UK/US Tax and Self Assessment Question
 

Hi there!

I have a tax question. I started earning in the UK in 2007 and had my taxes taken out through PAYE. I was made redundant in 2009 and took up a job for a US company that pays me in USD into my US bank account, but I continued to live in the UK.

I had part of the year taken out through PAYE and now I have to figure out how to 'claim' the rest of the earnings from Sept - April when I was on US income.

I have filed my US Fed Tax Return (2009) and claimed foreign earned income as everything was earned abroad (even the USD in my US account was earned while in the UK - presence test). Now, I need to figure out what I need to do next in terms of UK documentation.

We are moving back to the US in December so I think the same situation will apply for April 2010 - December 2010.

I want to make sure that I am not paying too much tax (or being double taxed).

I apologize for the long post, but any and all guidance would be most helpful!

Thank you!

Re: UK/US Tax and Self Assessment Question
 

Sounds like you're on the right track so far: the UK-USA tax treaty says that it's the country you reside in that gets to tax employment income, so that will be the UK. You shouldn't be double taxed.

I believe for UK tax, you would simply fill out the "employment" pages of the self-assessment form with the details of your US income. In my experience when I had self-employment income to declare, I called up the tax office, and they walked me through what to do: put this in box 1, put that in box 2 etc.

Re: UK/US Tax and Self Assessment Question
 

I am speaking to an accountant this afternoon - but will definitely call the tax office for more information. I know that you can claim based on accrual or remittance and I'm not sure that I entirely understand the difference in terms of the self assessment.

Since I'm paid in the US, I pay Fed and State tax. I know that I'll get the Fed tax back for claiming the foreign earned income, but MA does not have the same agreement since my 'domicile' is in MA. The woman at the MA tax office said that the same exclusions did not apply for MA that they did for the Federal tax - this is why I'm concerned about possibly paying too much tax!

Re: UK/US Tax and Self Assessment Question
 

This is getting well away from anything that I am familiar with, but it looks like if the US-UK tax treaty does apply to you such that you are taxed in the UK and not the US, then although you have to declare the UK income for MA tax, you can deduct it all on "Schedule Y". All of the MA instructions on this seem to be targeted at "aliens" in the US though, so it's a little confusing.

Also, I believe there's a distinction between excluding "foreign earned income" (which I assume is a general provision of the US federal tax code), and invoking a tax treaty (which involves lots of complication in getting the UK HMRC to certify UK residence then sending that to the IRS etc. etc. so I would assume is a last resort!).

Re: UK/US Tax and Self Assessment Question
 

Ah, ok! Yes - it's a bit tricky! My accountant in the US was unfamiliar with the process and I'm speaking to my UK accountant this afternoon ... I feel like I'm going to be paying a lot of tax on both sides of the pond until I can get it sorted out!

For 2010, all of my income is with the US company, in USD, and in put into my US account - but just 'earned' over in the UK.



Thank you for all of your help!

Re: UK/US Tax and Self Assessment Question
 

Sounds like the OP is either a USC or LPR. In that case the US will tax the UK income (possible reduced by foreign earned income exclusion and/or foreign tax credits). The UK will also be entitled to tax the income as that's the country where the services are performed.

Re: UK/US Tax and Self Assessment Question
 

Thanks, Peter! I just need to figure out who I actually have to pay! :)