Filing taxes can be confusing and complicated as it is, but when you are not living in your native country, the process becomes all the more complex.
Over 166,000 Americans reside in the United Kingdom. To help this specific group, Xerxes brings you a simple tax guide for US citizens living in London.

The first question that a US expatriate may have is after how long of staying in the UK are they obligated to start paying taxes to the UK government? The answer is when you start qualifying as a UK resident.

To check your residency status, simply take the Statutory Residence Test (SRT). If you went to the UK with the intention of living there for 2 years or above, you are treated as a tax resident from the very first day. You also qualify as a resident if you have stayed in the UK for over 183 days in one year or 91 days per year over the period of the last 4 years.

Even if you are a UK tax resident, you need to declare your worldwide income to the IRS. The US citizenship-based taxation system states that U.S. filing rules for Americans living abroad are the same as for Americans living in the states.

This does not mean that you have to pay your taxes twice!

The IRS offers programs like Foreign tax credit(FTC), Foreign earned income exclusion(FEIE), Foreign housing exclusion(FHE), etc. to avoid double taxation and reduce your tax liability.

For Social Security Taxes, a totalisation agreement between UK and US helps US expatriates to determine which country they should contribute to, they don’t have to pay twice.

For income tax imposed, one can use FTC to collect tax credits on a dollar-to-dollar basis.
Eg, Taxes to be payed (US) = $ 500
Taxes already paid (UK) = $ 300
Credits received = $ 300
Tax owed (US) = $200

You can also take the Physical Presence Test or the Bona Fide Residence Test, to check if you qualify for FEIE. a certain amount( which changes each year based on inflation), will be excluded if you do pass. People qualified for FEIE can also look at FHE to further reduce their tax liability.

A cautionary note: People with more than $10,000 in their foreign account need to file a Report of Foreign Bank and Financial Accounts (FBAR). Penalties apply if they don’t.

Coming to the tax rate now. US expatriates have a higher tax rate in the UK as compared to their native country. The exact payable amount is based on the income that you have.

If you have annual earnings of £150,000 or above, your estimated tax rate is 45%, for income between £50,271 to £150,000, the tax rate is 40%, and for annual income above £12,571 up to £50,700, the tax rate drops to 20%. Below £12,571, the tax rate is 0%.

In the UK, the tax year is from April 6 to April 5. you must file your tax returns to Her Majesty’s Revenue & Customs (HMRC) office before October 31st. However, If you are filing your taxes electronically your deadline gets extended to October 31st.

Taxation processes can be confusing, but Xerxes Associates are here to assist. Contact us for any further queries.

Many countries all over the world allow people to hold dual citizenship i.e. they are official citizens of not one but two countries.

Dual citizenship is acquired when you file for dual citizenship or you automatically get it through a parent. In some cases you become a dual citizen by birth.

No matter how you earn dual citizenship, you need to figure out your taxation obligations.

This article is specifically devoted to US/UK dual citizens and their taxation queries.

If you are a dual citizen of these two countries, you do owe taxes to both these countries. This is because the United States has a citizenship-based taxation system which mentions that the taxation rules for American citizens are the same no matter where they reside.

Technically, you might face double taxation but practically you do not have to pay twice since the IRS offers multiple programs and strategies to reduce the tax liability of dual citizens.

Foreign tax credit(FTC), Foreign earned income exclusion(FEIE), are some provisions to avoid double taxation.

The UK and US also have a totalization agreement that helps dual citizens to determine which country they should contribute to in terms of social security taxes. This treaty also clarifies what income is taxable and what is not.

If you feel lost in the series of processes, our expert team of tax advisers at Xerxes Associates LLP is there to help you. Trust our experienced tax accountants to guide you in every step with responsive and personalised service. From tax compliance to return preparations and submissions, we cover it all for you.

