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Tax Aware FAQ: I am a US citizen living in the UK – when and how should I pay my taxes?

Posted on 14 January 2022

UK taxes

The UK tax year runs 6 April to 5 April. Tax returns must be submitted by 31 January (or 31 October if filing by post) following the end of the relevant tax year. So a tax return for UK tax year 2020/21 is due online by 31 January 2022. It is in this "self-assessment" tax return that you can claim the remittance basis and certain tax reliefs. To submit a tax return, you will need to apply to HMRC for a "unique tax reference" (UTR) – the process for which is currently delayed.

Generally, UK income tax is payable in three instalments:

  1. First on 31 January during the tax year, equal to 50% of the income tax paid for the previous tax year.
  2. Second on 31 July afterwards, equal to that first payment.
  3. Third (the "balancing payment") on the following 31 January, equal to any income tax still owed after those two payments.

UK capital gains tax (CGT) is generally payable on 31 January following the tax year in which the capital gains is due. However, CGT on transfers of UK property (or property rich companies) is due and reportable within 60 days of such transfers (as extended from 30 days for completions on or after 27 October 2021).  

US taxes

For individuals, the US tax year is the same as the calendar year. The US tax filing and payment obligations are of course subject to US law – both federal and state - which are subject to change. Currently, we understand that US tax returns are due on 15 June (as extended automatically by two months for expatriates), and US tax is due on 15 April (even if you get the automatic extension for the return).

Tips

Your liability to UK and US tax will depend upon where you are "treaty resident" – i.e. in the UK or the US. This will depend on a prescribed review of your home(s), centre(s) of vital interests, habitual abode(s) and nationality (or nationalities).

Tax is best considered well in advance of the deadlines for US and UK tax reporting, and can often be mitigated with effective planning. For example, if claiming the remittance basis in the UK, you may only be able to avoid double taxation on remittance of certain US income if you have actually paid the UK tax first – which means paying the UK tax early is beneficial in some cases.

The "Tax Aware FAQs" is a new section where we will look into commonly asked tax questions. If you would like us to consider a specific tax question for the next issue of Tax Aware, please contact Nicola Simmons.

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