While each country has different tax laws, for many people moving to London from the US, there is the possible issue of double taxation and how to manage your financial affairs stateside while enjoying life in London.
While your relocation to London will cover all of your moving requirements: choosing a home, transport, and possibly even schools if you are moving to London with your family, there is another aspect of your relocation that you have to consider carefully: TAXES!
Best advice, certainly for Americans moving to London: Get a professional to look into your tax affairs and advise you on different aspects of your employment and what it means for your tax returns back home.
Not many Americans moving to London have even heard of this aspect of their foreign financial affairs but it could very easily affect your finances and your tax return. If you have a foreign bank account, which you certainly will have once you complete your relocation to London, and you at any stage had an amount over $10 000 dollars in that account you are required by law to register with the US Department of Treasury. This can come as a bit of a shock if you have not planned for this.
It is very important to remember that if you are US citizen living in the UK you will have to file two sets of tax returns each year. One in England and one in the United States. There are several exemptions and tax credits that you can apply for after your relocation to London but you’re going to need a specialized foreign tax expert to set it all up for you before you leave home.
There are a number of reasons to do this through a US based tax attorney before you move overseas, the biggest being that he or she will have a good understanding about all of the forms that you have to submit as a part of the tax return and they will be able to advise you on how to minimize the amount of taxes that you have to pay.
Keeping up with domestic US financial news can be difficult when you are moving to London; unless you know what you’re looking for you won’t be getting the same amount of news coverage. Best to have someone at home looking after your financial affairs while you’re enjoying London.
The details involved in keeping your finances and tax obligations under control can be challenging for many expats. If you’re one of the many Americans moving to London you’ll have to file two sets of returns and one of them is due right now.
You can get help from your London relocation services agents when you need to find a new home in a day, or even to open a bank account and get you settled after moving to London, but your taxes will always rest solely upon your shoulders. This may also impact on your choice of tax attorney as you may have to find one with tax expert who will be able to file both sets of returns for you. That may mean that you have to pay a little more and use a company who has an office in the United States and in London to be able to complete both sets of tax returns when they are due.
The tax year in the UK runs from April of any given year to April of the next year, which is almost the same as the USA, but, if you need to file a self assessment income tax return then you have to do it in October. Discuss how you will be taxed with your new employers before your move so you have a good idea of what will need to happen with your annual tax return.
Don’t think that just because you’ve left the US that you will be able to avoid paying taxes. Tax returns for expats living abroad is a complicated process and with the different deadlines, you don’t want to be spending the entire year planning for the next tax return due date. Even if you have an accountant or have managed your taxes alone for several years, the laws surrounding tax on American citizens working overseas is much more challenging than usual, and you’ll want to get professional advice.
Quick Tip: If you are completing your October self assessment forms you may want to consult with the online resources provides by the HM Revenue and Customs website.
• There are different federal tax laws governing the filing of a tax return for the foreign income that you have earned during the year. You cannot just pop along to your family accountant and expect him to know about the different credits and exclusions regarding foreign income earned and how to file a tax return in the US while living in a foreign country. Your best bet is to choose a specialty tax attorney that has practical experience in handling the finances of Americans moving to London.
• Your planning may be more important than your actual filing work. This is so important for anyone moving to London to bear in mind. If you do the groundwork you won’t have to do anything more than send a couple of emails and attach your bank statements for your tax attorney to submit your return. Make sure that you give your tax expert all of the information that they require before you leave, so you’re not running around after your move trying to find someone to notarize your birth certificate to courier back home in a hurry.
• If you have already been living in London and have not really paid attention to the fact that you need to file a tax return back home, you may have to find a better excuse than “I didn’t know I had to” when facing the wrath of the IRS. And they will catch up with you eventually. The best thing you can do is ‘fess up immediately and pay a non-compliance penalty and file your missing tax returns. If you have earned in excess of the foreign income earned exclusion amounts, it gets a little more complicated, and you will have to get a tax attorney to help you out.
Remember you have two years to apply for a tax refund, and a good tax expert can sort it all out for you and save you the possibility of civil charges for not paying tax in the US or criminal charges which you may be liable for if you have not filed a tax return after your big move.