Tax Consequences Of Giving Up Your Green Card And US Citizenship When Moving To The UK

Many US citizens have acquired Green Cards or Legal Permanent Resident status. However, questions arise when they relocate to the UK due to personal or career obligations. US Green Card holders have similar tax filing requirements as regular US citizens. They need to report income, regardless of where they live. They may be eligible for a filing extension and it’s a good idea to consult a tax professional for more information before filing. US tax reporting requirements are burdensome and complex, especially for Green Card holders who are living in the UK or other countries. Some people may consider renouncing their Green Card or even US citizenship, if there’s no realistic likelihood to return to the United States anytime soon.

Giving Up A Green Card
US citizens may renounce their US Green Card by submitting USCIS Form I-407. There are tax consequences for giving up Green Card. They need to pay exit tax if:
• ‘They have more than $165,000 (2018’s figure) of annual net income for the last five years before the termination of Legal Permanent Resident status
• They have a net worth of more than $2 million before the termination of Legal Permanent Resident status
• They fail comply to all federal tax obligations for the last five years before the termination of Legal Permanent Resident status.’

Exit tax is calculated based on the individual’s asset before they officially give up US Green Card. It’s a fairly common occurrence because many citizens who are Green Card holders are unaware that they need to continue filing tax for the IRS. One year after giving up their Green Card, they still need to file the last US tax return that includes IRS Form 8854. This certifies that the person has complied with all US tax requirements.

Giving Up US Citizenship
People who renounce their US citizenship and plan to live in the UK permanently may or may not need to file for exit tax, depending on their immigration status and personal finances. They are subject to exit tax if:
• ‘They were long-term US citizen for 8 years out of the last 15 years, before the termination of the US citizenship.
• They have an average annual net income of $165,000 (2018’s figure), for the last five years before the termination of the US citizenship
• They have a net worth of $2 million or more at the date of the US citizenship termination.
• They are not tax compliant by failing to meet US tax obligations for the past five years before the termination of the US citizenship.’

The amount of exit tax is dependent on the untaxed income or the structure of personal assets.

Contact British American Tax
To learn more about the tax consequences of giving up your green card and US citizenship when moving to the UK, contact British American Tax today and consult with an expert tax advisor who can answer any questions you might have about taking a pro-active approach to your tax planning.
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