Taxes gives us headaches even when we’re living in our home country. But as an expat, things can get even more complicated. As a U.S. citizen, you need to pay taxes to the US federal government regardless of where you live. As a resident of the U.K., you’ll also need to contribute to the local system.
Does that mean you’ll pay double taxes on the same income? How do you avoid that?
Are expats subject to different regulations than the typical contributor?
All these questions and more were answered by the experts at AccountingPreneur, who shared with us the fundamentals of taxes for U.S. expats living in the U.K.
The U.S – U.K Tax Treaty
In 2002, the U.S. and the U.K. signed a treaty meant to avoid double taxation on U.S. citizens living and working on U.K. grounds. Typically, the authorities of the two countries exchange information so there are no additional forms to fill in to benefit from the perks of the treaty.
However, there are some special cases where you might need to fill in Form 8833 to avoid double taxation. If you think that might be the case for you, please look for specialized advice. We can interpret whether your situation falls within the treaty provisions and, if not, we can guide you fill in Form 8833.
How Do Takes in The U.K. Work?
If the U.S. government taxes income based on citizenship, the U.K. taxes income based on residency and domicile.
A domiciled resident will pay taxes to the U.K. on all income and capital gains, locally or internationally gained.
A non-domiciled resident will pay taxes only on U.K.-gained income plus a remittance basis, which is a tax on income gained internationally but brought to the U.K.
To make sure you qualify as a resident, please contact a U.K. residency expert. While generally all people who pass the Automatic Residence Test or the Sufficient Ties Test are considered residents, we highly advise you to work with a professional before filing for taxes in the U.S. or the U.K.
What Are the Tax Rates for U.S. Expats?
Just like in the U.S., the amount you owe to the HMRC (the British version of the IRA) is calculated depending on your income.
Here are the taxation levels that were in place for the previous fiscal year:
| Taxable Income | Tax Rate |
| £0-£12,500 | 0% |
| £12,501-£50,000 | 20% |
| £50,000 to £150,000 | 40% |
| over £150,000 and up | 45% |
What Are the Deadlines for Filing Your Taxes?
For U.S. contributors, the traditional deadline is April 15th of the next year. As an expat, you benefit from an additional two months extension for filing your taxes, up until June 15th. Despite this extension, all taxes owed are still due by April 15th.
For U.K. taxes, the fiscal year ends on April 5th of the following year and all files must be submitted by October 31st (if submitted by paper) or January 31st (is submitted electronically).
If you’re looking for specialized assistance with filing your taxes and avoiding double taxation, feel free to contact us. We’re here to help you get the most out of your money!
