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Business taxation for US expats living in the UK

Taxation laws for US expats living in the UK can be complicated for a layperson. The problem gets further compounded if you own a business or are self-employed in your new country. It is a good idea to work with a tax consultant so you remain compliant with the Expatriate tax regulations in both countries and avoid the possibility of incurring fines and penalties.  A tax consultant might guide you through the process of filing taxes as a U.S. expat in the United Kingdom. Getting advice is also essential since taxation laws change from time to time. Here are a few of the critical factors that you must keep in mind. 

  1. You’ll Continue to File Returns in the US and UK

As long as you remain a US citizen or Green Card holder, you’ll continue to file returns with the IRS and in the UK. Both countries expect you to declare all income earned from worldwide sources in your returns. Even if you’re earning income from non-UK sources, you’ll report all earnings on the tax return and pay the applicable dues. However, with the advice of your tax attorney, you can take advantage of the UK-US Totalisation Agreement. Accordingly, you needn’t pay double and can avail of several exclusions permitted by the IRS. 

  • You Need Not Pay Social Security on Self-Employment Taxes in the US 

Tax regulations for US expats living in the UK permit you to pay Social Security in only your home country. Once you move to the UK, here’s what you must do:

  1. Apply for and get a National Insurance number via Jobcentre Plus, which is a UK governmental organization. 
  2. Register as a self-employed person with HM Revenue & Customs
  3. Having received the tax reference number and National Insurance number, submit an application for a Certificate of Coverage from the UK Revenue
  4. Your CPA or IRS receives the certificate that exempts you from paying Social Security back home.
  5. If you’re paying Social Security in the UK, you needn’t pay in the US also.
  6. Small Business Owners Must Pay One-Time Repatriation Tax and GILTI

If you’re a business owner running a company out of the UK, you might have to pay a one-time repatriation fee. US expats living in the UK could pay up to 17.5% on the profits they’ve earned from foreign sources since the year 1986. New IRS regulations may also require you to pay an annual Global Intangible Low-Tax Income (GILTI) fee to cover a part of the income you’re earning in the UK. These taxes are applicable even if you intend to make the UK your permanent domicile. 

New taxation laws require small companies and large corporates to pay similar taxes. Check with your consultant for information about the minimum annual gross receipts that incur tax dues at the time of filing the annual returns. 

Business taxation laws for US expats living in the UK are not just hard to understand, but can change with new regulations being signed into effect. Rely on a consultant for advice on how to take advantage of exclusions and lower your tax liability. 

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