US Tax Filing Rules for UK Expats Living in or Outside America

US Tax Filing Rules for UK Expats Living in or Outside America

UK citizens must file income tax returns in the USA if they live there and earn income. Less well-known is the fact that they have to file USA tax returns even if they are residents in the UK but receive certain income from American sources.

Few UK citizens are aware that they have to submit US tax returns if they have a permanent residence permit in the USA (so-called green card holders). This also applies if you are not in the USA at all and do not receive any significant income from USA sources. Failure to comply with this obligation may sometimes result in severe penalties.

In this article, we are going to discuss the tax filing rules that must be observed by UK citizens if they are living in the USA or earning a significant income from there while staying anywhere else in the world.

Taxation in the USA

The tax burden in the USA is based on the place of residence in the respective state or city.

There are states with low tax rates (such as Delaware) and those with high tax rates.

In addition, some cities or municipalities collect high tax rates or duties - for example, Marco Island near Naples, Florida. This community has a very high property tax rate as a significant portion of the people who live there are millionaires.

Concerning taxes, a distinction is made between ●

Residents, i.e., the USA resident

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Non-residents, i.e., USA residents who are living outside the country. This includes those who have been in the United States for less than 183 days in the past three years.

However, no difference is made between the taxpayers who are legal foreigners or American citizens for the same income profiles.

Tax Rules for Non-US Residents ●

A non-US resident must file their US tax return by June 15 of the following year, unless they have US-based income. Then the deadline for submission is April 15th of the following year. Extension of the deadline can be requested on the official form. But be careful about the fact that payments must be made by April 15th regardless of the deadline for filing the tax. If necessary, these are to be estimated and paid to the American Treasury.

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The tax payments are generally to be made in USD. Green card holders who have not filed U.S. tax returns should always ensure the currency of payment. USA tax returns should be submitted for the current year and at least the previous two years. If possible, one should also go back further. In such cases, you should definitely seek advice from an expert who is well versed in US tax law and can offer USA tax advice for UK residents.

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UK citizens who are not resident in the USA and who receive income from real estate assets located in the USA must pay tax on this in the USA. This also applies if the real estate is held by a partnership or by a US corporation (e.g., an LLC) for which transparent taxation has been opted for through the so-called check-the-box procedure.

Special provisions apply to gains from the taxation of real estate. In these cases, UK citizens are obliged to submit tax returns for federal tax and the tax of the state in which the real estate is located (state tax).

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Separate tax returns must also be submitted for partnerships and corporations that have been opted for. Under certain circumstances, you can also choose a 30 percent withholding tax on rental income for directly held properties. Then there is no need to file a US tax return in this case.

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It’s also worth noting that the UK citizens who are not resident in the USA do not have to tax interest from the USA on bank deposits, checking and savings accounts, certificates of deposit and deposits with credit unions and building societies in the USA. USA tax returns are not required in such cases either.

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If a certain tax amount was incorrectly withheld in the USA, it can be refunded. However, residents of the UK or expats from any other country living in America- should not forget to state this income in their UK Citizen income tax return.

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UK citizens who are posted to the USA by their employer have to clarify a large number of tax and social security issues in both the UK and the USA. The presentation of all of the sometimes very complex issues would go beyond the scope of this article. Even UK citizens who are not residents in the USA need a personal tax number (TIN) to submit declarations and certain applications.

Further information is also available on the website of the USA consulates. The USA tax authority IRS (Internal Revenue Service) has a branch at the USA Embassy in London.

An interesting note about the UK citizens who have to file tax returns in the USA without being a resident there. Don't be alarmed if you are officially called nonresident aliens. This is the official term technician and has nothing to do with the film of the same name.

The following is only a brief overview of USA taxes. As tax legislation is a constantly changing process, it is essential to consult a specialist who can ensure hassle-free tax filing in the USA. MASECO is an independent wealth management firm seeking to enrich the lives of our American and global clients by simplifying their multi-jurisdictional wealth management needs.

Given our FCA and SEC registration, if you plan on living or working in the USA, MASECO will help you and your family navigate the journey and plan for your future in the USA.

Embarking on a journey across the Atlantic can take unexpected twists and turns that are often impossible to foresee upon your departure from the UK. Let us help you explore the endless possibilities by ensuring that your finances are structured and invested in a manner to meet your life requirements, wherever it may take you. Learn more by contacting us today!