EU funds toxic, while UK disclosure rules block the US funds that would solve the problem.
- • Inside a pension the PFIC problem disappears, which is why pensions are the foundation of almost every plan for a US person in the UK.
- • UK workplace pensions, Roth IRAs and SIPPs are recognised by both countries and are free of PFIC issues. An ISA is not recognised by the US.
- • Some brokers refuse US persons living in the UK. Have a backup account in place before telling any provider you have moved.
- • The real fix is coordinated cross-border advice, because no single-country adviser usually sees both halves of the picture.
Who This Guide Is For
This guide is for US persons living in the UK. That means US citizens, including so-called accidental Americans who may never have lived in the States, and green card holders, including those whose cards have lapsed but who have not formally given up the status. If that is you, the US expects you to file, and potentially pay tax on, your worldwide income for life, wherever you live. That single fact is the root of almost everything that follows.
Here is the good news. Most of the difficulty is structural, not personal. Once you understand the handful of rules causing the walls, the path through becomes surprisingly clear. There is even a part of the system that works strongly in your favour, and we will get to it. But first, the two hidden causes.
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The Two Hidden Causes of Every Wall
Almost every problem a US person hits in the UK comes from two rules pulling in opposite directions.
The US side: PFIC rules make UK and EU funds toxic
The US taxes its citizens on worldwide income, and it treats most non-US investment funds extremely harshly under what are called PFIC rules (Passive Foreign Investment Company). In plain terms, almost any pooled fund domiciled outside the US, which includes nearly every UK and EU fund, index fund, ETF and investment trust, is a PFIC. Holding one exposes you to punitive US tax rates and heavy annual reporting on IRS Form 8621. So the sensible UK funds you would naturally reach for are exactly the ones you most want to avoid.
The UK side: disclosure rules make US funds hard to buy
The obvious answer would be to buy US funds instead, because a US fund is not a PFIC. But a UK rule gets in the way. A UK retail platform can only offer you a packaged investment if a short disclosure document is published for it, and US funds do not publish one. So UK platforms block the very US funds that would solve your PFIC problem. This regime used to be the PRIIPs framework, and the document was the Key Information Document (KID). From 6 April 2026 it is being replaced by the Consumer Composite Investments (CCI) regime and a new product summary, with firms able to use either format during a transition period running to 8 June 2027. The practical effect for you is unchanged: US funds still do not carry the UK retail disclosure that platforms require.
The catch-22: buy a UK fund and the US punishes you. Try to buy a US fund and the UK blocks you. That tension sits at the heart of investing as an American in Britain.
The third wall: brokers who do not want you
On top of all this, many brokers simply do not want the compliance burden of a customer who lives in another country. Some restrict what you can buy. Some freeze accounts. Some close them outright, which can force a sale of your holdings and an unexpected tax bill. UK platforms have increasingly offboarded US-connected clients for exactly these reasons, as recent moves by Fidelity and Transact show. We come back to which providers do work with US persons in the UK further down.
The One Thing That Changes Everything: Pensions
Inside a pension, the PFIC problem disappears.
This is the single most important idea in this guide. The US-UK tax treaty recognises pensions on both sides of the Atlantic. UK workplace pensions, UK SIPPs, US 401(k)s and US IRAs are all treated as pensions by both countries. And crucially, PFIC rules do not apply to investments held inside a pension.
That means inside a pension you can hold the diversified funds you actually want, with no PFIC penalty. It is why, for most Americans in the UK, pensions are not just one option among many but the foundation of the whole plan. Fill the pension wrappers first, and most of the catch-22 simply falls away.
JONATHAN LAWS | SENIOR FINANCIAL ADVISER, CAMERON JAMES
“The clients I see are almost never doing anything wrong. They are responsible people who tried to invest sensibly and ran straight into rules that were never designed to work together. What I try to do is take the fear out of it. Once you understand that pensions solve most of the PFIC problem, and that the order you fill your accounts matters more than the individual fund you pick, the whole thing becomes manageable. The mistakes that cost real money are usually the avoidable ones, such as an ISA quietly stuffed with index funds, or a US broker closing an account and forcing a sale. Get the structure right first, and the rest follows.”
The US-UK Tax Treaty, in Plain English
The treaty is the rulebook that stops the two systems double-charging you. You do not need to read it, but three things are worth knowing.
It protects you from genuine double taxation. In almost no situation will you pay full tax to both countries on the same income. As a rough rule, you pay the higher of the two rates, split between the two governments, rather than both rates stacked on top of each other.
It protects pensions. As above, this is the most valuable feature of the treaty for most people.
It does not recognise everything. Some accounts that are tax free in one country are fully taxable in the other. The big ones to remember: a UK ISA is tax free for the UK but fully taxable by the US, and a US 529 college plan or HSA is tax advantaged for the US but fully taxable by the UK. Neither country gives you credit for the other tax break.
