05 Nov Do dual citizens in the UK have to file US taxes?
Expats who live and work abroad often have tax questions about US taxes and require expert advice on the American tax system because it can seem complicated and rather confusing because the US tax system is so unique.
To gain tax saving benefits, expats must submit a tax return
US citizens, dual or not are responsible for filing a tax return when their income exceeds $12,400 which is the current standard deduction amount. Those working outside the US may qualify for the Foreign Earned Income Exclusion, which is set at $108,700.
Those with dual citizenship living in another country and paying taxes can often panic at the thought of being double taxed on their worldwide income.
Thanks to a treaty between the US and UK, dual residents won’t pay tax above the highest rate and Americans on higher salaries can claim the foreign tax credits via the treaty, helping to avoid double taxation.
Thanks to the treaty there is a fairer balance for US expats which eases the tax burden and working with a US expat tax advisor can help to limit the liabilities and even show you how to make tax savings.
Americans living abroad with dual citizenship can benefit from a two month extension until June 15th and can request an extension to October 15th if required.
It is worth bearing in mind that American expats must also report non-US financial accounts including banks, investments and business interests. This does depend on minimum value thresholds which a tax expert can advise on.
There are advantages to dual citizenship
Some countries do not recognise dual citizenship; thankfully, the UK and US are not one of them. The UK does allow those born in another country to retain their nationality and apply for residency with them.
This dual agreement comes with many advantages, including living and working freely in either country. And the benefit of owning property in either or both countries, and reasonably unlimited travel in and out of both.
Those who apply for the right to live and work within an EU country also enjoy the benefit of working and travelling in other EU member countries. Additionally, some dual passports open up further travel opportunities with visa free travel to other countries.
The other advantages are the ability to access both healthcare and social security systems, the legal right to vote in both countries and even the right to run for office.
Avoiding double taxation as a dual citizen
America dual citizens who live and work abroad can assume that the tax treaty between the UK and USA protects them from filing US taxes in both, but that is not so.
Americans living and working abroad must file their taxes but can claim provisions to avoid being double taxed in both countries. This can go as far to prevent double taxation on income like that from investments and retirement as they can be claimed through the federal tax return.
Depending on where the income was earned, it’s also possible to claim tax credits from one country to offset the taxes paid in another and the Totalisation agreement prevents double taxation on social security payments.
No Need to renounce US citizenship
Some expats have reportedly considered renouncing citizenship due to taxes but there is no need for this drawn out and complicated process to even be a consideration. There are plenty of protections in place for expats but seeking expert advice from a US expat tax advisor is a good step to take.
Do dual citizens in the UK have to file US taxes?
Indeed they do, and of course, it is sensible to do so to avoid any disadvantages and receive the advantages of dual citizenship which you can probably tell there are now many.
It is worth seeking the advice and support of a consultant specialising in US expatriate tax matters so that you can reap the rewards and avoid the pitfalls of US taxes.