Living abroad in a global metropolis like London can be exciting and full of opportunity, but for American expats, it also comes with unique financial responsibilities. Even if you’re earning and paying taxes in the UK, as a U.S. citizen or green card holder, you’re still required to report certain financial information to the U.S. government. Understanding FATCA vs FBAR is crucial—these two key compliance rules determine how and what you need to report to stay on the right side of the law.
Failure to comply with these regulations might result in severe penalties and legal consequences. However, with the proper knowledge and preparation, remaining compliant does not have to be unpleasant. In this article, we’ll explain what FATCA vs FBAR are, why they matter, and what US expats in London should do.
What Is FBAR?
FBAR stands for Foreign Bank Account Report. Formally known as FinCEN Form 114, it is required by the Financial Crimes Enforcement Network (not the IRS) to combat tax evasion and money laundering.
Who is required to file an FBAR?
You must file an FBAR if:
- You are a U.S. resident, green card holder, or citizen.
- You have international financial accounts—bank accounts, investment accounts, mutual funds, etc.
- At any time throughout the calendar year, the cumulative worth of the accounts surpassed $10,000.
Note: It’s not $10,000 per account — it’s the aggregate total of all foreign accounts.
Filing: When and How
- Rather than submitting your FBAR with your standard tax return, you are required to use the BSA E-Filing System.
- There is an automatic extension to October 15th from the original April 15th due date.
What Is FATCA?
FATCA stands for Foreign Account Tax Compliance Act. It took effect in 2010 to improve tax transparency for Americans living overseas and to combat offshore tax evasion.
Unlike FBAR, which is filed with FinCEN, FATCA is part of your IRS tax return and requires Form 8938, which is sent along with your Form 1040.
Who is required to file a FATCA?
You must file Form 8938 if you are a U.S. taxpayer living abroad and your foreign financial assets exceed the following thresholds:
- Single or Married Filing Separately: $200,000 on the final day of the year or $300,000 at any point throughout the year
- Married Filing Jointly: $400,000 on the last day of the year or $600,000 at any point throughout the year
Examples of foreign financial assets:
- Bank accounts
- Foreign entities issued stocks and securities.
- Interest in international partnerships or trusts.
- Foreign pensions or retirement accounts.
Particular Points to Keep in Mind for Americans Residing in London
Being a U.S. expat in London, you probably have UK-based bank accounts, investment ISAs, pension plans, or perhaps ownership of UK company shares. The U.S. government sees these as foreign, so they must be disclosed if they meet the criteria, even if they seem “local” to you.
Although you pay all of your taxes in the UK through HMRC, you must still report your global income and overseas assets to the IRS. As the United States taxes individuals on their worldwide income, these forms are required for compliance.
In addition, under FATCA, UK financial firms must report U.S. account holders to the IRS. So, even if you don’t file, your bank might, making noncompliance easy to see.
What Happens If You Do Not Comply?
There are serious penalties for both FBAR and FATCA:
- For willful violations, FBAR fines can total $100,000 or 50% of the account amount; for non-willful infractions, they can total $10,000.
- Beginning at $10,000, FATCA fines can rise if not handled upon IRS notification.
Noncompliance can also postpone passport renewals, create travel difficulties, and influence future tax or immigration negotiations.
Tips for Staying Compliant
- Even if the accounts are dormant, maintain an annual record of balances.
- Work with a CPA or tax advisor specializing in expat taxation, particularly one knowledgeable in the UK.
- Understand the Deadlines: FBAR and FATCA have separate paperwork and filing procedures.
- Don’t wait for notifications; US and UK officials now exchange data. Being caught is less safe than voluntary compliance.
- Expatriates could qualify for the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC) to prevent double taxation, but these do not exempt you from FATCA or FBAR.
Conclusion:
Living in London provides many new experiences, but your duties as a US taxpayer do not disappear. FBAR and FATCA are critical components of being compliant with US tax regulations when living overseas.
While the laws may appear confusing, remaining on top of your reporting obligations can help you maintain your financial stability, peace of mind, and future mobility. The keys are awareness, organization, and—where necessary—assistance from professionals who understand the expat tax situation.