Introduction: Why a Non-Executive Director With a US Passport Files Twice
A non-executive director who lives in Britain and holds a US passport is taxed on board fees by HMRC and the IRS at the same time, and the two systems classify those fees in completely different ways. Britain treats a board seat as an office, so fees run through PAYE with Class 1 National Insurance. The United States, by contrast, treats a director's fees as self-employment income reported on Schedule C and Schedule SE. Consequently, the same fee can attract UK National Insurance and a 15.3% US self-employment tax unless you take the right steps.
At TaxYork, we prepare returns for American board members across FTSE companies, AIM businesses, private equity portfolio boards and family companies. In our experience, the mistakes are remarkably consistent. US preparers who see no W-2 treat every non-executive director fee as ordinary self-employment income, charge full US self-employment tax and often claim the foreign earned income exclusion when the foreign tax credit would work far better.
How a Non-Executive Director Is Taxed on Each Side of the Atlantic
The short answer is this. In Britain, a non-executive director is an office holder under section 5 of the Income Tax (Earnings and Pensions) Act 2003, so fees are employment income taxed through the company payroll. In America, the Schedule SE instructions list "fees and other payments received by you for services as a director of a corporation" as self-employment earnings. Therefore, your US return must bridge two incompatible labels for exactly the same money.
Who This Guide Is For
This guide is written for US citizens and green card holders living in the UK who sit on one or more boards as a non-executive director, including chairs, senior independent directors and committee chairs. It also covers Americans who have retired from executive careers in banking, law or industry and built a portfolio of board seats. If your board sits in America while you live in Britain, the sections on sourcing and the treaty apply to you too. For US-based directors attending UK board meetings, our separate guide on the non-resident director position is the better starting point.
How the UK Taxes a Non-Executive Director
Britain's rules for board fees are clear and strictly enforced. Every non-executive director on a UK board should expect PAYE on fees from the first payment, whatever their seniority.
Office Holders, PAYE and Class 1 National Insurance
Since an office is treated as an employment, the company must pay your fees through payroll, deducting income tax and employee Class 1 National Insurance. For 2026/27, employee contributions are 8% on earnings between £12,570 and £50,270 and 2% above, while the company pays 15% employer contributions, according to HMRC's rates and thresholds for employers. Importantly, National Insurance is calculated separately for each directorship. As a result, a non-executive director with three boards can pay the 8% band three times over.
Travel to Board Meetings Is Usually Taxable
Many companies reimburse travel and hotels for board meetings. However, HMRC generally regards the place where the board meets as a permanent workplace for a non-executive director, so journeys from home are ordinary commuting. Accordingly, reimbursed travel is normally taxable through payroll. Some organisations instead settle the tax through a PAYE Settlement Agreement, which removes the item from your UK tax return entirely. That UK convenience, as we explain below, creates a real US problem.
Personal Service Companies and IR35
Some directors invoice through their own company. Nevertheless, the off-payroll working rules extend to office holders, and HMRC's guidance on understanding off-payroll working makes clear that the engagement is usually inside IR35. For an American, a personal company adds a second layer of US reporting, because a UK company you control is a controlled foreign corporation. Our guide to personal service companies for US consultants covers that trade-off in detail.
Fees Paid in Shares
Listed companies increasingly pay part of a non-executive director fee in shares, or require directors to buy shares with their fees. Shares delivered as remuneration are employment income in Britain, and where they are readily convertible assets, PAYE and Class 1 apply. Similarly, the United States taxes the market value of the shares as compensation, under section 83 of the Internal Revenue Code if they are restricted. Your basis in the shares for both countries is then the value taxed.
How the IRS Taxes a Non-Executive Director
The US treatment starts from a different premise. Because a non-executive director is not an employee of the company for US purposes, fees are self-employment income, whichever country the company is in.
Schedule C, Schedule SE and Form 1099-NEC
A US company paying you board fees reports them on Form 1099-NEC, not a W-2. A UK company issues a P60 instead, which US software does not recognise. Either way, the fees belong on Schedule C with any related expenses, and Schedule SE then calculates self-employment tax. For 2026, that tax is 15.3% on 92.35% of net earnings, comprising 12.4% Social Security up to $184,500 plus 2.9% Medicare with no ceiling.
Why UK Travel Reimbursements Are US Income
For US purposes, reimbursed travel to a regular board location is also treated as income unless it qualifies as a deductible business expense. Travel between home and the place you regularly work is commuting in both systems. Consequently, a non-executive director usually has taxable reimbursements in both countries. The difference lies in the credit. When the company deducts PAYE, you bear the tax and can claim it. By contrast, under a PAYE Settlement Agreement the company bears the tax, so you cannot claim a foreign tax credit for it at all, even though the IRS still taxes the benefit.
