Basics Of The UK Tax System For American Expatriates

With its long-standing global position and English-speaking culture, the United Kingdom is a popular destination for American expats. Among many things to consider when living and working in the UK, however, is how UK tax will affect US citizens.

Her Majesty Revenue & Customs

HMRC is the United Kingdom’s equivalent to the IRS. Its primary task is to collect tax, as well as administering various regulatory systems, including national minimum wage. A tax year in the UK starts from April 6th and ends on April 5th the following year. UK citizens and expats working in Britain must file a tax return before January 31st, if it’s electronically filed. For paper filling, the return must be filed and completed by October 31st.

National Insurance Number

Before working in the UK and being able to file a tax return, US nationals must obtain the National Insurance number. They must show proof of personal identity, residence permits, and documents of marriage. The tax system of the UK is similar to the one in the US. Tax is based on investment income, business income, wages, and salary. PAYE (Pay As You Earn) taxes for expats are consisted of regular income tax and contributions to the national insurance system.

American expats need to file tax return if they meet any of these conditions:

  • Have earned profits from selling a second home, stocks, or other assets.
  • Have earned income from property rentals.
  • Have earned income from non-UK sources, while expats live in the UK.
  • Have earned annual income of more than £100,000.

If expats want to claim deductions, they also need to file tax returns. Common tax deductions in the UK are work expenses more than £2,500, private pension contributions and donations to charity. If expats need to file a tax return, but haven’t received the form, they must register on HMRC’s website. The whole process takes about two weeks, because HMRC will mail verification PIN to expats. It is important to file a tax return as soon as possible to prevent delays and late penalties.

Contact British American Tax

To learn more about the tax filing and payment deadline, 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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