GILTI Tax for US Expats with UK Businesses: Complete 2026 Guide

Since 2018, the Global Intangible Low-Taxed Income (GILTI) regime has created a significant additional US tax burden for American expats who own or control foreign businesses — including UK limited companies. GILTI was designed to prevent US multinationals from shifting profits to low-tax jurisdictions, but its broad scope catches individual US expats with ordinary UK businesses.

This guide explains how GILTI works, when it applies to US expats with UK companies, how the UK’s 25% corporate tax rate affects your US GILTI liability, and the planning strategies available to minimise exposure.

What Is GILTI?

GILTI is a category of income under IRC Section 951A that US shareholders of Controlled Foreign Corporations (CFCs) must include in their US taxable income each year. It represents the income of foreign corporations that exceeds a routine return on tangible assets — the theory being that any income above this routine return is attributable to intangible assets (patents, know-how, customer relationships) that should be taxed in the US.

In practice, GILTI affects many ordinary UK businesses with high profit margins and few tangible assets — consultancies, professional service firms, technology businesses, financial service providers, and creative agencies.

How GILTI Is Calculated

For each CFC, GILTI is calculated as follows:

• Tested Income: The CFC’s gross income, excluding Subpart F income, income effectively connected with a US trade or business, certain dividends, financial services income, and certain items of oil-related income
• Qualified Business Asset Investment (QBAI): The average of the CFC’s adjusted basis in specified tangible property used in the production of tested income, measured quarterly
• Net Deemed Tangible Income Return (Net DTIR): 10% × QBAI
• GILTI Inclusion Amount: Tested Income minus Net DTIR (but not below zero)

For a UK consulting company with £200,000 of net income and minimal tangible assets (a laptop and a desk), virtually the entire £200,000 (converted to USD) may be GILTI. The US shareholder must include their pro-rata share of this amount in US taxable income for the year — even if no dividend has been paid.

GILTI Tax Rates for Individual US Expats

The tax treatment of GILTI differs significantly between US corporations and individual US taxpayers (including expats):

• US C-corporations: Benefit from a 50% GILTI deduction (IRC Section 250), reducing the effective GILTI rate to 10.5% (half of 21% corporate rate). They can also claim an 80% indirect Foreign Tax Credit for foreign taxes paid on GILTI income.
• Individual US taxpayers (including expats): Do not receive the Section 250 deduction, unless they make an IRC Section 962 election. Individuals pay GILTI at their full marginal ordinary income tax rate (up to 37%). They may claim a foreign tax credit for foreign taxes paid on GILTI, but the rules are complex.

The Section 962 Election: Individual Access to Corporate Rates

The Section 962 election allows an individual US shareholder of a CFC to be taxed on Subpart F income and GILTI as if they were a US corporation. This provides access to:

• The 50% GILTI deduction under Section 250, reducing GILTI to a 10.5% effective rate (before foreign tax credits)
• The 80% indirect foreign tax credit for taxes paid by the CFC

For US expats with UK companies paying the UK corporate tax rate of 25%, the Section 962 election can be very effective. The 80% indirect foreign tax credit on a 25% UK rate provides a 20% credit against the US GILTI inclusion — often eliminating most or all residual US GILTI tax.

However, the Section 962 election has a significant downside: when the CFC eventually distributes the income that was subject to the election, the distribution may be partially taxable as a dividend to the individual — creating a second layer of tax on the same income. Careful planning is needed.

UK Corporate Tax and GILTI: The Interaction

The UK’s headline corporate tax rate of 25% (applicable from April 2023 for companies with profits over £250,000; 19% small profits rate for profits under £50,000, with marginal relief between) is a key factor in GILTI planning:

• Under the Section 962 election, the 80% credit applies to foreign taxes paid by the CFC. For a UK company paying 25% UK corporation tax, the indirect credit is 20% (80% × 25%).
• Combined with the Section 250 deduction reducing the US GILTI rate to 10.5%, a UK company paying 25% tax may generate sufficient foreign tax credits to fully offset US GILTI liability.
• Without a Section 962 election, individual expats face GILTI at their full marginal rate (up to 37%) with more limited foreign tax credit relief under the general basket rules.

