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Is the US/UK tax situation really that complicated??
Is it really as difficult and nightmarish as what I read?? Both my wife and I are duel citizens and intend to return home in 5 years. Our only source of incomes would be from the US and consist of a 401k, 457 and our company pensions. Nothing really that complicated... in my opinion that is, lol. I have received some great info from this forum on the logistics of how to do some things. We are hoping to draw about £30k a year net, so what ever that translates to in US dollars? I know there’s a tax treaty, but not exactly sure yet how that works. I know have a lot of reading and learning to do. So to those folks who have made the move, I ask you, really how complicated is it? Thanks in advance for any help. |
Re: Is the US/UK tax situation really that complicated??
Originally Posted by Albert_dock
(Post 12623225)
Is it really as difficult and nightmarish as what I read?? Both my wife and I are duel citizens and intend to return home in 5 years. Our only source of incomes would be from the US and consist of a 401k, 457 and our company pensions. Nothing really that complicated... in my opinion that is, lol. I have received some great info from this forum on the logistics of how to do some things. We are hoping to draw about £30k a year net, so what ever that translates to in US dollars? I know there’s a tax treaty, but not exactly sure yet how that works. I know have a lot of reading and learning to do. So to those folks who have made the move, I ask you, really how complicated is it? Thanks in advance for any help. Since you have foreign income you will have to file self assessment taxes to HMRC. Probably one tax return each if you both have income over the threshold for filing (£11,850 for tax year 18/19). You will have to file a US tax return and figure out how to complete forms 1116 to get foreign tax credits on the taxes you have paid or accrued to HMRC. You will almost certainly have to file forms Fincen 1114 if either or both of you have UK accounts adding up to over $10k at any time during the year. As USCs you will not be able to invest in UK tracker funds without the extra hassle and taxation on PFIC's. Tax free income such as cash ISA interest and premium bond prizes are fully taxable in the USA. You won't be able to open savings accounts with NS&I (UK government backed bonds) because you are a USC and they exclude USCs because of FATCA. I just discovered that although SS income is only taxed in the UK I can't figure out how to get TurboTax to exclude it from taxation in the USA. Those are just the few things I have personally run up against, plus we also have a US investment account and selling shares of funds that only generate a small amount of capital gains in $'s have generated a much bigger capital gain in £'s because of the exchange rate fluctuations. |
Re: Is the US/UK tax situation really that complicated??
Originally Posted by durham_lad
(Post 12624939)
We have found it to be very complicated.
Since you have foreign income you will have to file self assessment taxes to HMRC. Probably one tax return each if you both have income over the threshold for filing (£11,850 for tax year 18/19). You will have to file a US tax return and figure out how to complete forms 1116 to get foreign tax credits on the taxes you have paid or accrued to HMRC. You will almost certainly have to file forms Fincen 1114 if either or both of you have UK accounts adding up to over $10k at any time during the year. As USCs you will not be able to invest in UK tracker funds without the extra hassle and taxation on PFIC's. Tax free income such as cash ISA interest and premium bond prizes are fully taxable in the USA. You won't be able to open savings accounts with NS&I (UK government backed bonds) because you are a USC and they exclude USCs because of FATCA. I just discovered that although SS income is only taxed in the UK I can't figure out how to get TurboTax to exclude it from taxation in the USA. Those are just the few things I have personally run up against, plus we also have a US investment account and selling shares of funds that only generate a small amount of capital gains in $'s have generated a much bigger capital gain in £'s because of the exchange rate fluctuations. |
Re: Is the US/UK tax situation really that complicated??
It really is tax neutral except for the cost of filing. I use tax software in both the UK and the USA but if your circumstances are simple enough you can do it manually in both countries. When you file in the USA you will claim back the tax you paid in the UK using form 1116 (foreign tax credits). Since all your income from the USA is on a calendar year basis reported on 1099-R and SSA-1099-BEN (?), when you file your UK return you can use the calendar year figures from your US forms and make a comment that is what you are doing. Once you do this you should so every year. Makes it easier than calculating the amount you received April to April. |
Re: Is the US/UK tax situation really that complicated??