Board Expenses You Can Deduct
Genuine business costs that the company does not reimburse, such as professional subscriptions, director training and travel between two different companies' offices on the same day, may be deductible on Schedule C. Nevertheless, a non-executive director cannot deduct UK tax on Schedule C; it is claimed as a credit instead. Moreover, costs relating to your UK employment income are not deductible on the UK side at all unless strict tests are met, so the two expense claims rarely match.
The Self-Employment Tax Problem and How to Solve It
For most American board members, US self-employment tax is the single largest avoidable cost. A non-executive director with £150,000 of UK fees can face over $25,000 a year in US self-employment tax on top of UK National Insurance.
The US-UK Totalisation Agreement
The United States and Britain have a social security agreement that prevents double contributions. Under it, a person working in the UK and paying UK National Insurance is covered only by the UK system. The IRS confirms the principle on its totalization agreements page. Accordingly, a non-executive director paying Class 1 on UK board fees should pay no US self-employment tax on those fees.
Getting and Using a Certificate of Coverage
The exemption is not automatic. You need a certificate of coverage from HMRC and must attach it, or a statement referring to it, to your US return each year. Our guide to the certificate of coverage that ends US self-employment tax explains how UK residents request one. Since the IRS also explains the process in its guidance on self-employment tax for businesses abroad, there is no reason to pay a charge the agreement removes.
Reclaiming Self-Employment Tax Already Paid
If a preparer has charged you self-employment tax in earlier years, you can usually recover it by amending those returns. The window is generally three years from filing. Therefore, the certificate should be requested as soon as the problem is spotted, because each lost year is lost for good.
Boards of American Companies
A UK-resident non-executive director on a US company's board receives a 1099-NEC and meets US self-employment tax head-on. The totalisation agreement generally assigns a self-employed person to the social security system of the country where they live. However, the position for board fees from a US company needs care, because Britain does not usually charge National Insurance on them. We therefore review each US board seat individually before claiming the exemption.
Foreign Tax Credits, Sourcing and the Treaty
Once self-employment tax is dealt with, US income tax on board fees is usually eliminated by foreign tax credits. The rules on where fees come from, however, decide how well those credits work.
Why the Foreign Tax Credit Beats the Exclusion
A non-executive director fee is earned income, so the foreign earned income exclusion is technically available up to $132,900 for 2026. However, UK tax at 40% and 45% exceeds most US rates, so the foreign tax credit on Form 1116 normally wipes out US income tax and leaves surplus credits to carry forward for ten years. By contrast, the exclusion wastes the UK tax on the excluded income. Moreover, once revoked, the exclusion cannot be claimed again for five years without IRS consent, so the choice deserves modelling.
National Insurance Is Not a Creditable Tax
Class 1 National Insurance is a social security contribution. It cannot be claimed on Form 1116, and including it overstates your credits. Instead, the totalisation agreement is the relief for social security. This is one of the most common errors we correct on returns prepared by US-only firms.
Board Meetings in the United States
Director fees are sourced where the services are performed. So when a non-executive director of a UK company flies to New York for a board meeting, part of the fee may be US-source income, which the ordinary foreign tax credit cannot shelter. Under Article 15 of the US-UK income tax treaty, directors' fees for services rendered in a country, as a board member of a company resident there, may be taxed in that country. Article 24 then re-sources income where needed so that UK tax can relieve the US charge. Our US-UK treaty and double tax relief team keeps a day-by-day log for board members with meetings on both sides.
New Arrivals and Overseas Workday Relief
Americans who have recently moved to Britain may qualify for Overseas Workday Relief on duties performed abroad, including board work for overseas companies. From 6 April 2025, the relief lasts for up to four years for qualifying new residents and is capped at the lower of 30% of qualifying employment income or £300,000 a year. Notably, income relieved in Britain carries no UK tax, so it generates no foreign tax credit and may bear US tax.
Accounts, Shares and Reporting for Board Members
A board portfolio usually brings investment accounts and, sometimes, authority over company accounts. Both matter for US reporting.
Shareholdings and Form 8938
Many listed boards require directors to build a shareholding. Shares held through a UK broker sit in a foreign financial account, which counts for the FBAR and for Form 8938 once the thresholds are met. For single filers living abroad, Form 8938 applies above $200,000 at year end or $300,000 at any time. The IRS comparison of Form 8938 and FBAR requirements sets out the overlap. Additionally, shares in UK investment trusts can be passive foreign investment companies, so a non-executive director of such a trust faces an extra layer of complexity.