Foreign tax credit(FTC)

For income tax imposed, one can use FTC to collect tax credits on a dollar-to-dollar basis. Since UK tax rates are higher than US ones, this program is extremely fruitful for dual citizens.
How this program works:
Total Taxes to be payed (US) = $ 500
Taxes already paid (UK) = $ 300
Credits received = $ 300
End Tax owed (US) = $200

Foreign earned income exclusion(FEIE)

To qualify for this program, you have to reside outside the US and pass either the Physical Presence Test or the Bona Fide Residence Test. If you do qualify, you can exclude your foreign earned income till a certain amount ( which changes each year based on inflation; the 2022 amount: $112,000)

In some rare instances, people don’t realise that they have dual citizenship and they owe taxes to the United States. This happens when you become an American by accident. For example, you and your parents are citizens of the UK and you have resided in the UK itself , but your birth took place in the US while your parents were working there.

Such situations become a bit tricky since you didn’t deliberately omit paying your taxes and shouldn’t be penalised for the same. IRS is pretty understanding in such cases and has Offshore streamlined compliance procedures in place, constructed to assist you to catch up on your US taxes.

If you can prove that this tax omission was an honest misunderstanding, you have resided in a foreign country for at least 330 days of a year, (within the past 3 years), and do not have any US land, you can correct your errors with the Offshore streamlined compliance procedures.

The UK and US tax years and tax bands both vary. In the UK, the tax year is from April 6 to April 5 whereas in the US it starts from January 1 and ends December 31. These variations affect your tax deadlines and the way you file taxes. Thus knowing which tax bracket you fall in and what are the prominent dates of filing taxes in both countries is extremely important.

A cautionary note: People with more than $10,000 in their foreign account need to file a
Report of Foreign Bank and Financial Accounts (FBAR) and Foreign Account Tax Compliance Act (FATCA) form . Penalties apply if they don’t.

Taxation processes can be confusing, but Xerxes Associates are here to assist. Contact us for any further queries.

If you are an American working in the UK, you probably have heard how overwhelming US tax processes can get. Besides worrying about the elaborate procedures to file your US taxes, other questions that could haunt you are as follows:

• Do your UK financial accounts affect your tax filing?
• Are there any options available to reduce your tax liability?
• How does taxation work if you are a dual US/UK citizen?

If you are filing your taxes for the first time and finding it tiring to do so, here is your ultimate tax advice for US expats in UK,

US taxes are based on citizenship and not place of residence which means that no matter where you live, you are under the obligation to file US tax. Irrespective of how long you stay and work in the UK, you have to report the income on US taxes.

If you are a US taxpayer with over $10,000 in your foreign bank account then you are subject to FBAR filing and reporting requirements. For foreign assets valued at more than $200,000, you may be subject to FATCA reporting requirements.

One great piece of tax advice for US Expats in UK is to benefit from the following tax strategies to lower your US tax bill and avoid dual taxation.

Strategy 1: Foreign Earned Income Exclusion

This tax benefit allows you to exclude taxation of all or a part of your income from US taxes. You can be eligible for this exclusion if you are a US citizen who qualifies as a bona fide resident of the UK, or any other foreign country for that matter, for a complete tax cycle without interruptions in your stay.

Strategy 2: Foreign Tax Credit

If you are a foreign income tax-paying US expat, then you can claim US tax returns on dollar for dollar basis with the help of the Foreign Tax Credit. Since income tax rates are higher in the US than in the UK, when you claim Foreign Tax Credit you receive enough US tax credits to eradicate the tax liability.

One thing that you need to remember is that the process of tax filing as a US expatriate is not as easy as it may sound. A lot depends on your current situation when it comes to filing taxes. So, when it comes to tax advice for US Expats in UK, it is always best to consult experts who can help you in the process and guide you through the complexities.

For instance, your investments in the UK that are deemed tax-free are not exempted from taxes in the US. You may consider it wise to invest in a tax-free Individual Savings Account (ISA) in the UK. However, these are not considered tax-free when it comes to US taxes irrespective of whether the investment is in cash or shares and stocks.

