Written by:Josh Katz, CPA
At the time Americans living in the US are winding down their tax season, Americans living in the UK are often just beginning to think about their UK and US taxes. For residents and expatriates alike in the United Kingdom, April marks a crucial period—the tax deadline. Understanding the intricacies of UK tax obligations is vital for both residents and US expats, ensuring compliance and avoiding penalties.
Here is a guide to navigating the UK tax landscape, including key dates for 2024 and important considerations for expatriates.
Important UK Tax Dates for 2024
In the United Kingdom, the tax system operates on afiscal yearbasis, which differs from the calendar year used in many other countries. This fiscal year, often referred to as the UK tax year, runs from April 6th of one calendar year to April 5th of the following year.
5th April 2024
End of the 2023/2024 UK tax year: This date marks the conclusion of the current tax year, and individuals need to ensure that all income, gains, and allowances for the tax year ending on this date must be accounted for in tax calculations.
31st July 2024
Deadline for the second payment on the account: For individuals who make payments on account towards their tax bill, the second installment is due by this date.
•What are Payments on Account?
Payments on account are advance payments towards your tax bill for the upcoming tax year. They are calculated based on your previous year’s tax liability.
•How are Payments on Account Calculated?
The total amount due for payments on account is usually calculated as half of your previous year’s tax bill. This amount is then split into two installments, with one due by 31st January and the other by 31st July.
•Adjustments:
If your tax bill for the current year is expected to be higher or lower than the previous year, adjustments to payments on account can be made. However, it’s important to accurately estimate your tax liability to avoid underpayment penalties.
5th October 2024
Deadline for registering for self-assessment: Individuals who have become self-employed and started receiving untaxed income or have any other reason to file a self-assessment tax return must register with HM Revenue & Customs (HMRC)by this date.
31st October 2024
Deadline for filing paper self-assessment tax returns: If you choose to file your tax return on paper rather than online, it must reach HMRC by this date.
31st January 2025
Deadline for filing online self-assessment tax returns and paying any tax owed: This is the most crucial deadline for UK taxpayers. It’s the deadline for filing online self-assessment tax returns for the 2023/24 tax year and paying any tax owed. Additionally, any balancing payment for the 2023/24 tax year and the first payment on account for the 2024/25 tax year are due by this date.
6th April 2025
Start of the new UK tax year: The cycle begins anew, with new tax rates, allowances, and regulations coming into effect.
Table of Contents
What is a P60?
The P60 is a crucial document provided to employees in the United Kingdom at the end of each tax year by their employers. It serves as a summary of the individual’s total earnings and deductions throughout the tax year, which runs from April 6th to April 5th of the following year.
The primary purpose of the P60 is to provide employees with a comprehensive overview of their earnings and tax contributions for the tax year. It includes essential information such as total income, tax deducted, National Insurance contributions, and any other deductions made from the employee’s salary.
The P60 in the United Kingdom and the W-2 form in the United States serve similar purposes of documenting income and tax withholdings.
Contents of P60
- Total Earnings: The P60 shows the total gross earnings for the tax year, including salary, bonuses, commissions, and any other income.
- Tax Deductions: This outlines the total amount of income tax deducted from the employee’s earnings throughout the tax year.
- National Insurance Contributions: Details of the employee’s contributions toNational Insurance, which fund state benefits such as the National Health Service (NHS) and state pensions.
- Other Deductions: Any additional deductions, such as contributions to pension schemes, are also included on the P60.
How do I get a P60?
- From Your Employer: Your employer is responsible for providing you with a P60. They usually issue P60 forms to their employees by May 31st, following the end of the tax year. You can ask your employer’s HR department or payroll team for your P60 if you haven’t received it.
- HM Revenue and Customs (HMRC): If you cannot get a P60 from your employer, you can contact HMRC. They can provide you with the information contained in your P60, but not the physical form itself. You can do this by calling the HMRC helpline or through your personal tax account on the HMRC website.
