The US operates a citizenship taxation model which imposes taxes on citizens, regardless of where the citizens reside. As such, providing that you are a US citizen, your worldwide incomes and gains will continue to be assessable in the US, even if you are a US expat residing in the UK.
Therefore, you may believe that because you are paying US taxes, you do not need to pay UK taxes however, this assumption is incorrect.
Providing that you are resident in the UK, which broadly will be achieved by spending 6+ months, having a home, working full time, or having ties in the UK, as a starting point, your worldwide incomes and gains will be assessable in the UK.
This means that alongside declaring and paying tax in the US, you have an equivalent requirement in the UK.
As a result of having tax obligations in both countries, US expats are often faced with double taxation issues – that is paying tax twice on the same income to the IRS and HMRC.
To mitigate/remove double taxation, there are a number of tax planning strategies to explore in the US and the UK and also at international level, as follows:
1) providing that you meet the foreign earned income requirements which broadly can be achieved by minimising physical presence in the US or by acquiring sufficient links/ties to an overseas country, the first $120,000 of earned income can be exempt from US taxation; or
2) providing that you are considered a new arriver, you can exempt foreign incomes and gains from UK taxation; or
3) claiming a foreign tax credit in line with the UK/US double taxation agreement which requires one country to give a credit/deduction for tax suffered on the same income or gain overseas.
From a compliance perspective, if you receive foreign incomes and/or gains, you need to file a UK tax return.
If you have been residing in the UK and have undeclared foreign incomes and gains, you can complete a disclosure to bring your tax affairs up to date on the best possible terms with HMRC.
Don’t let the complexities of dual taxation keep you up at night. Take charge today—partner with our trusted UK tax experts for US citizens. Navigate foreign income exemptions, double-tax credits, and HMRC disclosure with confidence.
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