Start Filing US Taxes From the UK
October 11, 2024 | Country Guides | 5 minute read
Expat Tax Blog. Tax Tips for US Americans abroad.
Updated October 15, 2024
All blogs are verified by Enrolled Agents and CPAs
Updated October 15, 2024
From Wales to England, to Scotland, to Northern Ireland, it’s understandable why you decided to move to the UK. You have access to many different cultures and so much history! Although you’re living the dream in the UK, you cannot forget about some of your US responsibilities, such as US taxes. There is quite a lot to be aware of, but this article aims to inform you about all your US tax basics while living abroad.
Table of Contents
- Who Needs to File US Taxes
- Filing Information for the UK
- Visas in the UK
- Tax Deadlines
- US Tax Benefits
- Family Benefits
- Self-Employment
- Investing and Retiring
- First-Time Filers
- Get Filing Today!
Who Needs to File US Taxes from the UK
You will likely have to file US taxes from the UK if you are a US citizen or Green Card Holder with an income that exceeds a certain threshold. For your 2023 tax return, if your income threshold exceeds any of the following amounts, you will have to need to file US taxes from the UK.
| Filing Status | Threshold Amount (Under 65) |
|---|---|
| Single | $13,850 |
| Married Filing Separately | $5 |
| Married Filing Jointly | $27,700 |
| Qualifying Widower | $27,700 |
| Head of Household | $20,800 |
| Self-Employment | $400 |
When you’re earning in British pounds, you will need to convert your income into US dollars to check to see if your met the criteria.
If you are a US citizen or Green Card Holder, you will need to report your worldwide income if it exceeds the threshold amounts. Earned income such as wages, investment income, and even pensions must be included. After checking out your income, check to see if you qualify for any tax credits to reduce your tax liability.
UK Residency Status
The UK has three primary residency categories: Resident, Non-Resident, and Domiciled. Depending on which category you are in will determine what you will need to report on your UK taxes.
As a resident, you will be required to report all of your worldwide income. If you’re considered a non-resident, you will only be taxed on UK-based income. Lastly, if you’re someone who has domicile status, meaning keep the UK as your permanent home even if you are living abroad. If you are domiciled, your foreign income could face UK taxation.
UK Income Tax Rates
Filing US taxes are one thing, but UK income tax rates are another. Similar to many countries, the UK has a progressive tax system, meaning if you’re earning a certain amount, you will be placed in a specific income tax bracket.
Here’s an overview of the UK income tax rates:
| Basic rate | 20% on income up to £50,270 |
| Higher rate | 40% on income between £50,271 and £125,140 |
| Additional rate | 45% on income over £125,140 |
These amounts will influence how much you owe the UK, but also the amount you can offset your US tax liability using certain tax benefits.
Visas in the UK
When you apply for a visa as a US expat, you will have several visa categories, such as:
- Skilled Worker Visa: For people with a job offer from a UK employer.
- Family Visa: For those with family ties in the UK.
- Innovator or Start-up Visa: Entrepreneurs starting a business in the UK.
There are many visas available to US citizens looking to immigrate to the UK. Your visa is essential for determining your UK tax and residency purposes. These two factors determine your tax implication, length of stay, and employment situation.
Key Tax Deadlines
US Tax Deadlines
When you’re filing US taxes as an expat in the UK, you must remember four key deadlines. The first one is the standard filing deadline of April 15th, which is also the deadline all Americans must pay their US taxes. The next is for US expats, who get an automatic 2-month extension until June 15th. If you need more time, you can file for October 15th by filing Form 4868. Finally, an option is to get an extension until December 15th, but it requires you to write a handwritten letter to the IRS by October 15th.
Please remember that all dates are subject to change by a few days if they fall on a holiday or weekend.
UK Tax Deadlines
For UK taxes, the tax year is from April 6th 2023 to April 5th 2024. Therefore, all UK tax returns must be filed by October 31st 2024 for paper returns and January 31st, 2025, for e-filing. January 31st, 2025, is also when you must pay UK taxes to avoid penalties!
US Tax Benefits
All US expats should be aware of three tax benefits: the Foreign Tax Credit (FTC), the Foreign Earned Income Exclusion (FEIE), and the UK-US tax treaty.
The Foreign Tax Credit (FTC) allows US expats to claim a credit for taxes paid to the UK. This is a dollar-for-dollar reduction of US taxes owed, ensuring you’re not taxed twice on the same income.
The Foreign Earned Income Exclusion (FEIE) lets US expats exclude up to $120,000 of foreign-earned income from US taxation. To qualify, you must meet the Bona Fide Residence Test or the Physical Presence Test, proving that you reside abroad.
The US and UK have a tax treaty that helps prevent double taxation. The treaty outlines how different types of income are taxed, including pensions, investment income, and social security. Consulting this treaty is essential for understanding how your taxes will be divided between the two countries.
The Child Tax Credit
As a US expat with children living and filing from the UK, you could still be eligible for a credit known as the Child Tax Credit (CTC). The CTC always requires you to claim up to $2,000 per child child under the age of 17 with a Social Security Number. Out of $2,000, $1,600 is refundable if you do not owe US taxes.
When you want to claim the CTC, you need to add Form 8812 to your IRS Form 1040.
Filing US Self-Employment Tax from the UK
When you live abroad as a self-employed US citizen, you will still have a US tax responsibility regarding self-employment taxation. The standard rate for self-employment tax is 15.3%, which covers both Social Security and Medicare contributions. Therefore, if you want to be on the safe side, it’s recommended to save 15.3% of every paycheck to account for self-employment taxes.
Not all, but most self-employed individuals will have to file, especially if the cost exceeds the income threshold amount of $400.
Investing and Retiring in the UK
The UK healthcare system (NHS) and the many options for European healthcare are very attractive for US expats who are looking to retire in the UK. In addition, the option to use the UK-US tax treaty offers clarification on how the US taxes pensions and retirement accounts.
If you are curious about where to start, check out Individual Retirement Accounts (IRAs) or the UK Self-Invested Personal Pension. Investing in your future can be a big deal, so we recommend getting professional advice from a MyExpatTaxes Tax Professional.
Catching Up on Filing US Taxes from the UK
If you haven’t filed while living abroad for the last years, do not worry, there is a procedure known as the Streamlined Procedure which can get you call caught up with no penalties. This procedure allows you file three prior tax returns and up to six FBARs to put you back in good terms with the IRS.
In order to qualify, you must not have filed at all since moving abroad, and you must not have been contacted by the IRS. If these requirements are not met, you cannot use the streamlined procedure.
Don’t Miss Your Chance to File with MyExpatTaxes!
Filing US and UK taxes for an expat can feel a little daunting, but keep in mind that there are many benefits and credits available to help lessen your tax burden. Many MyExpatTaxes professionals are also waiting to help guide you through your US taxes.
File today to ensure an easy tax filing journey that is correct and efficient. Get your tax benefits today with MyExpatTaxes!
Written by Nathalie Goldstein, EA
Nathalie Goldstein, EA is a leading expert on US taxes for Americans living abroad and CEO and Co-Founder of MyExpatTaxes. She contributes to Forbes and has been featured in Forbes, CNBC and Yahoo Finance discussing US expat tax.
October 11, 2024 | Country Guides | 5 minute read