UK Self-Assessment Tax Return
Self-assessment tax returns are required for self-employed individuals, company directors, individuals who have income from savings, investments, or property, or have any other sources of income not taxed through Pay As You Earn (PAYE) by their employer.
How to File a UK Tax Return?
Whether you need to submit a UK tax return depends on your individual circ*mstances. Here’s a general guide on how to submit a UK tax return:
1. Check if You Need to Submit a Tax Return:
If you’re solely employed and your income is solely from employment, and you have a P60 provided by your employer, you usually don’t need to file a UK tax return. You need to submit a tax return if you are self-employed, a company director, have income from savings, investments, or property, earn over a certain threshold, or if HMRC has sent you a notice to file a return.
2. Gather Your Documents
Collect all the necessary documents and information needed to complete your tax return. This may include your P60, P45 (if you’ve left a job during the tax year), records of self-employment income, bank statements, dividend vouchers, rental income details, and any other relevant financial documents.
3. Register for Self-Assessment (If Needed)
If you’re required to submit a tax return but haven’t done so before, you’ll need to register for self-assessment with HMRC. You can do this online on the HMRC website.
4. Complete Your UK Tax Return
Use the information you’ve gathered to complete your tax return. You can do this online using HMRC’s online services or by using commercial software approved by HMRC. Alternatively, you can fill out a paper tax return, though this option is becoming less common.
5. Submit Your Tax Return
Once you’ve filled out your tax return, review it carefully to ensure all information is accurate and complete. Then, submit it to HMRC by the deadline. The deadline for online tax returns is usually January 31st, following the end of the tax year.
6. Pay any Tax Due
If you owe tax based on your tax return, make sure to pay it by the deadline to avoid penalties and interest charges. HMRC will provide details of how to make payment once you’ve submitted your tax return.
How to report UK Income on US tax return?
Even if you are already filing a UK tax return, as a US citizen or green card holder living in the UK, you’re still required to report your worldwide income to the IRS, including income earned in the UK.
Reporting UK income on a US tax return can be a bit complex due to the misalignment of tax years between the two countries.
Here’s a general approach to handle this situation:
Choose the Correct Tax Year
Since the UK tax year ends in April and the US tax year ends in December, there might be a mismatch in the tax years for reporting income.
To accurately report your UK income on a US tax return, you must adjust for the difference in tax year-end dates between the UK and the US. This adjustment involves prorating the income earned during the UK tax year to align with the US tax year.
For instance, to prepare for your 2023 US taxes, you’d allocate three months’ worth of income from the UK 2022-2023 tax year and nine months’ worth from the UK 2023-2024 tax year. By prorating your foreign earned income accordingly, you ensure compliance with US reporting standards on your tax return.
Convert UK Income to US Dollars
Convert all your UK income figures (such as salary, dividends, interest, etc.) from British pounds to US dollars using theaverage exchange ratefor the tax year. The IRS and Department of Treasury provide historical exchange rates.
Claim Foreign Tax Credits or Exclusion
To avoid double taxation, you may be eligible to claim foreign tax credits for taxes paid to the UK on the income you’re reporting on your US tax return. Alternatively, you might qualify for the Foreign Earned Income Exclusion (FEIE), which allows you to exclude a certain amount of foreign-earned income from US taxation.
File FBAR if Required
If you have financial accounts in the UK with an aggregate value exceeding $10,000 at any time during the year, you must also file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), with the US Treasury Department.
File US Tax Return by the Deadline
Ensure that you file your US tax return by the appropriatedeadline, which is usually April 15th unless you’ve obtained an extension. If you’re living abroad, you have an automatic extension until June 15th, but any taxes owed are still due by April 15th to avoid penalties and interest.
2024 US Expat Tax Guide
This comprehensive guide is packed with helpful information and expert advice to make sure you stay on top of your US tax obligations.