Signature Authority and the FBAR
A non-executive director rarely signs on company bank accounts. However, where you do hold signature authority over a UK account, it belongs on your FBAR filed with FinCEN even though the money is not yours. For directors of US-listed companies and certain regulated entities, FinCEN's extension for signature-authority-only filers pushes the deadline to 15 April 2027. Our FBAR and FATCA reporting team checks which accounts qualify.
Multiple Directorships on the UK Return
Each directorship needs its own employment page on your UK Self Assessment return. From 2025/26, directors of close companies must also report the company's name, registration number, dividends received and highest shareholding percentage. Consequently, a non-executive director with several private company seats now has more UK reporting than ever, and those figures feed straight into the US foreign tax credit calculation.
Missed US Returns for Non-Executive Directors
Many Americans build a board portfolio after years in which a UK employer ran their payroll and nobody mentioned the IRS. If you have missed US returns or FBARs, the position can usually be fixed without the heaviest penalties.
Catching Up Under the Non-Wilful Route
Taxpayers living abroad whose failures were non-wilful can generally file three years of returns and six years of FBARs with a certification of non-wilful conduct. Our IRS Streamlined Filing service prepares the whole package. For most board members, foreign tax credits and a certificate of coverage reduce the US tax due to little or nothing.
Correcting Returns Filed the Wrong Way
If you filed, but paid self-employment tax or claimed the exclusion, amended returns can recover the overpayment. Nevertheless, the refund window for self-employment tax is only three years, while foreign tax credit claims enjoy a ten-year window. As a result, we deal with the oldest open years first. For a wider view of US rules for company directors, see our guide for US citizens who are UK company directors.
Case Study: David's Board Portfolio
This illustrative example shows how the rules combine for a typical American non-executive director. The figures use 2026/27 UK rates, 2026 US figures and an assumed exchange rate of $1.35 to the pound.
David's Boards and His Old Returns
David is a US citizen and former investment banker living in Surrey. He chairs the audit committee of a FTSE 250 company for £90,000, sits on an AIM company board for £45,000 and a private company board for £30,000. The AIM company also pays him £15,000 of his fee in shares, and his boards reimburse £8,000 of travel through payroll. His UK employment income is therefore £188,000. His previous US preparer reported everything on Schedule C, charged full self-employment tax and claimed the foreign earned income exclusion.
The UK and US Numbers
David's UK income tax is about £70,800, plus roughly £8,600 of employee National Insurance across three payrolls. In dollars, his income is about $253,800. Under the old approach, his US self-employment tax was roughly $29,700 a year. Meanwhile, his US income tax before credits is around $52,500, while his UK income tax is worth about $95,600.
What We Changed
First, we obtained a certificate of coverage confirming his UK National Insurance coverage, removing the $29,700 annual charge and supporting amended returns that reclaimed about $85,000 for three earlier years. Next, we revoked the exclusion and claimed full foreign tax credits, which eliminated US income tax and created about $43,000 of surplus credits to carry forward. We also treated his AIM shares as compensation at market value, giving him a correct US basis, and added his UK broker account to his FBAR and Form 8938. Finally, we confirmed that his travel was taxed through payroll rather than a PAYE Settlement Agreement, so the UK tax on it was fully creditable. Overall, David now pays nothing to the IRS on his board fees.
How TaxYork Can Help
TaxYork provides comprehensive US and UK tax return preparation for American board members. For every non-executive director we act for, we translate P60s and 1099-NEC forms into a correct Schedule C, obtain certificates of coverage, prepare Form 1116 and treaty claims, and file FBARs and Form 8938 for share accounts. Additionally, we coordinate your UK Self Assessment with each company's payroll, so the UK tax figures on your US return match exactly what HMRC holds. For wider support, our US tax returns for expats service covers every other part of your return.
Conclusion
A non-executive director with a US passport sits between two tax systems that describe the same fee in opposite ways. Britain sees an office holder on PAYE; America sees a self-employed contractor. In our experience, the most valuable single step is the certificate of coverage, which removes US self-employment tax on UK board fees. Beyond that, the foreign tax credit usually beats the exclusion, National Insurance must stay off Form 1116, PAYE Settlement Agreements should be avoided for your expenses where possible, and US board meetings need sourcing. Above all, act promptly, because refunds of self-employment tax expire after three years.
Contact Us
If you serve as a non-executive director on UK or US boards while living in Britain, speak to specialists who prepare both returns. Please book a consultation with the TaxYork team today. Alternatively, email hello@taxyork.com or call 020 3488 8606.
Disclaimer
This article provides general information about the US and UK tax position of an American non-executive director as at September 2026 and does not constitute tax, legal or financial advice. Tax rules and rates change frequently, and the correct treatment depends on your personal circumstances. The case study is illustrative, uses assumed figures and simplified calculations, and does not describe a real client. Please obtain professional advice tailored to your situation before acting on any information in this article.