UK ISA Accounts: Are They Reported to the IRS?

UK Individual Savings Accounts (ISAs) are popular tax-free savings vehicles in the UK — interest and gains inside an ISA are completely exempt from UK tax. Unfortunately, the IRS does not recognize ISAs as tax-advantaged accounts, so income and gains earned inside an ISA are fully taxable on your US return just as if the ISA didn't exist. If your ISA holds cash or UK gilts (government bonds), the interest is reportable as ordinary income on Schedule B. If the ISA holds shares in UK funds, those funds are likely PFICs, triggering the harsh PFIC tax regime. The ISA itself must be reported on FBAR if the aggregate value of your foreign financial accounts (including the ISA) exceeds $10,000, and potentially on Form 8938 above its higher thresholds. The mismatch between UK and US treatment makes ISAs significantly less attractive for US citizens living in the UK than for UK-only taxpayers.