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Simple Tax Guide for Americans in the UK

You may be asking if you still need to file US tax returns if you are a citizen of the US or a Green Card holder living in or wanting to move to the UK. 

Who is obligated to file?

You must file your taxes in the United States if you are an American citizen living in or moving to the United Kingdom. This rule applies even if you are no longer earning money in the United States if you are a Green Card holder, a dual national, or a US citizen living in the United Kingdom. Even if you do not have any income subject to tax in the United States due to living elsewhere, you are still required to file tax returns there. If you are a citizen of the United States, you are subject to taxes on all of your income because the US tax system is based on citizenship. For instance, if you are not earning income in the United States but have an employment contract in the United Kingdom, you are required to record this on your tax return in the United States.

Who among those living in the UK is exempt from the requirement that they file a tax return in the United States?

A recent college graduate doing an internship in the UK is a typical example of an American living in the UK who does not have to file a tax return in the US. If you do an internship, your salary won’t be more than 6,000 euros per year. Even after converting from GBP to USD, this amount is below the threshold of $12,200 for single filers, so you are exempt from having to submit a return.

How much money must an American living in the UK make before they are required to file US taxes?

You should still file a US tax return even if you’re now residing in the UK. Due to the low threshold, there aren’t many people who don’t have to file US tax returns who are American and live in the UK.

Once your annual income as a single taxpayer reaches above $12,400 in the United States of America, you must submit a tax return. The barrier is $24,800 for married couples filing jointly and $18,650 for single taxpayers. If your income exceeds the threshold (currently $200,000) in any currency earned anywhere in the world, you must file a US 1040 Federal Tax Return for the year. You can also read about US tax CPA in the United Kingdom to know more.

If a married couple filing separately has any income in the United States, even $5, they must file a tax return. If your combined international income exceeds $5, you must file a US tax return even if you are married to a foreign national. That usually takes them by surprise. You need to file even if you aren’t working and making money. You would have to file if you got $5 or more in interest from a bank, pension, retirement plan, stock sale, or dividends. Because of Trump’s tax cuts in 2017, this limit was lowered by a lot in 2018.

Finally, if you are self-employed or make more than US $400 annually from self-employment (in any currency from any nation), you are required by US law to file a tax return in which you report all of your income, regardless of where it was earned.

References

  1. https://www.unbiased.co.uk/life/managing-your-money/expatriate-taxes
  2. https://www.taxesforexpats.com/country_guides/uk/us-tax-preparation-in-uk.html
Marco Polo
Marco Polo is the admin of sparebusiness.com. He is dedicated to provide informative news about all kind of business, finance, technology, digital marketing, real estate etc.
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