Your Accounts, in Order of Priority
Here is how the main accounts stack up for a US person in the UK. Individual circumstances vary, but this is the typical order of preference.
| Account | US recognised? | PFIC-safe? | Verdict for US persons |
|---|---|---|---|
| UK workplace pension | Yes | Yes | Usually first priority. Free employer money. |
| Roth IRA | Yes | Yes | Excellent if you have US earned income. |
| UK SIPP | Yes | Yes | Strong, especially for consolidating old pensions. |
| Stocks and shares ISA | No | No | Tricky. Individual shares only. Situational. |
| General Investment Account | No | No | Last resort, once wrappers are full. |
| HSA / 529 plan | US only | No | Usually not worth keeping once in the UK. |
UK workplace pension (usually first)
If you are employed, your workplace pension is almost always the place to start. Your employer must enroll you and must contribute at least 3%, which is free money. It is tax-deferred in both countries and has no PFIC issues. The trade-off is access: you cannot touch it until age 55, rising to 57 from April 2028. One nuance for US filers: if you personally contribute more than your employer does, some advisers take the view that the pension becomes a reportable foreign trust for the IRS. More on that below.
Roth IRA (excellent, with one condition)
Both countries recognise a Roth IRA, and growth and qualifying withdrawals are tax free. There is no PFIC issue. The one condition is that you must have US earned income to contribute, and you cannot manufacture that by excluding your salary under the Foreign Earned Income Exclusion. In practice this usually means using the Foreign Tax Credit instead. It is also far easier to open a Roth before you leave the US. If you are weighing whether to convert an old pension pot into a Roth, see our guide on 401(k) to Roth IRA conversion tax for UK residents, which explains what the online adverts get wrong.
UK SIPP (strong, especially for consolidating)
A SIPP is a personal pension you control, very similar to a workplace pension but without an employer. Same treaty protection, same absence of PFIC issues. It is the natural home for consolidating old or scattered pensions, and often gives you better and cheaper investment options. The foreign trust reporting question below is a little sharper for a SIPP, because there are usually no employer contributions.
Stocks and shares ISA (the famous trap)
This is where Americans get caught. An ISA is tax free for the UK and looks a little like a Roth, but the US does not recognise it, so it gives you no PFIC protection. That means you cannot sensibly hold index funds or ETFs inside an ISA, and you are pushed towards individual shares instead. An ISA can still make sense if you are investing meaningful sums each year, you are comfortable holding individual stocks, and you expect to stay in the UK. It rarely makes sense if you still have pension allowance available, if you can use a Roth instead, or if you plan to move back to the US soon.
Lifetime ISA (niche)
A Lifetime ISA adds a 25% government bonus, but locks the money away until you buy a first home or reach 60, and the bonus is taxable by the US. It carries the same PFIC issue as a normal ISA. Niche, but occasionally useful.
General Investment Account (last resort)
A General Investment Account has no limits and no tax shelter. To use one safely you need investments that are both non-PFIC and HMRC reporting funds, or individual shares, which is a narrow path. It is normally the last place you invest, after pensions and, where appropriate, an ISA.
US employer plans and old 401(k)s
The treaty respects US workplace plans well. You usually cannot keep contributing once you live in the UK, but you can generally leave them where they are, or roll them into an IRA to consolidate and cut fees, provided your broker will keep serving you abroad. There are no PFIC issues inside these accounts. Withdrawals are where it gets technical: broadly, a lump sum tends to be taxed by the US but not the UK, while regular payments can be taxed by both with credits to prevent true double tax. Our guide to 401(k) to IRA rollovers for Americans living in the UK walks through the mechanics.
HSAs and 529 plans (usually not worth it)
Both are US tax breaks that the UK simply ignores and taxes as ordinary investment accounts, often at higher income rates because they rarely hold HMRC reporting funds. You also usually cannot keep funding an HSA once you are in the UK. In many cases these are best dealt with before you move, with advice.
So How Do You Actually Buy US ETFs?
This is the question that brings most people here. The short version: the US ETFs you want are not PFICs, and many are HMRC reporting funds, so they are tax-friendly. The only real obstacle is access. The main routes are:
- Holding them inside a US IRA or rolled-over 401(k).
- Holding HMRC reporting US ETFs inside a SIPP that allows them.
- Qualifying as an elective professional client.
- Using a regulated cross-border adviser to hold and manage them for you.
We go through each route, and the tactics we do not recommend, in our guide on how to invest in US listed ETFs from the UK.
Finding a Broker That Will Actually Take You
Not every broker will work with a US person living in the UK, but some do, and the right choice depends on which wrappers you need. Among the providers known to work with US persons are Interactive Brokers (which has both UK and US entities), Hargreaves Lansdown (which offers ISAs, Lifetime ISAs and SIPPs to US persons), AJ Bell (SIPPs), and Schwab International on the US side. Each enforces the rules differently and not all of them offer every account type, so always check current terms before committing.
