I had previously posted a question about I-bonds and accrued interest. I was trying to avoid a large tax bill but it just seemed to complicated to try and figure a way around it. In the end my wife and I decided to cash out all our I-bonds when we happened to be visiting the US a couple of months ago. Thus we have generated a sizeable amount of taxable interest (most of our income this year). I have calculated our estimated tax payments for the UK and made a tax payment to the HMRC. We will be filing for a foreign tax credit to hopefully eliminate any US tax. We also have some relatively minor amounts of dividends and capital gains from our US brokerage account, and I have a small private US pension that I started taking in the 2nd half of 2024. We are both UK and US citizens resident in Scotland.
My questions are these:
I was hoping to align my UK and US tax years with the calendar year to try and simplify calculations for tax credits etc. Durhamlad has reported that he did this when he moved back to the UK. However, I have been back in the UK for about 7 years - is It too late to start filing on a calendar year basis? By my calculations it would make no difference to last years filings, and if I did a calendar filing for the UK I would simply include Jan, Feb, March 2024 income again in my 2024-5 filing, even though I had included them in my 2023-24 filing.
My plan is to file UK taxes in April 2025, and then file my US taxes before June 15, 2025, or October is I need an extension. I think I will be able to fill out a form 1116 (I will read through previous postings advising on filling out 1116 although it seems quite complicated getting things in the right buckets) to get a credit for the taxes on I-bond interest that I have now paid HMRC, as well as UK tax paid on my small private US pension. How does FTC work for US dividends (either from individual shares or ETFs)?
Hopefully I am not making a hash of this. I still have time to make a payment to the IRS to avoid any penalties if necessary.
Thanks in advance for your feedback. I may decide to go with a tax professional this year just to make sure I do it correctly!
