If you are an American expat staying in the UK, you might be wondering if you need to file both US and UK taxes and how to do it. Connect with Expat Global Tax and find out everything on tax filing for US citizens living abroad.
If you are an US citizen and you have recently moved to the UK, chances are that you might be wondering about the dos and don’ts of US expat taxes, and rightly so! The tax obligations can be downright confusing when US citizens move abroad, but it doesn’t have to be so. So, here’s some help!
US citizens and Green Card holders/ lawful permanent residents are required to file their annual income tax returns, regardless of their current country of residence. However, this does not mean that you’ll be paying tax to both countries. Sometimes, in such cases, people are exempt from paying US taxes, thanks to relief from double taxation, but there’s still an obligation of filing US tax returns for UK residents.
There are a few filing requirements that you have to keep in mind, though it is only applicable if you meet certain conditions. But there’s more! While the US tax year follows the actual calendar year i.e. January 1st to December 31st, the one in the UK runs from April 6th to April 5th the following year. At Expat Global Tax, we help you with the basics of tax filing for US citizens living abroad as well as with the complicated bits.
For US citizens living in the UK - the chances of double taxation i.e. paying taxes to both US and the UK can be quite daunting. Luckily, there’s enough regulations in place to rule out this burden - some you might be aware of, some you might not know. Luckily, you have us by your side! That said, one of the most effective tools to rule out double taxation is Foreign Tax Credit. What does this do? Well, simply put, this allows expats to use the taxes they’ve already paid in the UK as credit against any US tax on the same income. As UK taxes are usually higher than one in the US, this almost always rules out any and all US tax liability on income generated in the UK.
That is not all! Another great tool at your disposal is the Foreign Earned Income Exclusion, which basically excludes up to $105,900 of foreign earned income from taxable income. However, those who are about to opt for tax filing for US citizens living abroad should note that this exclusion only applies to earned income such as wages and income from business, and does not include passive income like dividends and interests.
The Totalization Agreement between the two countries - US and UK, further eases the tax burden. This agreement basically exempts US expats from paying US self-employment tax, if they are already contributing to the UK’s National Insurance. At Expat Global Tax, we use these strategies to help with US tax returns for UK residents, so that you can rest easy, knowing that your expat taxes are being handled by professionals.
Let’s face it! US expats living in the UK face complex tax challenges – all of which can be quite challenging for most individuals. This is why US expats should seek professional help. In fact, navigating the tax challenges/ laws of both the US and the UK can be quite daunting, including the risk of double taxation. This is where professional tax consultants come in – experts who have thorough knowledge of international tax laws and treaties. Only professionals who specialize in expat laws can help you maximize your benefits, and avoid paying more than the absolute necessary.
Moreover, if you are looking to leverage the US-UK tax treaty and the US social security benefits, you would need professional help. At Expat Global Tax, our team of experts will not only help you with tax filing, but would also make sure that you meet compliance with all US tax obligations. This way you can stay away from the hassle and also rest assured that your tax filing is accurate.
Moving to the UK is a thrilling new start for American expats, but it comes with its own set of responsibilities, particularly since you have to be aware of both US and UK taxes. Luckily, we at Expat Global Tax have you covered! Connect with our experts now!
Foreign tax credit optimization: At Expat Global Tax, our team of financial and tax advisors will help you every step of the way, maximizing the Foreign Tax Credit, thereby making sure that the taxes paid to the UK offsets your US tax liability. This thus rules out the risk of double taxation, thereby eliminating any and all US tax liabilities on your UK income.
Strategic use of exclusions: Our experts will guide you through the Foreign Earned Income Exclusion, which excludes up to $105,900 of foreign-earned income from your US taxable income. This comes in handy for US expats who file early and don’t like waiting for the UK tax year to end.
Social security coordination: The Totalization Agreement between the US and the UK is of big help, and our experts at Expat Global Tax, help you navigate its different avenues. This agreement exempts US expats from the US self-employment tax, if they have already begun contributing to the UK’s National Insurance. This thus rules out double contribution/ taxation.
Tax treaty benefits: No one understands US expat taxes better than us! Our services are designed to help with US tax returns for UK residents. We take advantage of US-UK tax treaty provisions in areas like US social security benefits and UK pension contributions, thereby minimizing the tax burden on our clients.
Frequently Asked Questions
As a US expat, I haven’t filed for a few years. Can I start filing returns again?
Yes, you can definitely start filing returns again. At Expat Global Tax, we help you get back on track through IRS’ Streamlined Filing Compliance Procedures – that’s particularly designed for US expats who haven’t filed in a few years. It has a simple process and has a very low penalty. Our experts in tax filing for US citizens living abroad will guide you through every step of the process.
Do I need to file US tax returns even if I’m paying taxes in the UK?
Yes, as a US citizen, you need to file US tax returns, irrespective of where you stay and work. Since the US has a citizen-based taxation system, you must report your income to the IRS, in spite of you earning it in the UK or some other part of the world. Sounds confusing? Don’t worry! We at Expat Global Tax will guide you through this and help you take advantage of credits and exclusions to avoid double taxation.
Do I need to report my UK bank accounts and financial assets to the IRS?
Yes! If your financial assets or UK bank accounts exceed a certain threshold, you will have to report it to the IRS. Our team at Expat Global Tax will help you with it. This is done through the FBAR and FATCA filings. That said, these reports are separate from the usual US tax returns for UK residents but are crucial nonetheless.
For your FREE consultation on any tax related matters, please contact us via the phone number or email listed below or request a call back using the forum.
