US nationals who have UK tax residence are subject to same tax rules as US citizens (worldwide income). This means that US tax residents based in the United Kingdom may have to file tax returns in the United States and the United Kingdom.

The test HMRC applies to determine residency is detailed here. This test is very complex and we urge you to seek professional advice to interpret it.

US citizens and resident aliens living abroad maybe able to exclude $101,300 of their earned income from US taxation if they meet certain requirements and can claim an addition 16% for certain housing expenses; however, they must still file a tax return.

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 and they have a permanent resident (per Article 5 of the treaty) in that other state.

An employed US taxpayer working in the United Kingdom will most likely have UK tax withheld from their payroll.

Social security РIn the United Kingdom, social security contributions are called National Insurance Contributions (NICs).  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. We can help you obtain your initial certificate and extension.

Equalization clause – Many of our US clients who are sent by their employers to the UK have tax equalization clauses in their contracts. These clauses typically operate so that an individual will not pay income tax at a rate greater than the United States., which typically has lower personal income tax rates than the United Kingdom. In cases where treaty benefits are not claimed, this imposes an additional cost on the employer, which is another reason why employers should seek expert advice on international tax issues.

US residents based in the UK are required to comply with FBAR and FACTA reporting requirements.

A US resident who is also a UK tax resident but not domicile, does not pay UK tax on foreign income. In certain circumstances a US resident may be liable for the U.K. non-domicile levy, essentially a charge for availing of the remittance basis of taxation if you are UK resident but non-domiciled beginning once you are a resident but non-domiciled for at least seven out of the last nine years.

If you have questions or need assistance with US to UK personal taxes please contact us.