If you feel lost in the series of processes, our expert team of tax advisers at Xerxes Associates LLP is there to help you. Trust our experienced tax accountants to guide you in every step with responsive and personalised service. From tax compliance to return preparations and submissions, we cover it all for you.

As an American living and working in London and or anywhere in the UK, you might get baffled by the US and UK tax processes. Even getting started can sometimes be overwhelming especially if it is your first time.

For serious matters like taxes, it is always best to get expert help. Xerxes Associates LLP offers comprehensive services when it comes to filing US Tax Return London and UK.

Our services include the following:

US Federal and State Income Tax Returns

We guide you to file a US Federal Return, and a possible State Tax Return, depending on your current personal situation. Our team of IRS preparers and Certified Acceptance Agents also assist you to comprehend the filing system of ITIN and FBAR. In turn, it lets you understand the necessary Federal and State applications you need to file for.

UK Self-Assessment Tax Returns

Get the significant and necessary knowledge regarding the UK tax return from our team of ICAEW Chartered Accountants. Our team works closely with in-house IRS-enrolled agents. They help you deal with the complexities of US and UK tax returns. Our experts explain to you the preparation process and work to provide the most optimal filing options.

Personal Tax Planning and Advice

While staying in the UK, there are some expenses connected to our personal lifestyles. It can also be your financial situation related to your personal business. We offer the best resources to understand your financial and tax situation and provide you with the most beneficial advice. Our team is available to assist you at your convenience.

FBAR and ITIN Assistance

For a US citizen, it is mandatory to file for the FBAR. Also, non-US citizens with a US spouse, who is willing to keep a report of US-sourced income through a US tax return can file it through the ITIN application. Be it the Foreign Bank Account Report (FBAR) form or the US Individual Tax Identification Number (ITIN) application, our team can assist you through beneficial advice and resources.

Company and Small Business Tax

A US-citizen operation, even a small business in the UK required to apply for statutory and tax filing. Our team also has ICAEW Chartered Accountants and they possess the expertise and experience necessary to deal with the complexities of the filing system. Guidance regarding entity selection, HMRC and companies house filing obligations is provided by our legal experts. US/UK statutory and tax compliance advice are also offered here.

Streamlined Filing Package

A late filing along with being abroad for at least 3 years can become overwhelming. The team of Xerxes helps you to get through the procedure of tax compliance with ease. For late filers, the process includes calculating the interest and penalties, along with profitable advice. This is done by filing with the IRS through the Streamlined Program. All these activities are completed with ease with the assistance of our experienced team.

CFCs, Form 5471 and GILTI

The IRS is strict when it comes to reporting US citizens owning shareholding in a Controlled Foreign Corporation (CFC). The penalties are severe for non-compliance with no statute of limitations. Our team of advisors offers tailored services to keep the situation in control from filing to ensuring compliance with the IRS.

Crypto Tax

There is a misconception that profit made by investing in crypto-currencies is excluded from taxation. Also, both the IRS and HMRC have noticed the popularity of cryptocurrency and its gains and prioritise that individuals are paying the tax for their crypto assets. Our team of Associates LLP includes chartered accountants and tax advisors that assist US citizens staying in the UK with legal advice for crypto taxes.

Conclusion

Not sure which service you need to fulfil your requirement regarding US Tax Return in London and the UK? Consult with our expert and experienced professionals online or in person at our London offices. We offer tailored services to clients across the UK as per their requirements and at their convenience.

Contact us if you have any questions or would like to chat about your requirements in a friendly, no-obligation manner.

If you are a US expat living in the UK, you have to file US taxes every year and report the money you have in foreign banks with the help of the Foreign Bank Account Report (FBAR). 

It is quite common that US and UK expats don’t know about their tax duties once they are living and working abroad, especially if they are the first ones from the family to settle in a faraway land. Many often misunderstand or overlook the tax duty and think that they have to file taxes only for the country that they now live in. 

