Self-Employed in UK, Debating between FEIE and Foreign Tax Credit

Hi!

I’m self-employed in the UK, but don’t make loads of money, around $7000 a year. Last year I filed with the Foreign Earned Income Exclusion, but I later found out about the Child Tax Credit of $1000 and am wondering if I could/should revoke the FEIE to be able to claim the Child Tax Credit.

Basically, I’m confused about the following things:

1. Is there any downside to revoking, if my earnings and situation will likely be the same for the next five years?

2. I didn’t actually owe any income tax in the UK on my self employed income because it’s under the threshold for paying tax. So what would I put even in the Foreign Tax Credit? Just taxes paid on bank account interests which will be very very small?  Or would I have to use it at all?

3. The Child Tax credit also says that it can’t be applied to the US Self Employment tax.  But I’m using Turbo Tax and have experimented both ways, and it definitely calculates that I owe much less tax if I revoke FEIE.

Thank you so much in advance for any help you might be able to give!

According to your signature you have been in the UK for more than 5 years, so I do not understand why you would be paying self-employment tax at all.

The standard answer is to formally revoke the exclusion, but you may want to run some projections for the next 5 years.

Hmmm....interesting. I was under the impression that, if you're self-employed in the UK, one always had to pay the US self-employment tax of 15.3% of earnings (different than income tax) no matter what?

It would be totally amazing if I was mistaken on this.

Hmmm....interesting. I was under the impression that, if you're self-employed in the UK, one always had to pay the US self-employment tax of 15.3% of earnings (different than income tax) no matter what?

It would be totally amazing if I was mistaken on this.

Get ready to be totally amazed.

If you are self employed in the UK you pay Class 2 (a least until, or if, the budget changes go through) and Class 4 NI. Why would you pay US self-employment tax for work done in the UK?

Ah. I guess I did sort of know this - is this the one where you get a certificate from the HMRC that says you pay NI? Because I think at some point I read that if you do pay the US Self Employment tax, it effectively buys you a year's worth of Social Security benefits and Medicare coverage.  I'm not sure where I'm going to retire yet, the US or UK, and the $500 or so I owe seems like a reasonable price to pay for a year on the books.

Let me know if I'm thinking along the right lines about this, and thanks for your responses, guya and nun!

Ah. I guess I did sort of know this - is this the one where you get a certificate from the HMRC that says you pay NI? Because I think at some point I read that if you do pay the US Self Employment tax, it effectively buys you a year's worth of Social Security benefits and Medicare coverage.  I'm not sure where I'm going to retire yet, the US or UK, and the $500 or so I owe seems like a reasonable price to pay for a year on the books.

Let me know if I'm thinking along the right lines about this, and thanks for your responses, guya and nun!

You don't get to choose. You must pay UK NI, VAT etc and comply will all the UK rules and as you are self-employed in the UK you don't qualify to pay FICA and Medicare taxes.