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UK nationals who have US tax residence are subject to the same tax rules as US citizens (worldwide income).

The test the IRS applies to determine residency is detailed here.

Please consider this information in regard to how the IRS taxes foreign individuals.

As a consequence of the residency test, a green card holder becomes a US resident taxpayer once they are present in the United States with their green card. Therefore, a U.K. national can be both a US resident and non-resident taxpayer during a year if they have this dual status. A married dual status taxpayer may not file a joint tax return, but they may elect to be taxed as a US resident for the entire year.

If a British national who is a US resident alien is also a UK resident under the HRMC’s Statutory Resident Test, then we look at the tie-breaker clauses set out in the UK-US tax treaty to determine which country has tax residency for tax treaty purposes. However, if the US test is met then they must file tax returns as required.US states are not party to any tax treaty so these provisions will not apply to state or local tax filings.

A UK national filing a US tax return will generally get a credit against their US tax liability for UK tax paid on the same income. The credit being limited to the amount of UK tax actually paid on the income. As there is a Totalization Agreement (see below) in place between the UK and the US the IRS will not give credit for any UK National Insurance paid.

Focus on UK National Insurance – In the US national insurance contributions are called social security contributions. Under the US/UK Social Security Treaty (called a Totalization Agreement) if an employee of a UK or US employer covered under their own social security system is sent to the other country to work for that employer for a period of five years or less, then they may continue to contribute to their own social security system. The employee must get a certificate of the coverage from their own country. An extension may be obtained from the other country after five years.  Our firm can help you obtain your initial certificate and extension.

A self-employed US or UK taxpayer will be taxed in their country of residence for work performed in the other country unless they spend more than 183 days in that other state during a year or they have a fixed base (analogous to a permanent establishment under Article 5 of the treaty) in that other state.

Employment income earned by a resident of the UK in respect of an employment exercised in the United States will be exempt from U.S. tax if the employee is in the United States for less than 183 days in the taxable year, the employer is not US resident, and the cost is not borne by a permanent establishment or fixed base in the United States.

We look forward to helping you with any international tax issues you may have, please contact us and we will respond to you shortly.