elizabethsmum

Hello,

I have a question my husband and I (and our children) are planning to move back to USA (my hubby is a USC) we have been back in the UK for 7 years now and my husband has been working here, he has filed taxes from here but someone mentioned that when we get back to the USA he will be able to claim all of the tax back he has paid in the UK? Is this true? What are the steps and how long does this take?

Thanks in advance

RICH

He may be able to claim back some or all of the (UK income) tax paid this tax year, but not previous years. He has to fill in a P -xx form(can't remember the number), send in his P45 from his last job with it, and it takes a few weeks/months.

lansbury

P-85

RICH

That sounds like it. Jeez, Lansbury, that's some memory you have

elizabethsmum

TY

civilservant

It's a pretty straightforward form. I filled it out a couple of weeks back.

elizabethsmum

Oh OK, So can it only be filled in after leaving the UK? So its only the last year that he can claim back? Does it take a while to receive the money back? Is it 100% of all UK taxes paid?

civilservant

After he received his P45.

It's not even the last year, it's everything below the tax threshold for that year. If he earned over £9,500 (or whatever the tax free level is) in this financial year then all tax paid over those earnings was due and he will not get it returned. Tax paid under the individual threshold will be. Remember that the Inland Revenue take tax in the basis that you will earn in every month of the year what you hav earned in this month.

In the 3 months April - July I earned 9,450, and paid tax of around £900 (not this PAYE ONLY and not NI contributions) This £900 will be repayable. It takes a few months and is paid into a specified bank account.

rpjs

It's a little bit more complicated than that, but it is advantageous for most emigrants to file the P-85.

It's because thst £9,500 or so personal allowance applies in full for any UK-taxable income received in a tax year, whether you're UK tax resident for one day of that year or 365. However, for anyone who pays their income tax through PAYE (i.e. most British taxpayers), the benefit of the personal allowance is applied pro-rata to each paypacket.

This means if you emigrate and stop paying UK income tax, almost certainly some of the personal allowance will not have been used, and so you'll have overpaid. The amount you'd get back will vary depending on when during the tax year you leave and how much you earn), but unless you actually emigrate on the last day of the tax year (April 5th) you'll almost certainly get something back.

If you don't file the P-85, eventually HMRC will work out that tax was overpaid and issue a refund anyway, but that might not happen for a couple of years.

civilservant

So in my situation, are you saying my personal calculation is probably incorrect?

rpjs

No, but from what you wrote it looks like you assumed that if you'd earned any more you wouldn't have gotten any more overpaid tax back and you probably would. You just happen to be in one of the simplest scenarios where the amount you'd earnt in the UK before leaving happens to be the same as the personal allowance so clearly you get all the tax paid so far back.

If you were going to be staying longer you'd still get a refund but that would gradually taper away the longer you stayed. Like I said, unless you happen to leave at the exact end of the tax year, you'll almost certainly get something back.

elizabethsmum

Will I be likely to get any tax back? I am a UK citizen will I have to file the dame form? On the US taxes I believe my husband filed Married I am not sure of that he is at work at the mo.

elizabethsmum

I am the USC. I was told by HMRC over the phone that due to Double Taxation Treaties with the USA/UK and the fact that I filed taxes every year in the USA claiming my UK earnings that under the treaty I am entitled to a full refund of all taxes paid in the UK for all years I filed in the USA when I get back to the USA. With the IRS stamps and certifications that I have done, of course. They said this when I called and asked for help with the forms to make sure I was filling them out correctly and stopped me when I said I was still in the UK saying the rest and that I need to be in the USA to make the claim. So a bit confused if I am honest with this only one year claim.

elizabethsmum

By the way that was my hubby posting on my name to avoid confusion.

rpjs

If you paid tax to the US then you may be entitled to a refund from the UK as the tax treaty is intended to avoid double taxation. However if you've been resident in the UK for several years it seems to me that you are, or have been until now, a UK resident for tax purposes and not a US resident.

Of course the US, fairly uniquely, reserves the right to tax its expatriate citizens, but also a generous ($90k or so) deduction on foreign earned income for those actual resident outside the US. Furthermore, if your income exceeds the allowance, the tax treaty allows you to credit tax paid to the UK against your US taxes. The upshot is that most US citizens resident in and paying tax to the UK don't have to pay any tax to the US, although they do usually have to file a tax return with the IRS unless their income is very low (< $3000 or so)

So if you have been paying tax to both the US and the UK, you shouldn't have needed to - you're probably going to need a good tax accountant and/or lawyer to figure out who you should claim a refund from, though.

If you've only been paying tax to the UK, and you're now trying to sort out your US tax affairs for your wife's visa, don't panic: you most likely won't owe Uncle Sam a bean. There's a great article on the wiki on this site covering how to file your US taxes from abroad and how to claim the allowances and credits that should ensure you don't owe the IRS anything.