In case of honest mistakes, IRS has a history of showing leniency allowing expats to catch up on their past taxes with Streamlined Filing Compliance Procedures. Through this procedure, expatriates who were unaware of their tax obligations are able to catch up with previous years’ filings and minimise the penalties.

How to know if you qualify for Streamlined Filing Compliance Procedures?

In order to qualify for the Streamlined Filing Compliance, you need to be living outside the US for at least 330 days during any of the previous three years.

You also need to confirm and prove that you failed to file the US tax returns due to a genuine misunderstanding or lack of knowledge.

Once you qualify for the Streamlined Filing Compliance Procedures, you will have to ensure the following:

1. You need to file the missed income tax returns for the previous three tax years which were delinquent.
2. You then have to file an FBAR for the previous six tax years.
3. Once you have filed the two, now you need to provide a complete statement of explanation in which you mention in detail the reason why you didn’t file your income tax return and FBAR.
4. Now, the last and the most straightforward of all the steps, you need to pay the tax along with the interest due for the previous three tax years.

Does this overwhelm you?

Well, Streamlined Filing Compliance Procedures do require a lot of paperwork. So, it is wise to consult experts who have in-depth knowledge of how things are done.

Xerxes provides late or delinquent tax filers with reliable advice and efficient assistance in getting tax compliant with the IRS with the help of the Streamlined Program. The agents enrolled in the IRS help you identify, gauge and calculate the additional penalties and interests.

If you have lived outside of the US for at least a period of 3 years and have not filed US taxes, you can reach us for a no-obligation chat. Speak to one of our members to know your options and all that you need to do to catch up with your missed tax filings.

It is wise to note here that the Streamlined Filing Compliance Procedures is strictly for US taxpayers who have genuine reasons for overlooking their previous years’ US tax responsibilities. Only in cases where your delay or delinquency is not wilful, you can qualify for the program and catch up with your unpaid taxes.

Do you need help getting caught up with taxes? Xerxes Associates LLP work closely with US and UK expats from all different backgrounds, circumstances and occupations as well as high-net worth individuals in order to help them through the complexities of US and UK tax compliance requirements. Contact us if you have any questions or would like to chat about your requirements in a friendly, no-obligation manner.

Contact us if you have any questions or would like to chat about your requirements in a friendly, no-obligation manner.

Xerxes Associates LLP makes filing US income taxes for US expats living abroad seamless and simple. We understand the dynamics of being a US citizen living abroad in countries like the UK and cities such as London. We take pride in helping you understand US expat tax laws and rules without overwhelming you with difficult tax terminology. We work with simple situations and very complex US expat tax returns.

We value our client’s confidence and we work hard to build trust and lasting relationships. Every US expat tax return is a unique and niche situation because the foreign country you reside in has a different currency, different types of retirement accounts, and different agreements with the USA.  If you also add the complexity of your personal tax situation, most inexperienced tax advisers simply do not deliver the service you will require and need.

The stakes are high with US expat tax returns because failing to file a foreign bank account report or another required international informational return can come with penalties of $10,000 or more.  The IRS can also deny the foreign earned income exclusion or foreign tax credits if they are used incorrectly.

Our US & UK clients enjoy working with Xerxes Associates LLP because we proactively engage with them on all key issues and help you ensure there are no misunderstandings of what the IRS requires.  A professionally completed, accurate tax return that is e-filed is really the best way to stay on the good side of the IRS!

Do you need help getting caught up with taxes? Xerxes Associates LLP work closely with US and UK expats from all different backgrounds, circumstances and occupations as well as high-net worth individuals in order to help them through the complexities of US and UK tax compliance requirements.

US Expats living in the United Kingdom can contact us if you live in any of the following areas;

• – London
• – Birmingham
• – Manchester
• – Leeds
• – Scotland
• – Wales
• – All towns, cities and remote locations in England and Wales

Contact us if you have any questions or would like to chat about your requirements in a friendly, no-obligation manner.

