UK and US tax treaties and issues
August 30, 2021
British may move or invest in the United States. Americans may move or invest in the United Kingdom (UK). Tax treaties between the US and the UK prevent double taxation. British and Americans need to understand how these tax treaties work.
Both Americans and British can pay taxes in both countries. This means they have overpaid tax. Understanding the tax treaties allows British and American taxpayers to pay the least tax.
Where you live dictates where the majority of tax will be paid, there is a clear distinction between being a resident and tax resident. British and Americans moving countries living abroad need to be mindful of this distinction to avoid tax penalties and tax overpayments.
You usually pay tax in the UK and America that generates income. A tax credit will be provided to you to reduce the tax paid in the other country.
Americans and those with a financial interest in the United States of America need to file a 1040 tax return to the Inland Revenue Service (IRS). British and Americans with a financial interest in the UK must file a self-assessment tax return to HMRC.
American IRS tax system works on a calendar year basis. A 1040 tax return needs to be submitted to the IRS by April, 15. Any tax liabilities also need to be paid at that point. Foreigners can get an automatic 1040 filing extension to June, 15. Taxes must still be paid to the IRS by April 15 to avoid penalties and interest charges.
The UK HMRC tax system works on a fiscal tax year running from 6th April to the following 5th April. Self-assessment tax returns must be submitted to HMRC by 31st January following the fiscal tax year. The tax liabilities of the taxpayer also need to be paid on 31st January
Americans pay tax on their worldwide income irrespective of where they live.
Optimise Accountants provides tax support to landlords/property investors to help grow their wealth and minimise tax: income tax, capita; gains tax (CGT), inheritance tax (IHT), corporation tax and Stamp Duty Land Tax (SDLT). Optimise also helps expats understand taxes in the United States, United Kingdom, Spain and Hong Kong
www.optimiseaccountants.co.uk
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