Saving for a US citizen child in the UK

A child born to a US citizen is usually a US citizen too, wherever they live, and the US taxes its citizens on everything they earn anywhere. The UK tax breaks for children's savings do not carry across: the US-UK treaty lets the US tax its own citizens as if the treaty did not exist, apart from a few exceptions, and none of those covers an ISA. What follows assumes the child lives in the UK with a parent, has no earnings, and can be claimed as a US dependant.

A Junior cash ISA

The interest is the child's own income in the year it is earned, although the child cannot touch it until 18. Whether that lock could delay the tax until 18 is arguable, but no IRS source says so, so the safe course is to report it each year.

• A return to file. A dependant child with no earnings must file once unearned income, such as interest and dividends, passes $1,350 in a year. The figure is the same for 2025 and 2026. A parent files and signs it for a child who cannot.
• The kiddie tax. A child's unearned income above $2,700 is taxed at the parent's rate if that is higher, on Form 8615.
• Or on the parent's return. A parent can report the child's income on their own return with Form 8814, if it is only interest and dividends and is under $13,500. The child then files nothing, but the income raises the parent's own, and a capital gain rules the election out.

The child's own FBAR and Form 8938

The FBAR, the report of foreign bank and financial accounts, belongs to the child. A US citizen child files one for any year in which all the child's accounts outside the US together pass $10,000 at any point, even with no tax return to file, and a parent or guardian files and signs it as the child's guardian. It goes to FinCEN, not the IRS, by April 15, with an automatic extension to October 15. The parent's and the child's accounts are never added together.

A parent who is only the registered contact on a Junior ISA probably does not have to list it on their own FBAR, because a registered contact cannot take money out. No official source addresses the Junior ISA directly, so that is a judgement call. An ordinary children's bank account that the parent can draw on is different, and does go on the parent's FBAR.

Form 8938 applies to a child only in a year the child must file a return, and for someone living abroad only above $200,000 at the end of the year or $300,000 at any point in it. Few children reach it. A parent using Form 8814 counts the child's accounts towards their own Form 8938 instead.

A Junior stocks and shares ISA

The IRS treats the child as owning each investment directly. UK funds and the companies behind UCITS ETFs are PFICs, passive foreign investment companies, and a gain on one is taxed as ordinary income at top rates with an interest charge unless an election was made in time. Each needs a Form 8621, unless the child's PFICs total $25,000 or less at the end of the year and nothing was sold. A child with no return to file sends it straight to the IRS. None of this is saved up for 18: the filing test applies every year the fund is held, and the tax falls when it is sold. Shares in ordinary companies avoid the problem, though a listed investment trust can itself be a PFIC. Only three platforms open a Junior stocks and shares ISA for a US citizen child; see the Junior stocks and shares ISA page.

A junior pension (SIPP)

This is unresolved, and it matters. The treaty's rule that defers tax on a pension until it pays out covers a pension in the other country, and its relief for contributions needs a UK job. A child living in the UK with a UK pension has neither, so on the treaty's own words nothing obviously stops the US taxing the growth each year. Nobody can deduct a payment into a child's pension on a US return.

If the IRS treats the SIPP as a foreign trust, a US citizen parent or grandparent who pays in can be treated as its owner, with a Form 3520 every year and penalties that start at $10,000. The IRS exemption usually relied on for UK pensions, Rev. Proc. 2020-17, requires contributions from earned income, which a child's pension funded under the £2,880 allowance does not have. No IRS ruling covers a child's UK pension either way, so take cross-border advice before paying in. The UK side is simple: up to £2,880 a year paid in for a child with no earnings, topped up by 20% tax relief to £3,600.

Gifts from a parent

Money paid into a Junior ISA is a completed gift: it belongs to the child and nobody can take it back. A US citizen can give each person $19,000 a year (2025 and 2026) without filing a gift tax return, but only for a gift the child can use now. A Junior ISA is locked until 18, so it probably qualifies only under the special rule for gifts to children, which no IRS source has applied to one. Above the limit, or to be certain, a parent files Form 709, and no tax is due until lifetime gifts pass $15 million (2026). A payment into a child's pension, locked for decades, looks like a gift the child cannot use now, which needs a Form 709 whatever its size.

A parent who is not a US person sometimes invests in their own ISA instead, where UK funds carry no US tax, and gives the child the money later. It is the parent's until it is given. The child reports the gift on Form 3520 if it comes to more than $100,000 in a year, counting gifts from the parent's relatives who are not US persons either.

How a 529 plan compares

A 529 is the US answer to saving for education: growth is not taxed, and withdrawals for qualifying education costs are tax-free on the US side. Some UK universities qualify: about 210 to 225 UK institutions, including Cambridge and Queen's University Belfast, are on the US Department of Education's list of eligible schools. Contributions count as a gift the child can use now, and can be spread over five years.

Two things stand in the way for a family living here. The two state plans checked, Utah's my529 and New York's Direct Plan, both require the account owner to give a US street address, and my529 wants one for the child too. And HMRC has published nothing on how it taxes a 529 held by someone living in the UK: its manuals do not mention one. Advisers differ, and a UK resident family needs advice before opening or keeping one.

A Child Trust Fund

Children born between September 1, 2002 and January 2, 2011 may have a Child Trust Fund. The US treats it the way it treats a Junior ISA: the interest is the child's income, funds inside are PFICs, and the balance counts towards the child's FBAR. Up to £9,000 a year can still be added, and it matures at 18.

The UK rules, briefly

Up to £9,000 a year can go into Junior ISAs for each child, cash and stocks and shares combined, a limit fixed until April 2031. A parent or guardian with parental responsibility opens one for a child under 16; at 16 or 17 the child can open their own. The child must live in the UK when it is opened. The money belongs to the child, stays locked until 18, and then becomes an ordinary adult ISA.

Sources

• IRS Publication 501, dependant filing thresholds
• IRS Rev. Proc. 2025-32, 2026 inflation adjustments
• IRS instructions for Form 8615, the kiddie tax
• IRS instructions for Form 8814, a parent's election
• FinCEN, report of foreign bank and financial accounts
• IRS instructions for Form 8938
• IRS instructions for Form 8621, PFICs
• US-UK income tax treaty, Articles 1, 4, 17 and 18
• IRS instructions for Form 3520, foreign trusts
• IRS Rev. Proc. 2020-17, foreign retirement trusts
• IRS, estate and gift tax changes
• IRS Publication 970, 529 plans
• my529 program description
• New York 529 Direct Plan disclosure booklet
• GOV.UK, Junior ISAs
• GOV.UK, Child Trust Funds
• GOV.UK, tax relief on private pension contributions