Here is All US Citizens Need To Know About Taxes Before Moving To UK


We are now living in times where moving to any part of the world or UK, to say the least, for work is easy. But at the same time, such ease is also coming at a cost of some complications which majorly arise in the form of taxes for any individual. And to conclude the whole experience, we agree that paying taxes and filing your returns can indeed be rather overwhelming.

But with that being said, we are also here to say that we have got you covered with all the right basic information that you need to know upfront before moving to the UK – or even if you already have for work.

We truly understand that a lot of calculations still have to be done by expat tax CPA in UK or USA but these are the basics that everyone moving from the US to the UK must know.

US Tax Requirements for their Citizens Working In The UK

First up, US taxes stand applicable on the basis of citizenship and not where the individual is currently residing. So, that by law means that US expats have an obligation to file US taxes irrespective of whether they are living or working in the UK.

The only difference arises when you earn income in the form of a short-term assignment in the UK as in that case, you are required to report your numbers to the US tax authority. On the other hand, if your financial roots start to go deep in the United Kingdom, there are more considerations in place related to your American tax filing.

For the latter scenario, residents have to submit UK financial accounts and assets to the tax authority and as a result, US taxpayers who may have $10,000 in a foreign bank or financial accounts will be asked to do FBAR filing and fulfill other reporting requirements as well. The FATCA reporting requirements also become applicable for individuals who may own foreign assets valued at $200,000 and higher in the UK.

But there is also one advantage in place as you can lower your US bill and avoid dual taxation by applying some specific tax strategies. Two of them are listed below

  • The Foreign Earned Income Exclusion With this, citizens of the US working in the UK can exclude their wages from the US taxes. But for that to happen, individuals are required to fulfill certain time-based residency requirements.
  • The Foreign Tax Credit Citizens have a right to claim a credit for income taxes they pay to the government of the UK. And not to forget as the tax rates are generally high in the UK, therefore, the claim turns out to be much more favorable for US citizens.

There is also one more principle that every US citizen should remain aware of and that is if you plan on doing UK tax-free investments either in the form of cash or stocks, they won’t be tax-free in the United States.

UK Tax Requirements For US Citizens

Understanding the UK taxes is not going to only help you in paying them with ease, but the right information can also help US citizens with Foreign Tax Credit.

To be precise, what you are going to pay in the UK as a part of income taxes will only depend on your residency and domicile status.

The domicile is generally based on your permanent home or the residency of one’s father. Whereas, residency is counted as a place where you spend most of your time. Hence, that means while you can be a resident in many countries for a longer period of time, your domicile always remains to be one.

Furthermore, the domiciled residents pay taxes on their total income and capital gains, irrespective of where the income has come from. Whereas, the non-domiciled residents only pay taxes on UK source income and also on remittance — such as you will be only taxed on foreign income or gains brought to the UK.

For non-residents, taxes are only applicable on UK -sourced income and not capital gains in the majority of the cases.

US / UK Tax Treaty

Before you start to worry a lot, there is also a US/UK tax treaty that offers benefits and provisions to any American working in the UK. This tax treaty includes provisions ranging from personal pensions to corporate taxation, and also a clause that lets the US and the UK exchange tax information on individuals across the borders.

But with all the basics being stated above, we would still recommend you to pay your taxes and get the filings done through the help of experts such as Protax Consulting. The reason behind the suggestion is simple; they ease up the process for you and make sure that you don’t miss out on any exemptions so that you save the majority of your hard-earned money.

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