Practical impact of US vs UK tax year offsets

I know a few of you on the forum are dual US/UK taxpayers and based in the UK. I'm expecting to move back to the UK the middle of 2025. As I understand it, the UK would the primary taxing authority, and I would generally be able to get credit for UK tax on my US tax return.

However, I'm curious how that works in practice, given that the US return is due before the UK one based on normal deadlines,, and the fact the tax year is offset.

Is it feasible to use the overseas extension for the US return to be able to close out the UK return first, and include final UK tax figures on the US return? Or is it better to pay estimated UK tax before 31 December, include that estimate in the US return, and then true it up the following year? Or is there another way? I'm also unclear whether it should be accounted for on a cash basis i.e. you only get credit for the UK tax actually paid in the calendar year, or whether it's on an accruals basis?

As ever, thanks in advance for your insights!

Rgds
Martin

How we do it is to take the automatic extension for overseas residents and file our US taxes in May, by which time all figures are in for the HMRC return so we know exactly how much tax we’ll be paying and even though the foreign tax credits are marked as accrued there is never any correction needed the following year. HMRC taxes are usually filed in October and taxes paid by end of year.

I know a few of you on the forum are dual US/UK taxpayers and based in the UK. I'm expecting to move back to the UK the middle of 2025. As I understand it, the UK would the primary taxing authority, and I would generally be able to get credit for UK tax on my US tax return.

However, I'm curious how that works in practice, given that the US return is due before the UK one based on normal deadlines,, and the fact the tax year is offset.

Is it feasible to use the overseas extension for the US return to be able to close out the UK return first, and include final UK tax figures on the US return? Or is it better to pay estimated UK tax before 31 December, include that estimate in the US return, and then true it up the following year? Or is there another way? I'm also unclear whether it should be accounted for on a cash basis i.e. you only get credit for the UK tax actually paid in the calendar year, or whether it's on an accruals basis?

As ever, thanks in advance for your insights!

Rgds
Martin

Because of the current government's proposals, you shouldn't have UK tax on any FIG items for the first 4 tax years of residence. Under current law, standard practice is to pay UK tax no later than 31 December of the year in which the income or gains arise, but this won't be relevant in arrival years from 6 April 2025.

Thanks @durhamlad - that makes sense (I like to get my taxes done early, so I guess I'll just have to be patient going forward!).

Just for clarity, my assumption had been that there would be a need to split UK tax years when reporting credits on a US tax return i.e. you would calculate UK taxes paid in the period 1 Jan to 6 April from one year's UK tax return, and then taxes paid from 7 April to 31 December from the next year's UK tax return. Is that accurate?

@guya - thank you for pointing out the changes in Foreign Income Regime. I'll read up further on that, as I'll be arriving after 6 April 2025. My initial reading was that it likely didn't apply to me, as although I've been resident and domiciled outside the UK for some time (over 14 years), I believe my domicile will move back to the UK, as it'll be a  permanent move (purchase of permanent residence on return etc.). However, if I (or my spouse) can legitimately avoid UK tax on some foreign income during that period, that would be helpful!

Thanks @durhamlad - that makes sense (I like to get my taxes done early, so I guess I'll just have to be patient going forward!).

Just for clarity, my assumption had been that there would be a need to split UK tax years when reporting credits on a US tax return i.e. you would calculate UK taxes paid in the period 1 Jan to 6 April from one year's UK tax return, and then taxes paid from 7 April to 31 December from the next year's UK tax return. Is that accurate?

Not sure as my tax accountant handles this.  My US 1099s are considered co-terminus with the UK tax year, and my UK taxes are all paid by end of December each year. My UK pensions are reported calendar year on my US return (the P60s are not used, just the gross monthly amounts to calculate pension in a calendar year).