Best timings to file UK & US tax returns

My wife and I (both UK + USA citizens) moved back permanently to the UK to retire late-May this year (2023). We have been US tax residents since 1995 when we moved to the USA and subsequently became US citizens.

Our current income is primarily from USA-based savings and investments, as well as some more recent UK-based savings. My wife receives a small UK pension from a former employer and we will receive both US and UK social security retirement benefits in a few years from now, as well as a couple of US-based 401K plans.

I have read so much really helpful information on this forum over the past few years as we prepared for this transition. Now I would love some of your suggestions on the timing of our respective UK & US tax filings for this tax year (and subsequent years).

We would like to make it as easy as possible (!) to file our UK and US tax returns each year, recognizing that we have to report the income in each country on both our US and UK tax returns, and pay tax to the relevance authority, as well as claiming back tax credits as necessary.

So, how best to time these tax returns, allowing for the different tax return deadlines and the need to figure out how much tax (and perhaps tax credits) we should report to each tax authority? For example, if I have to declare UK-based income on my US tax return, how do I figure out how much tax I will have to pay HMRC and, therefore, report that amount to the IRS and make a claim for a corresponding US tax credit?

I hope the question makes sense!

Be sure to track all your income from the day you arrived back in the UK as you will be liable to UK tax on worldwide income from that date until April 5th 2024.  This first year back you will qualify for split year treatment as you won't be liable for taxes on income received before you arrived back.

You will continue to be liable for US tax on your worldwide income so no change there, except for this year and onwards you will be able to claim foreign tax credits and the filing deadline is automatically extended to June 15th each year for overseas filers.

You won't need to file a UK return until after April 2024, for the year 23/24. The foreign tax credits you can file against your US 2023 will be "accrued" as you probably won't actually have paid them to HMRC when you file your US return.

There are various HMRC tax estimators available, just Google "UK Tax estimator" to get some options.

To make life easier you can continue to use your US tax documents such as 1099s and W2s for the calendar year and state on your HMRC return that for taxation purposes they are co-terminus with the UK tax year. Use wording such as:
 

My wife and I returned to the UK on ? May 2023, having lived in the USA since 1995. In
this return, the 2023 calendar year has been regarded as co-terminus with the 2023/2024
UK tax year since all income and capital gains will be declared year on year and this
method makes the foreign tax credit computation more accurate with UK taxes credited on
the US Return in respect of doubly taxed income only.

For your US return you'll need to keep a spreadsheet or some other method to record your gross UK income in the calendar year, you won't be able use P60's issued by pension providers as they run April to April.

Great information, thank you!

I'm definitely still confused about the timings of respective UK & USA tax returns, because I need to know, for each one, how much my foreign income has been for the year (in the other country) as well as how much tax I will/have paid for that foreign income in the foreign country (e.g. taxes paid to HMRC for UK-based income).

For example, as the US tax year finishes first, I can calculate my US tax liability for the year in Jan/Feb once my US tax documents are available from banks & brokerages. But I do not yet know how much much UK income and tax for the year will be, until I do my UK tax return after the end of the U~K tax year in April. SO how do I complete my US tax return until I know the UK numbers, and vice versa for the UK tax return?

It seems I get stuck in a loop where each tax return needs to know the income & taxes due on the other prior to completion. How do I do this without using a "guesstimate"?

Can anyone suggest a "calendar" and methodology of best dates to file UK & US tax returns each year so as to make this process as easy as possible?

David-

Great question. We are not in your situation yet but will be in a couple of years and would greatly appreciate some clarity on the issue. Seems there must be people out there with a working formula.

Thanks

Can anyone suggest a "calendar" and methodology of best dates to file UK & US tax returns each year so as to make this process as easy as possible?

You get an automatic extension to June 15 to do your US tax return so don't submit it to the IRS until May, by which time the UK tax year will have ended and you can file your UK return and you know exactly what tax you paid to HMRC.

Thanks Durhamlad, I appreciate your always-helpful responses. I guess my challenge is how to figure out how much I owe the IRS in order to make payment by early-April 2024 without knowing the numbers from my UK tax return at that point (in order to report foreign income from the UK + taxes paid to UK on my US tax return).

Like others here I get so confused in a kind of endless loop, as each tax return seems to need info for the other one! I feel as though I am missing something obvious, but I just cannot figure out what! Here's my thinking:

US tax year ends 31 Dec 2023 and I have until early April 2024 to pay my taxes for the year (even though I do not have to file until June 2024 or even later with an extension). I will know how much UK income I have made (interest and a small pension) during the months of the US tax year, but I do not yet know what my UK tax liability will be (until I file my UK tax return). My UK tax return will need to show my US income for 2024 (for which Durhamlad suggests using concurrent US and UK tax years) as well as how much tax I paid so I can claim a tax credit on my UK return.

I'm hoping it will be easier in future years once I have done it once, but for this (partial) first year back in the UK I am completely lost trying to figure it out!

Thanks Durhamlad, I appreciate your always-helpful responses. I guess my challenge is how to figure out how much I owe the IRS in order to make payment by early-April 2024 without knowing the numbers from my UK tax return at that point (in order to report foreign income from the UK + taxes paid to UK on my US tax return).

Like others here I get so confused in a kind of endless loop, as each tax return seems to need info for the other one! I feel as though I am missing something obvious, but I just cannot figure out what! Here's my thinking:

US tax year ends 31 Dec 2023 and I have until early April 2024 to pay my taxes for the year (even though I do not have to file until June 2024 or even later with an extension). I will know how much UK income I have made (interest and a small pension) during the months of the US tax year, but I do not yet know what my UK tax liability will be (until I file my UK tax return). My UK tax return will need to show my US income for 2024 (for which Durhamlad suggests using concurrent US and UK tax years) as well as how much tax I paid so I can claim a tax credit on my UK return.

I'm hoping it will be easier in future years once I have done it once, but for this (partial) first year back in the UK I am completely lost trying to figure it out!

Just be sure to have reached the safe harbor with your estimated tax payments.

https://www.hrblock.com/tax-center/irs/tax-responsibilities/avoiding-underpayment-tax-penalty/

The safe harbor estimated tax has three components, which we’ll outline here.

Generally, an underpayment penalty can be avoided if you use the safe harbor rule for payments described below. The IRS will not charge you an underpayment penalty if:

You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year, or
You owe less than $1,000 in tax after subtracting withholdings and credits

Assuming you and your spouse each wish to claim foreign tax credits in your 2023 US Federal tax return(s), it may help to clarify that you would need to have paid that tax to HMRC no later than 31 December 2023.

You could alternatively, irrevocably elect to claim foreign tax credits for any UK tax due for the year ended 5 April 2023; which - based on the limited information provided - would presumably be zero.

The tax I’ve paid for the 2022/23 tax year, (via HMRC Self Assessment) and already paid, is the amount I use for tax credits to the IRS for the 2023 year. Anything post April 6th this year (2023/24 HMRC tax year), will then credit for the 2024 IRS Filing.