Thanks again for the reply. While we are still a few years making the move, it’s good to know exactly what we are walking into. Especially from people like yourself who have first hand experience. I hope you are enjoying being back in the UK and it’s meeting all you expectations. |
Re: Is the US/UK tax situation really that complicated??
Originally Posted by Albert_dock
(Post 12625457)
Thanks again for the reply. While we are still a few years making the move, it’s good to know exactly what we are walking into. Especially from people like yourself who have first hand experience. I hope you are enjoying being back in the UK and it’s meeting all you expectations. |
Re: Is the US/UK tax situation really that complicated??
For a brief overview of how USCs resident abroad currently view the complexity of taxation by the US, the following should be of interest.
A survey, just recently released, outlines some of the basic problems: https://www.democratsabroad.org/carm...emocratsabroad The actual survey: https://docs.google.com/forms/d/e/1F...elLfw/viewform The global view: https://www.americansabroad.org/tax-fairness-act-rbt/ The view from France: https://aaro.org/position-papers-201...cial-reporting The view from Australia: https://fixthetaxtreaty.org/problem/ Any US tax treaty will, for the most part (98%), NOT apply (benefit) USCs resident abroad (saving clause), but individual circumstances will define the personal difficulty in compliance one may face. It may be minimal; it may be a real PITA. Also, the individuals tolerance for reading (yes, this is a test) and research will come into play. A reminder: in the last 15 years a number of changes to US tax laws have increasingly complicated the filing of USCs abroad. Increased difficulty will likely continue. Thus, the emphasis on the links to the Tax Fairness For Americans Abroad Act. It's unlikely to happen, but it's the first time in 160 years citizenship taxation, unique to the US, has been challenged. On a personal note as a dual USC/UKC resident in the UK, I find US reporting a real PITA. Only 10% of my income comes from the US. HMRC reporting, simple for me even with income from multiple foreign sources, takes maybe 30 mins. to complete a paper and pencil, snail mail, self assessment form. Even with multiple spreadsheets, the completion of the US tax form (also snail mail - well, courier actually, it's the only way for me to confirm delivery) will take days. Not a joke. |
Re: Is the US/UK tax situation really that complicated??
Originally Posted by theOAP
(Post 12625625)
For a brief overview of how USCs resident abroad currently view the complexity of taxation by the US, the following should be of interest.
A survey, just recently released, outlines some of the basic problems: https://www.democratsabroad.org/carm...emocratsabroad The actual survey: https://docs.google.com/forms/d/e/1F...elLfw/viewform The global view: https://www.americansabroad.org/tax-fairness-act-rbt/ The view from France: https://aaro.org/position-papers-201...cial-reporting The view from Australia: https://fixthetaxtreaty.org/problem/ Any US tax treaty will, for the most part (98%), NOT apply (benefit) USCs resident abroad (saving clause), but individual circumstances will define the personal difficulty in compliance one may face. It may be minimal; it may be a real PITA. Also, the individuals tolerance for reading (yes, this is a test) and research will come into play. A reminder: in the last 15 years a number of changes to US tax laws have increasingly complicated the filing of USCs abroad. Increased difficulty will likely continue. Thus, the emphasis on the links to the Tax Fairness For Americans Abroad Act. It's unlikely to happen, but it's the first time in 160 years citizenship taxation, unique to the US, has been challenged. On a personal note as a dual USC/UKC resident in the UK, I find US reporting a real PITA. Only 10% of my income comes from the US. HMRC reporting, simple for me even with income from multiple foreign sources, takes maybe 30 mins. to complete a paper and pencil, snail mail, self assessment form. Even with multiple spreadsheets, the completion of the US tax form (also snail mail - well, courier actually, it's the only way for me to confirm delivery) will take days. Not a joke. |
Re: Is the US/UK tax situation really that complicated??
