United Kingdom Tax Tips for U.S. Expats

If you’re an American living across the pond, check out these tax tips to help maximize your U.S. tax situation.

  1. The foreign earned income exclusion is probably not the right tax benefit for you. The taxes you pay on your income in the United Kingdom will usually create excess foreign tax credits that can provide you with additional protection from U.S. tax for the following ten years.

  2. Be careful with ISA investments. These investments may be a savvy choice for U.K. nationals but they are not tax-free in the United States - so U.S. expats beware. At the end of the day, with U.K. taxes generally being relatively higher, investing in an ISA may make financial sense. However, investing in funds and unit trusts and may undermine your investment strategy due to high rates of U.S. tax on this type of income and increased tax filing costs.

  3. Your U.S. taxes generally need to be reported on a calendar basis. The P60s and other reporting documents you receive will follow the U.K. tax year ending in early April. Having pay slips for the calendar year end and record of any bonus or other lump-sum payments will allow for the allocations to be handled painlessly.