UK/US tax question

Could someone please clarify....

Once I am a U.K. resident....

I know I will have to file a US tax return.  I will owe US taxes on US residential rental property and any capital gains from portfolio investments and dividends etc will be taxed by US. Fine. However, will the U.K. tax those things too?  Or is paying any tax owed to the US sufficient?

Similarly, if my future salary is paid in GBP by a British employer and taxed by the U.K., will I also have to pay tax on that earned income to the US as well?

I thought I read there was some deal whereby one is not subject to double taxation by both countries. Is this correct?

I'm hoping that I can just deal with the US on the passive/portfolio and rental property income and the U.K. on the earned/salary income.

Help!


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If you are a US citizen, you remain subject to US tax on worldwide income & gains [using US tax rules] (plus annual information reporting to the IRS & US Treasury).  If you are UK resident you are UK taxable on worldwide income & gains [using UK tax rules] unless you are domiciled outside of the UK and elect to claim the remittance basis. It would be rare, however, for a US citizen to save tax by electing to claim the remittance basis.

You may wish to have your investments managed by an adviser who is both US and UK regulated so you only select investments that are "tax friendly" in both countries and the adviser can supply both US and UK tax year reporting annually.

Thanks Guya.  This is making me rethink this move. From a financial standpoint, it makes way more sense for my husband to move over here. I don't want to sell my US house yet and was planning on renting it out. I just bought it two years ago, so I'd take a hit if I sold it now. But I don't want to owe the U.K. and the US both tax on rents earned from it.  Similarly dividend income.

When will I be considered a resident for U.K. tax reporting purposes? The minute my vignette is stamped at Heathrow or when I finally move there in March? 


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Thanks Guya.  This is making me rethink this move. From a financial standpoint, it makes way more sense for my husband to move over here. I don't want to sell my US house yet and was planning on renting it out. I just bought it two years ago, so I'd take a hit if I sold it now. But I don't want to owe the U.K. and the US both tax on rents earned from it.  Similarly dividend income.

When will I be considered a resident for U.K. tax reporting purposes? The minute my vignette is stamped at Heathrow or when I finally move there in March? 


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You wouldn’t be double taxed. Once resident in the UK you will pay HMRC tax on your rent and dividends and then claim that back as tax credits when file you file in the US.

I will let someone else comment as to when you will be considered UK tax resident as it can be complex. For us it was the day we arrived last year because our intent was to stay and immediately start using the NHS etc.

You probably want to read RDR1: https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability

You wouldn’t be double taxed. Once resident in the UK you will pay HMRC tax on your rent and dividends and then claim that back as tax credits when file you file in the US.

I will let someone else comment as to when you will be considered UK tax resident as it can be complex. For us it was the day we arrived last year because our intent was to stay and immediately start using the NHS etc.

Thank you! I'm going to have my financial advisors work with a dual UK/US accountant.  The residency bit concerns me as I can't imagine I can tell the tax people I'm not a resident on those dates and still have those dates count toward ILR!


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You probably want to read RDR1: https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability

Thanks Guya.  I got a whopping C+ in my federal income tax law class (although he graded on a C curve) so I'm smart enough to know that there is way too much that I don't know/understand! And that's without throwing the U.K. into the mix.

At first glance, if the US allows deductions for things like mortgage interest (and hubby tells me that the U.K. does not), double taxation will be an issue in terms of the U.K. giving credit on a lower amount paid to US as a result. And then the currency conversion rate will also add to the bill. Ugh.


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Thanks Guya.  I got a whopping C+ in my federal income tax law class (although he graded on a C curve) so I'm smart enough to know that there is way too much that I don't know/understand! And that's without throwing the U.K. into the mix.

At first glance, if the US allows deductions for things like mortgage interest (and hubby tells me that the U.K. does not), double taxation will be an issue in terms of the U.K. giving credit on a lower amount paid to US as a result. And then the currency conversion rate will also add to the bill. Ugh.


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Generally US tax rates on rental income have been lower than UK rates because of mandatory depreciation in the States. This comment is however simplifying things because of the way the UK applies mortgage interest.

Thanks. I need to find a good U.K./US tax expert.


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