Filing US taxes while abroad generally comes with additional steps, such as reporting foreign bank accounts and determining which expat-related tax benefits you can or should take.
But if you’re filing from the UK, there’s more to the story. You also need to know how unique situations in the UK can affect your American taxes. This is important not just because you want your return to be accurate—but also to insure you’re not missing anything that could result in costly penalties.
Investing made simple can make taxes complicated. British mutual funds and Unit Trusts that let you easily diversify your portfolio can come with a cost for US taxpayers. These accounts are typically considered Passive Foreign Investment Companies, or PFICs, which means more complex reporting requirements and higher tax rates, as well as high fines for failing to report them. It’s critical to understand how these accounts affect your taxes as they can take a big bite out of your bottom line.
Tax free doesn’t always mean tax free. Your Individual Savings Account (ISA) provides tax-free investing—but only where your British taxes are concerned. On your US return, the gains within your ISAs will be taxed as regular income, regardless if your account is made up of cash or if it holds stocks and shares.
There’s a time zone shift for your taxes. The UK tax year starts April 6 and ends on April 5 each year, but your US filing will still be on the American clock, following the calendar year from January to December. To account for the full US tax year on your return, you’ll need to combine your British P60 Forms (End of Year Certificate) with your pay stubs.
H&R Block’s experienced tax advisors have got you covered If filing from the UK sounds complicated, don’t worry – H&R Block’s knowledgeable tax advisors have helped thousands living in the UK with their US taxes. They’ll put their experience to work making sure that your financial accounts are reported accurately, so you can file confidently.