Are you A US Expat Living Abroad & Haven’t Filed Your Taxes?

You might be living overseas and concerned that you haven’t filed US taxes. If you are an US expat, you might consider getting into tax compliance before it is too late. Our ‘US Tax Return London and UK’ product is a bespoke service designed to tackle any and all possibilities on your behalf. Here are some important points for you to understand about US tax returns.

• – Filing US taxes is required even when working and earning an income overseas.
• – Even if you earn an income overseas, you must file your US taxes.
• – Not paying US taxes could cause problems when renewing your passport.
• – It is impossible to predict what the US Government will do in the near future, particularly with regard to immigration.

If you use the ‘Foreign Earned Income Exclusion’ and the ‘Foreign Tax Credit’ together, you may not owe as much US tax as you think you do.

Self-employed people and people who live in countries not covered by the ‘Totalization Agreement’ may owe taxes that fund their payments to Social Security.

It is difficult to determine how many tax returns are needed to be filed in terms of previous years, however, people who file tax returns for the previous six years seemingly satisfy the IRS system. However, some people try to file less than six and the response from the IRS is not always favourable.

Here is some motivation to reach out to us and start the process; the pandemic stimulus payments will be provided to you if you file 2020 2021 returns (if you qualify). Contact us here. Xerxes Associates LLP is a leading firm of tax advisers qualified in both the United States (IRS) and the United Kingdom (HMRC) tax procedures.

There is nothing more complicated, confusing, time-consuming, or even a bit frightening than filing a tax return. With our help, Americans and Brits can understand US and UK tax easily. No matter what form you’re trying to complete, what questions you’re asking or how much tax you’re trying to save, we can help you.

Xerxes Associates LLP work closely with US and UK expats from all different backgrounds, circumstances and occupations as well as high-net worth individuals in order to help them through the complexities of US and UK tax compliance requirements (tax imposed on expatriates). If you have a query or would like a friendly no obligation chat about your requirements then please get in touch and we shall be happy to assist you.

There are a variety of expat services available however, Xerxes Associates LLP offers you a premium and efficient service which has made us the number one choice for U.S. expats living in the UK.

In order to meet your specific needs, Xerxes Associates LLP offers US Expats living in the UK a range of reliable services bespoke to your personal taxation requirements. There is no one better equipped to handle complex expat tax issues than the Xerxes Associates LLP team.

U.S. Tax Compliance Services

A U.S. citizen or U.S. green card holder must file a U.S. tax return annually to report their worldwide income, regardless of whether they owe any tax. It’s still necessary to file a U.S. tax return even if you earned all of your income abroad and paid taxes in your country of residence.

There are a number of exclusions and credits available to you and you can minimise your U.S. federal tax liability by optimising your tax return. Xerxes Associates LLP can help you achieve maximum tax optimisation and efficiency.

Xerxes Associates LLP provide the following range of tax preparation services:

– Completion of individual Federal US resident and non-resident tax returns (Form 1040 and Form 1040NR).

– Streamlined filing for delinquent filers.

– Preparing expatriation returns.

– Preparing and submitting Foreign Bank Account Reports (FBAR) forms.

– Completion of State Tax Returns.

– Planning for moving to or from the US.

– Planning of UK/US profit extraction from companies including the resolution of both the Repatriation Tax and the GILTI Tax.

– Claims for Foreign Earned Income deductions.

– Claims for Foreign Tax Credits.

– Crypto Tax Advice.

Our dual-qualified team of tax advisers can look after your personal tax affairs as well as those of your business. We have been helping our clients manage their tax affairs for over 10 years now and can assist you with all associated complexities.

Xerxes Associates LLP work closely with US and UK expats from all different backgrounds, circumstances and occupations as well as high-net worth individuals in order to help them through the complexities of US and UK tax compliance requirements (tax imposed on expatriates). If you have a query or would like a friendly no obligation chat about your requirements then please get in touch and we shall be happy to assist you.