High-Tax Exclusion (HTE)

Under Treasury Regulations, GILTI income subject to an effective foreign rate exceeding 18.9% (90% × 21%) may be excluded from the GILTI inclusion amount — the so-called High-Tax Exclusion (HTE). For UK companies paying the 25% main rate, this exclusion may apply, potentially eliminating the GILTI inclusion entirely.

The HTE is a tested unit-by-unit calculation, not applied globally. Each CFC’s income must exceed the 18.9% effective rate threshold independently. The election is annual and must be made affirmatively on the US tax return. Strategic use of the HTE can significantly reduce GILTI complexity and cost for US expats with UK companies.

GILTI and the UK Small Profits Rate

UK companies with profits under £50,000 pay the small profits rate of 19%. If a UK company’s effective tax rate is below 18.9%, the High-Tax Exclusion does not apply, and GILTI exposure increases. US expats running early-stage or lower-profit UK companies face higher GILTI risk than those with more mature businesses paying the full 25% rate.

Form 8992: Reporting GILTI

Form 8992 (US Shareholder Calculation of Global Intangible Low-Taxed Income) is filed by US shareholders to calculate the GILTI inclusion. It is filed as part of the US income tax return and requires information from Form 5471 (the CFC information return). Key steps:

• Complete Form 5471 for each CFC (tested income and QBAI data from Schedules C, F, and H)
• Complete Form 8992 to aggregate tested income and QBAI across all CFCs
• Make any Section 962 election on Form 1040 (noted in the return with a supporting statement)
• Complete Form 1118 to calculate the foreign tax credit on GILTI

Frequently Asked Questions

Does GILTI apply if my UK company has a loss?

No. GILTI only applies to tested income — if the UK CFC has a net loss for the year, there is no GILTI inclusion for that year. Tested losses can offset tested income from other CFCs in the same year, but unused tested losses cannot be carried forward to offset future years’ GILTI.

Can I use the Foreign Earned Income Exclusion (FEIE) to offset GILTI?

No. The FEIE excludes earned income (wages, self-employment income) from US tax. GILTI is not earned income — it is a deemed distribution of corporate income. The FEIE has no effect on GILTI liability.

I pay myself a salary from my UK company. Does this reduce GILTI?

Yes — salary paid to you as a director reduces the UK company’s taxable profits and therefore its tested income for GILTI purposes. However, your salary is subject to UK PAYE and NIC, and is foreign earned income for US purposes (eligible for the FEIE). The optimal salary level involves balancing UK and US tax considerations simultaneously.

What if I have multiple UK companies?

If you own multiple UK CFCs, Form 8992 aggregates the tested income and QBAI from all of them. Tested losses in one CFC can offset tested income in another, which may reduce the overall GILTI inclusion. Group planning across multiple entities can sometimes be advantageous.

Should I consider converting my UK Ltd to a US entity?

Some US expats consider converting their UK company to a US LLC or S-Corp to avoid GILTI entirely. This eliminates the CFC issue but creates UK tax complications — a UK-registered entity may still be required for UK commercial and VAT purposes. Cross-border business structure planning is complex and should be reviewed with advisors who understand both UK and US rules simultaneously.

Speak to a US-UK Business Tax Specialist

GILTI represents one of the most significant and evolving areas of US expat tax law. If you own a UK company — whether a consulting firm, professional practice, trading company, or holding structure — your US tax position deserves careful annual review. Our cross-border specialists can calculate your GILTI exposure, advise on Section 962 elections and the High-Tax Exclusion, and ensure Forms 5471, 8992, and 1118 are correctly prepared.

Contact us today for a GILTI review and US-UK business tax consultation.