Do Expats In The UK Have To Pay Taxes in 2022?
Expats are often required to file and pay taxes in both the US and their country of residence because you are required to file and pay US taxes on worldwide income, no matter where you live or work. By using special tax credits and exclusions for living abroad that the IRS has put in place to help avoid double taxation, most expats living in the United Kingdom can reduce or eliminate their US tax bill entirely.
The US has strict tax laws and it can be difficult to understand the process completely. The information below outlines some of the important elements you need to know in order to better understand your US expat tax obligations with confidence.
All Expats must file US Federal tax returns every year if you have income from the following and if your worldwide income exceeds the filing threshold (which can vary by filing status).
● Wages and/or salary from sources in and outside of the US
● Interest from monetary investments
● Dividends from shares
● Rental Property Income
Regardless of your filing status, the threshold for self-employment is $400 (£300 approximately). Certain other conditions, including owing special taxes, may also require that you file.
The good news is that if you make a mistake on a previous US tax return, you can amend it. If you find that you have not reported some income or have not taken all the deductions, you are able to file an amendment via the form 1040X. Often, penalties are less steep if you file an amendment before the IRS notices the error.
Majority of Americans living in the UK or abroad elsewhere owe no taxes to the US. To prevent double taxation, the US has put in place several important deductions, exclusions, and credits to offset all of your expat earned income with the following:
● Foreign Earned Income Exclusion
● Foreign Tax Credit
● Foreign Housing Exclusion
For the exclusions, you must qualify as an official expat and have foreign earned income. You must also file your tax return in order to prove that you are eligible for these benefits.
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. 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.