If you hold a US brokerage account, the bigger risk runs the other way: a US broker deciding it no longer wants UK-resident customers. Responses range from blocking new purchases to closing the account altogether, and a forced closure can trigger an unwanted, taxable sale. It is wise to have a backup account in place before you tell any broker you have moved abroad.
A Word on IRS Form 3520 and Foreign Trusts
You may come across alarming talk that your UK pension or SIPP must be reported to the IRS as a foreign grantor trust on Forms 3520 and 3520-A, with heavy penalties for getting it wrong. This is a genuinely unsettled area with several respectable views, and it does not change the PFIC position. It is exactly the kind of judgement call where coordinated US and UK advice earns its keep.
Doing This Without the Headache
The reason this is so hard to do alone is that no single adviser usually sees both halves. A UK adviser may not understand PFIC or US filing. A US adviser may not understand ISAs, SIPPs or HMRC reporting funds. The whole point of coordinated cross-border advice is to make the two systems work together rather than against each other.
What This Means for You
If you are a US person in the UK, the walls you have been hitting are real, but they are also navigable once you build in the right order. For most people that order is simple: fill the pension wrappers first, because that is where your money can grow without the PFIC penalty, then decide whether an ISA of individual shares or a carefully built General Investment Account has a place after that. The accounts that look most attractive at first glance, such as an ISA full of index funds, are often the ones that create the biggest US tax problems.
Your own answer will depend on your employment, your existing US and UK accounts, whether you expect to return to the States, and how your provider treats US-connected clients. None of that is one-size-fits-all, which is why a coordinated plan matters more here than almost anywhere else in personal finance. If you are unsure where to start, start with the wrappers you already have and work out which ones are working for you and which ones are quietly working against you.
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). Our advisers hold individual SEC authorisation in the US through Beacon Global Advisor Network, LLC (CRD 288833), and 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.
In practice, that means we can:
- Build your plan around the PFIC-safe pension wrappers first, where your money can actually grow without penalty.
- Use US listed, non-PFIC, HMRC reporting ETFs where appropriate, inside the wrappers where they belong.
- Handle the provider and account-opening problems that stop most people before they start.
- Keep your US and UK tax reporting aligned, so nothing falls down the gap between the two systems.
Speak to a Cameron James adviser
Investing as a US person in the UK is one of the few areas where the structure matters more than the fund. Our advisers give you the honest position on your accounts, from PFIC-safe pension wrappers to the US listed ETFs that belong inside them, built around your circumstances rather than a one-size-fits-all template.
Frequently Asked Questions
Two rules collide. UK and EU funds are PFICs, which the US taxes punitively, while UK platforms block US funds because they do not carry the UK retail disclosure document that platforms must provide. That requirement used to be the PRIIPs Key Information Document and is being replaced by the Consumer Composite Investments product summary from 6 April 2026. There are legitimate routes to US ETFs, mainly inside pension wrappers or through a cross-border adviser.
Yes, but the US does not recognise an ISA, so it gives no PFIC protection. That means index funds and ETFs are effectively off the table inside an ISA, leaving individual shares. Whether an ISA is worthwhile depends on your circumstances, your time horizon, and whether you still have pension allowance available.
Some brokers do, and responses range from blocking new purchases to full closure. A forced closure can trigger a taxable sale, so it is sensible to have a backup account in place before you notify any broker of a move abroad.
Yes. The US taxes its citizens and green card holders on worldwide income for life, regardless of where they live. The US-UK tax treaty exists to prevent you being taxed twice on the same income, but it does not remove the obligation to file.
For most people it is a pension. UK workplace pensions, Roth IRAs and SIPPs are all recognised by both countries and are free of PFIC issues, which makes them the natural foundation before anything else.
It is tax free for UK purposes, but the US still taxes the income and gains inside it, because the IRS does not recognise the ISA wrapper. So it is not the tax-free account it appears to be, and any pooled funds inside it create PFIC reporting.
No. The US-UK tax treaty recognises UK and US pensions, and PFIC rules do not apply to investments held inside a recognised pension during accumulation. This is why filling pension wrappers first removes most of the difficulty for a US person investing in the UK.
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. Cameron James is authorised and regulated in the UK by the Financial Conduct Authority. Cameron James advisers hold individual SEC authorisation in the US through Beacon Global Advisor Network, LLC, and individual EU/EEA authorisations where applicable. PFIC, foreign grantor trust and treaty treatment are complex areas, and provider policies and disclosure rules change over time, including the move from the PRIIPs regime to the Consumer Composite Investments regime from 6 April 2026. You should seek advice tailored to your own situation before acting.