No matter where they live, U.S. citizens and residents pay taxes on their worldwide income. Therefore, you must also report any income you report on your UK return on your US return. Filing requirements in the US are determined by your filing status and your income amount.

Finding conformity between your UK and US tax year

In the UK, the tax year runs from 6th April to 5th April, so submitting your US tax returns may be difficult as the IRS expects to see your earnings from January 1 to December 31.

This issue can be addressed in many ways, but we find the most accurate method is to use the following formula:

Take the amount of your P60 this year – The YTD amount from your PAYE statement from the previous year + The YTD amount from PAYE statement of this year = The amount current year amount.

In addition to calculating the amount of money you earned last year, this calculation can also be used to calculate the amount of money you paid to HMRC during the year.

Avoid paying taxes twice

There should never be a double taxation of the same income. Americans in the UK typically pay their income tax to the UK first, then file their US tax returns. Foreign Tax Credits are available in both the United Kingdom and the United States, thus allowing for a smaller tax due amount on foreign-sourced income.

Totalization Agreement

The Totalization Agreement came into effect in February 1984. As a consequence, US citizens living in the UK are not subject to double social security payments or taxation.

Exemption from foreign earned income – Form 2555

If US expats living in the UK meet either the Bona Fide Residence Test or the Physical Presence Test, they may qualify for a reduction or, in some cases, pay zero US tax.

Report of Foreign Bank and Financial Accounts – FBAR

Every year, Americans who have accounts outside the United States with a balance of at least $10,000 must file a FBAR, or FinCEN Form 114, by October 15. Bank, investment, and retirement accounts should be included in the report, converted into US dollars. The Form 8938 is required for taxpayers with UK accounts worth more than $200,000.

Xerxes Associates LLP work closely with US and UK expats from all different backgrounds, circumstances and occupations as well as high-net worth individuals in order to help them through the complexities of US and UK tax compliance requirements (tax imposed on expatriates). If you have a query or would like a friendly no obligation chat about your requirements then please get in touch and we shall be happy to assist you.

A PAYE system is used by most UK employers to withhold taxes from employees’ paychecks.

You will need to file a UK tax return if ‘any’ of the following applies to you;

• – Your income is exceeding £100,000 including any benefits
• – Your investment income exceeds £10,000 per year
• – Your self-employment income is £1000
• – You are the director of a company (unless you receive no salary and/or benefits)
• – You and your partner have income exceeding £50,000 whilst claiming Child Credit
• – You have income from a source external to the UK

A form should be sent to you if you are required to file by Her Majesty’s Revenue and Customs (HMRC). HMRC offers a tool that can be used for checking your tax filing obligations. In addition, you may be able to receive deductions from HMRC by filing a tax return.  Viable deductions  include donations to charities, private pension contributions and work related expenses over £2,500.

HMRC requires you to register online if you have not received a tax form from them. Avoid late filing penalties by doing this as early as possible.

The types of income you should report will depend on your residency status. The only income you need to report if you are a non-resident is UK-sourced. UK residents whose permanent home, or “domicile,” is outside the UK and who are not considered “ordinary residents” are subject to special rules.

Residency status is determined by how long you intend to stay in the UK and how many days you spend there physically. Generally, if you live in the UK for at least two years, spend more than 183 days here or average more than 91 days there over the past four years, you are considered a resident for tax purposes.

It is common for US expats in the UK to be considered non-UK domiciled. UK residence and domicile regulations are constantly being updated by HMRC. If you want to be clear about your domicile status while living in the UK, we strongly encourage you to speak with a UK & US tax experts sooner rather than later.

Xerxes Associates LLP work closely with US and UK expats from all different backgrounds, circumstances and occupations as well as high-net worth individuals in order to help them through the complexities of US and UK tax compliance requirements (tax imposed on expatriates). If you have a query or would like a friendly no obligation chat about your requirements then please get in touch and we shall be happy to assist you.