NRI Investment Playbook: Navigating UK Residency and Tax Changes

(UNITED KINGDOM) — For Indian nationals and NRIs choosing between the UK and the U.S., the most important tax distinction is simple: the UK taxes mainly by residency under the Statutory Residence Test, while the U.S. can tax you as a “U.S. person” based on immigration status or day-count rules and then requires extensive foreign asset reporting.

For tax year 2026 (returns filed in 2027), that difference affects everything from whether your Indian bank interest becomes taxable, to whether your London ISA triggers U.S. reporting, to whether you must file FBAR.

The UK’s post–non-dom reality also matters. The UK is now a much tougher place to assume offshore income stays “outside” the tax net.

For many NRIs, that changes how you plan before you settle in London, buy property, or move onward to the U.S.

UK vs. U.S.: side-by-side comparison for NRIs (tax year 2026)

IRS starting point for residency and filing status rules: Publication 519 at IRS Publication 519 (PDF).

How you become a tax resident: clear criteria (UK SRT vs U.S. SPT)

UK: residency under the Statutory Residence Test

The SRT looks at several factors that together determine UK tax residency.

• Days in the UK
• Work ties (including where you work)
• Accommodation available to you
• Family presence
• Other “ties” that intensify residency risk

Many NRIs become UK tax residents sooner than expected. This happens often after a student-to-work shift or a sponsored job move.

U.S.: Green Card Test or Substantial Presence Test

The U.S. system is different. You can become a U.S. tax resident in two common ways.

1. Green Card Test: If you are a lawful permanent resident at any time in 2026, you are usually treated as a U.S. tax resident for that period.
2. Substantial Presence Test (SPT): A day-count formula across three years. The typical shortcut readers remember is the 183-day concept, but the real test uses weighted prior-year days. The IRS explains this in Publication 519.

Visa categories matter:

• F-1 and J-1 students/scholars often have an exemption from counting days toward SPT for a limited period, depending on the visa category and facts. Publication 519 covers “exempt individuals.”
• H-1B, L-1, O-1, TN workers typically count days normally and often become U.S. tax residents quickly once they arrive.

⚠️ Warning: Many NRIs assume “I’m on a visa, so I’m a nonresident.” That is often false in the U.S. once SPT is met, and it can be false in the UK once SRT ties build.

Numbers that change your filing: U.S. reporting thresholds NRIs often miss

If you are a U.S. tax resident in 2026 (even for part of the year), foreign reporting is where costly mistakes happen.

Quick-reference thresholds (tax year 2026 rules)

FBAR is triggered if the aggregate maximum of foreign accounts exceeds $10,000 at any time in the year. That includes Indian savings accounts, NRE/NRO accounts, and often UK accounts.

Form 8938 thresholds are higher, but it is not a replacement for FBAR. Many taxpayers must file both.

Official IRS international portal: IRS: International taxpayers

IRS forms hub: IRS: Forms & publications

Deadlines (U.S. federal)

📅 Deadline Alert: FBAR has an April 15 due date with an automatic extension to October 15. Missing it can trigger penalties even when no tax is due.

Practical examples with numbers (UK vs U.S.) for an NRI profile

Example 1: London employee with Indian bank interest

An Indian professional moves to London in 2026 and becomes UK tax resident under SRT. They keep ₹20,00,000 in an Indian account and earn the equivalent of $1,200 in interest.

UK outcome (typical): That foreign interest is often taxable in the UK once you are UK resident, with foreign income disclosure expected.

U.S. outcome (if later moving to the U.S.): If the same person becomes a U.S. tax resident in a later year, that Indian interest is also reportable on the U.S. return. If their foreign accounts exceed $10,000 at any point, FBAR is required.

The planning lesson is not “pick the lower-tax country.” The lesson is to plan for worldwide income taxation once resident in either system.

Example 2: UK ISA vs U.S. tax treatment

Suppose you contribute the UK ISA limit and grow it to £30,000 by the time you move to the U.S.

UK: ISA growth is usually UK tax-free.

U.S.: The U.S. does not generally treat an ISA as a tax-exempt retirement account. Earnings may be taxable on your U.S. return once you are a U.S. tax resident.

The account may also be reportable on FBAR and possibly Form 8938, depending on values.

This is where many NRIs feel blindsided. A “tax-free” wrapper in London may become fully visible in the U.S. tax system.

Example 3: First-year U.S. filing and standard deduction (tax year 2026)

If you become a full-year U.S. resident for 2026, you may qualify for the 2026 standard deduction:

• $14,600 (Single)
• $29,200 (Married filing jointly)

But if you are a dual-status taxpayer (part-year nonresident, part-year resident), you may not get the standard deduction in the same way. Publication 519 explains dual-status returns and elections.

Common mistakes NRIs make (and how to avoid them)

• Assuming UK “non-dom” means offshore income is ignored
  The post–non-dom environment is tighter and time-limited. Treat UK residency as a worldwide income trigger unless a specific rule clearly applies.
• Missing U.S. FBAR because “there was no tax due”
  FBAR is an information filing. The $10,000 aggregate threshold is low, and it includes India and UK accounts.
• Not converting currency consistently for U.S. reporting
  U.S. forms often require U.S. dollar reporting. Inconsistent FX conversions can create mismatches across Form 1040, 8938, and FBAR.
• Forgetting old accounts in India (or joint family accounts)
  Signature authority and joint ownership can still create FBAR duties. This is common for NRIs who keep family-linked accounts.
• Not coordinating India–UK DTAA or India–U.S. treaty positions
  Treaty claims must be supportable, documented, and sometimes disclosed. Publication 901 is the IRS starting point: About Publication 901.

What to do for tax year 2026 if you are cross-border (UK / India / U.S.)

• Confirm your tax residency for each country for 2026 using the UK SRT and IRS Publication 519 rules.
• If you are a U.S. tax resident for any part of 2026, inventory foreign accounts for FBAR and assets for Form 8938.
• Track UK ISA and pension positions before any U.S. move. Get advice on U.S. reporting and taxable income timing.
• If you have Indian mutual funds, trusts, or company interests, ask whether Form 3520, 5471, or 8865 applies. These forms carry high penalties.

“You are [X] if…” (plain-language status guide)

You are likely a UK tax resident for 2026 if:

• You spent enough days in the UK and have UK ties such as work, housing, or family, under the SRT.

You are a U.S. tax resident for 2026 if:

• You held a green card at any time in 2026, or
• You met the Substantial Presence Test day-count rules in Publication 519.

You are likely a U.S. nonresident for 2026 if:

• You did not meet SPT, did not hold a green card, and you fit a nonresident category under Publication 519 (often relevant for certain F-1/J-1 fact patterns).

You are an FBAR filer for 2026 if:

• Your non-U.S. accounts total more than $10,000 at any point in 2026.

Action items now: confirm 2026 residency, build a full foreign account list for FBAR/8938 testing, and document ISA/pension balances before any U.S. move.

⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.