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UK/US Tax understanding

UK/US Tax understanding

Old Mar 19th 2019, 5:21 am
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Default UK/US Tax understanding

Hey all,

Is my understanding correct, I’m a UK citizen, currently working in IT through a limited company, and going through the process of obtaining a L2 visa on the back of a L1 application, hopefully moving in 4-6 weeks, visa interview booked for 10 April.

Rental income – I will have to complete a personal UK tax return, and will have the benefit of the UK personal allowance as a UK citizen. I will also have to notify HMRC and register for the non-resident landlord scheme.

Dividend income – this depends on how long you move to the US for… if you are non-resident in the UK for five calendar years or less, and were resident in the UK during at least four of the seven years prior to departure, then any dividends received from the company during that non-residence period become chargeable in the tax year that I return to the UK. If I am non-resident for longer then I will pay no UK income tax on the dividend income.

I will have to complete US tax returns and declare your worldwide income, which would obviously include the UK property and dividend income. However, due to a double-tax treaty between the UK and US, on the US tax return I can claim for any UK tax paid on the property income as well as 7.5% deemed (but not actually paid) tax on the dividend income.

So as specific examples;

Rental Income
Assume an overall loss per tax year (2 houses will be rented out, 1 home is paid off and I’m a part owner).
Implication is no UK tax liability, but can offset the loss against overall UK tax liability. The likelihood is that there will be no US tax liability as I don’t make a profit in the UK and can offset any profit with depreciation, mortgage interest, repair charges, etc

Dividend income:
Assume take £34,500 per UK tax year
When you are non-resident you pay no UK tax on the dividends*. However, for US tax purposes you are deemed to have paid UK tax at 7.5%. So if the US tax rate is 10% then you only pay 2.5%

Salary
No UK salary
No UK tax liability

Pension
Continue to make pension payments to private pension from the limited company (£2k per month)
No UK tax liability
No US tax liability

Student Loan
Has to be repaid based on UK income
Will be based solely on dividend income

*UK dividend income - To clarify the situation if you are non UK-resident for less than five years: if you are non-resident for say, three years, and in that time you’ve received say, £45,000 of dividends then that £45,000 would be taxed as if it was all received in the tax year that you return. If you are a non-resident for more than five years and return to the UK you have no UK tax liability on the dividend income paid during that time.

Last edited by jtj1; Mar 19th 2019 at 5:24 am.
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Old Mar 19th 2019, 7:08 am
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Default Re: UK/US Tax understanding

Do you have a question specifically?
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Old Mar 19th 2019, 7:20 am
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Default Re: UK/US Tax understanding

Is my understanding correct?
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Old Mar 19th 2019, 7:37 am
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Default Re: UK/US Tax understanding

Well...you refer to many aspects..Student loan? Several properties? Dividend income? Pension?
Personally I do respect that you have several issues, including, from your past posts, personal one's.
How are you?
Are you remaining in the US?
If so it's maybe better to deal with your questions one step at a time. There's no rush.
What's the most important one?

(Are you required to do a US tax return? And if so, do you know how to do so? Please don't take any offense at my questions, like many here, we just want help.)

Last edited by Hotscot; Mar 19th 2019 at 7:46 am.
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Old Mar 19th 2019, 11:22 am
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Default Re: UK/US Tax understanding

No offence taken, and appreciate all the guidance given.

My past issues are behind me and I am currently in the UK looking to reapply for a new visa in 3 weeks time.

I just woke up early today and wanted to make sure I had a good understanding (this time around)... lol

I know I will have to do joint returns for the first few years, US and UK
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Old Mar 19th 2019, 5:58 pm
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Default Re: UK/US Tax understanding

Are you planning to make the section 962 election? https://rsmus.com/what-we-do/service...-election.html
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