Beginners Taxation Guide for American Expats Living in the UK

Taxation Guide for American Expats

There is no doubt in the fact that coming to the UK for work can be a great experience for any individual coming from the US. But while the history and culture of the country appeals to a person.

Taxation Guide for American Expats

American expats also find themselves in the trouble of dealing with both US and UK tax file returns simultaneously and that is also where they end up getting help from expat tax CPAsThe bitter reality is that not a lot of American citizens know about the US taxes from overseas though and if you are one of them, there is nothing to worry about anymore as we have got you covered with all the essential information listed below. 

Who Qualifies for Filing Returns? 

If you have one of the following kinds of income, you will be required to file returns 

  • If you have earned money while being self-employed or through your investments
  • Individuals with income coming from the property given on rent. 
  • If you have earned profits by selling shares, a second home, or maybe any other asset that offered you capital gains.
  • Any income that you have earned from non-UK sources during your stay in the UK
  • If you have claimed child benefits despite you or your partner’s income reaching £50,000
  • Your overall income was £100,000 or higher
  • If you want to claim deductions, you would still be required to file a tax return that will eventually contribute a great deal in reducing your tax liability and in also getting a refund from HMRC. Few examples of common deductions are money given to charity, private pension contributions, or work expenses above £2,500.

Where to Get the Form? 

The HMRC itself issues tax return forms to the US expats in the country. There are also chances that HMRC may not send you a tax form if they know you paid enough during your payroll withholding.

In case, if you haven’t received your form from HMRC, but you still need to file your returns, then you must get yourself registered with HMRC online. Make sure you do it on time because the sign-up process takes 10-14 days. 

Tax Return Detail 

While some may think the US is being unfair to stand as one of the very few governments around the world that take taxes from expats living abroad, the authorities at the same time offer special provisions in order to avoid double taxation. 

Following are the examples of exemptions 

  • The Foreign Earned Income Exclusion that lets you decrease your taxable income on your 2021 US expat taxes if you have earned $108,700 or less being a labor.
  • A foreign tax credit allows individuals to lower tax bills on the remaining income by showcasing how they have paid certain amounts to foreign governments. 
  • A Foreign Housing Exclusion is an additional exclusion from income which actually are amounts paid for household expenses that one has to bear living abroad.

How Do You Count as A UK Citizen?

There are guidelines issued by HMRC on the matter of being a UK citizen. The status depends on your long-term intentions and for how long you have been physically present in the UK. 

Moreover, below are some other conditions that you have to take care of

  • If you have spent 183 days or more without the intention of staying in the UK for more than two years, you will still have to pay taxes for the year. If the number of days fall short of 183 then you won’t have to pay taxes.
  • If you have spent 91 days or more on average every year in the UK for the last four tax years then you will be considered as a resident. You will also be treated as a resident for tax purposes if you have the intention of staying more than 91 days, on average per year upon your arrival in the country.
  • If you have come to the UK to stay for two years or more, you will be considered a tax resident from the day you first arrive. 

We hope these basics help! 

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