Our two Enrolled Tax Agents, Damian Talbot and Ashleigh Molton can help US citizens who are living in the UK to comply with their US taxation requirements.
Foreign Earned Income Exclusion
US taxpayers living outside of the US are entitled to exclude up to $99,200 (2014 rate) of earned income from tax in the US. This is subject to meeting a certain criteria and is only available on general earnings, such as employment income or profits from self-employment. Please note that this does not include dividends even if they are received from a company in relation to services performed.
Foreign Tax Credit
Income from the UK may have been subject to UK taxation whether deducted at source or paid via self-assessment. In this situation it is possible to claim a deduction from your US tax liability for the amount of tax already paid on the income in the UK. This also applies for other countries depending of the tax treaty in place with that country and the United States.
Due to the tax treaty in place between the US and the UK it is possible to make a claim for pension income to be taxed solely in one jurisdiction, either the US or the UK depending on the individual situation to avoid being taxed twice on your retirement income.
Social Security Taxes
If you are a US citizen living in the UK and working as self-employed, you are required to report your UK earnings on your US tax return as well as paying self-employment taxes in the US. Due to totalisation agreements in place with the US and the UK, it is possible to claim and exemption from this tax if you are paying national insurance contributions in the UK.
If you believe you may benefit from any of the above positions please contact us and we will be able to offer tailored advice to your situation.