MEDOWS International Tax has specialized expertise and years of experience in the area of US-UK taxation. We have worked with countless individuals and business moving from the United States to the United Kingdom, and vice versa. We have team members who hold dual accounting qualifications in both countries and have represented clients at all levels.
Taxes in the United Kingdom are administered by Her Majesty’s Revenue and Customs (HMRC) and the majority of returns may be filed online. While US taxpayers must generally file state and local tax returns along with their annual IRS filings, UK taxpayers only have to file with the HMRC.
The United States and United Kingdom have a tax treaty in place which governs many areas of international taxation setting out rules on:
- Tie breaker residency clauses
- Taxation of employment (dependent) and self-employment (independent) services
- Rates of withholding taxes to be applied to certain payments
- Special taxation of artists or athletes
Importantly, the tax treaty does not impose any tax–only domestic law does that–but may offer reliefs and allowances to prevent double taxation, provide a credit for tax paid in one county against tax due in the other and provide for reduced rates of taxation in certain circumstances.
Understanding the HRMC’s Statutory Residency Test
For Americans in the United Kingdom, the first issue to determine is residency. A US resident might be working in the United Kingdom for themselves, for an employer or living there married to a UK national.
The test HMRC applies to determine residency is the Statutory Residency Test (SRT) it is detailed here. This test is very complex and we urge you to seek professional advice rather than trying to interpret it on your own.
UK tax residents must file for the tax year ending April 5, paper filers are required to file by the following October 31 and online filers must file by January 31 of the following year.
US businesses in the United Kingdom may operate as a subsidiary or a branch under the UK to US tax treaty. Such businesses are liable to pay U.K. corporate tax.
To learn more about how we can help American businesses operating in the UK, review our UK to US Business Tax page.
Understanding the IRS Residency Test
For British nationals in the US the first issue to determine is residency. If they are a US resident, they are taxed the same as a US citizen and must report their worldwide income to the IRS. The test the IRS applies to determine residency is detailed here.
The US tax year runs from January 1 to December 31 and returns are generally due by April 15 of the following year.
To learn more about how we can help UK nationals working in the United States, please visit our UK to US Personal Tax page. .
British businesses operating in the United States may operate as a domestic corporation or a branch under the tax treaty. To learn more about how we can help British businesses operating in the US please visit our UK to US Business Tax page.
In addition to the mainly federal taxation issues identified, UK nationals in the United States may be subject to state and local taxation.
If you need assistance with US and UK taxes, please contact us and we will respond promptly.