Originally Posted by Albert_dock
(Post 12625782)
100 % of our income would be from the US. Not sure if that’s a good or bad thing. We left the UK in ‘89 and have nothing due to us or have any substantial savings over there.
When dependent on one country (US) income source the potential downside is exchange rates. Things are very good at the moment, and may improve more, but at some time in the future the pendulum will swing. Be sure all your future financial planning for the UK considers significant swings in the rate. If you're comfortable at, say, £1 to $1.60, you should be OK. You have plenty of time to plan and ask more questions. |
Re: Is the US/UK tax situation really that complicated??
Originally Posted by theOAP
(Post 12625843)
With 100% of your income from the US and with no accounts in the UK other than a current bank account, your US tax filing should be easier. You'll only be concerned with claiming tax credits for tax you will have paid to HMRC. As for the UK and HMRC, read durham_lad's comments carefully. As said earlier, the majority of my income is from outside the US which makes my US filing much more difficult, but UK filing very straightforward. For the US, everything is 'foreign', and foreign is undesirable for US tax.
When dependent on one country (US) income source the potential downside is exchange rates. Things are very good at the moment, and may improve more, but at some time in the future the pendulum will swing. Be sure all your future financial planning for the UK considers significant swings in the rate. If you're comfortable at, say, £1 to $1.60, you should be OK. You have plenty of time to plan and ask more questions. |
Re: Is the US/UK tax situation really that complicated??
Originally Posted by theOAP
(Post 12625843)
With 100% of your income from the US and with no accounts in the UK other than a current bank account, your US tax filing should be easier. .
I'm not going to trouble myself with UK investments. Just send a chunk over from the US when I need it. Keep it simple. I may toy with the idea of giving up US citizenship but it's handy to have and you never know. |
Re: Is the US/UK tax situation really that complicated??
Originally Posted by durham_lad
(Post 12624939)
We have found it to be very complicated.
Since you have foreign income you will have to file self assessment taxes to HMRC. Probably one tax return each if you both have income over the threshold for filing (£11,850 for tax year 18/19). You will have to file a US tax return and figure out how to complete forms 1116 to get foreign tax credits on the taxes you have paid or accrued to HMRC. You will almost certainly have to file forms Fincen 1114 if either or both of you have UK accounts adding up to over $10k at any time during the year. As USCs you will not be able to invest in UK tracker funds without the extra hassle and taxation on PFIC's. Tax free income such as cash ISA interest and premium bond prizes are fully taxable in the USA. You won't be able to open savings accounts with NS&I (UK government backed bonds) because you are a USC and they exclude USCs because of FATCA. I just discovered that although SS income is only taxed in the UK I can't figure out how to get TurboTax to exclude it from taxation in the USA. Those are just the few things I have personally run up against, plus we also have a US investment account and selling shares of funds that only generate a small amount of capital gains in $'s have generated a much bigger capital gain in £'s because of the exchange rate fluctuations. |
Re: Is the US/UK tax situation really that complicated??
Originally Posted by morpeth
(Post 12627681)
To not pay tax on SS in USA if resident in UK is there any procedure that needs to be followed or form filed?
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Re: Is the US/UK tax situation really that complicated??
Originally Posted by Hotscot
(Post 12627642)
Yes. That's going to be my approach.
I'm not going to trouble myself with UK investments. Just send a chunk over from the US when I need it. Keep it simple. I may toy with the idea of giving up US citizenship but it's handy to have and you never know. |
Re: Is the US/UK tax situation really that complicated??
Originally Posted by durham_lad
(Post 12627691)
Do you know what filings are required for a non-US citizen citizen living in the UK with all their income originating from the US? I believe you would still have to file a 1040NR to report US income as a non resident alien, but don’t know for sure. Just treat it as income in your country of residence. (I am not a tax professional.) |
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