But before you jump to claim the FEIE, there are a few things you should know:

• If used properly, the FEIE can save you thousands of dollars on your United States taxes
• It’s not a blanket foreign income exclusion — there are stipulations on what you can exclude and what you can’t
• You don’t automatically get the FEIE — you need to meet specific qualifications and then file the proper paperwork (Form 2555)
• The FEIE isn’t your only tax relief option — you should ask your Tax Advisor what options are available to you based on your specific situation.

U.S. taxes for expats aren’t easy. Let our experienced Expat Tax Advisors help prepare your tax return this year to ensure the foreign earned income tax exclusion is elected when it is most beneficial to you. Ready to claim the FEIE? We’ve got a tax solution for you — whether you want to DIY your expat taxes or leave it to one of our experienced Tax Advisors. Head on over to our Ways to File page to choose your journey and get started.

What foreign income can you exclude with the FEIE?

The Foreign Earned Income Exclusion can help reduce or eliminate U.S. taxes on foreign income earned while working abroad, but it doesn’t apply to all sources of income.

This exclusion is only available for earned income and doesn’t apply to passive or investment income such as interest and dividends. Foreign earned income includes:

• Salary
• Wages
• Bonuses
• Commissions
• Self-employment income

All income must have been earned in a foreign country to count as foreign earned income.

Note: You might qualify for the foreign earned income exclusion even if the country in which you’re working doesn’t assess income tax on compensation, like the UAE.

Who qualifies for the Foreign Earned Income Exclusion?

The foreign income tax exclusion applies to those who have lived abroad for a certain period of time within the tax year. However, partial-year exclusions are available if you’ve recently moved to a foreign country or returned to the U.S. mid-year.

The FEIE is available to expats who either:

• Work outside the U.S. as employees, whether for a U.S. or non-U.S. employer
• Work outside the U.S in a self-employed or partner capacity
• Pass either the Bona Fide Residence Test or the Physical Presence Test

Employees of the U.S. government can’t claim the foreign income exclusion. However, an employee of a private company under contract with the U.S. government might still be eligible.

Passing the Bona Fide Residence Test

To qualify as a Bona Fide Resident and pass the test, you must prove that you have more ties to a foreign country than the U.S. You also must be a resident of that country for an uninterrupted period that includes an entire tax year. When and if you go back to the U.S., you must have the intention of returning to your current foreign country of residence. In addition, you must:

• Be a U.S. citizen or be a resident alien of a foreign country with which the U.S. has an income tax treaty.
• Earn active income. Unearned, or inactive, income like pension payouts, interest, and dividends cannot be included.
• Be overseas for work for a period longer than a year.
• Have a permanent place of work in a foreign country.

It is possible to be a Bona Fide Resident for part of the year if you spent at least a full tax year outside the U.S. in a prior year. As a result, you can claim the FEIE for part of the year.

Passing the Physical Presence Test

To qualify under the Physical Presence Test, you must have been living outside the U.S. for 330 full days out of the year. Be careful when you track your time, because a “full day” counts as 24 hours starting at midnight, and you need to be in-country for every minute of those 24 hours.

For example, if you lived in Windsor, Canada and popped over the border to Detroit for Friday night and came back Saturday evening, you wouldn’t be able to count that time towards your 330 full days.

How much foreign income can I exclude?

If you’re an expat and you qualify for a Foreign Earned Income Exclusion from your U.S. taxes, you can exclude up to $112,000 or even more if you incurred housing costs in 2022. (Exclusion is adjusted annually for inflation). For your 2023 tax filing, the maximum exclusion is $120,000 of foreign earned income. If you’re married and both of you meet either the bona fide residency test or the physical presence test, you can each claim the FEIE.

Foreign Tax Credit vs. Foreign Earned Income Exclusion

It’s important to choose between the foreign income exclusion vs. foreign tax credit wisely. If you claim the exclusion and then change back to the foreign tax credit, you can’t claim the exclusion again for five years. The only way to claim the exclusion again involves a costly process with the Internal Revenue Service (IRS). Get tax help from an expat tax advisor to help you understand your options.

Claiming the foreign tax credit and filing Form 1116 might be the better option if any of these apply:

• You’re paying foreign tax at a higher rate than your U.S. tax rate
• You wish to participate in an individual retirement arrangement (IRA)
• You qualify for certain family-related credits based on non-excluded income
• You wish to exclude or reduce taxes on passive or investment income

Foreign Earned Income Exclusion extensions

Even if you haven’t been out of the country long enough to claim the exclusion by your expat filing deadline, you can request an extension to file until you’ve met these time requirements.

You generally must claim the exclusion either:

• Within one year of the due date of your tax return
• By amending a timely filed return

However, you may claim the exclusion if:

• The IRS hasn’t discovered your failure to file your return claiming the exclusion, or
• You owe no tax after taking the exclusion into account

If you haven’t filed returns in prior years, you still might be able to exclude your foreign earned income from U.S. tax. This could have the effect of eliminating your tax liability and any penalties and interest that would be assessed.

Foreign Housing Exclusion and Foreign Housing Deduction

If you’re an expat and you incur foreign housing expenses, you might be able to exclude or deduct them. The Foreign Housing Exclusion is available for expats working as employees with housing expenses like rent and utilities.

The foreign housing deduction is available for self-employed expats paying foreign housing expenses. The amount of your housing exclusion or deduction is based on the difference between the following:

• Your actual foreign housing expenses
• A base amount for your foreign country of residence

You can use the Foreign Housing Exclusion if your housing costs total more than 16% of that year’s FEIE.

To calculate the maximum amount you can exclude, you’d multiply that year’s maximum income exclusion by 0.3 to get 30% of the full exclusion amount. So, for 2023, you’d take $120,000 x 0.3 = $36,000. Something to know is that most large metro areas have higher limits, so it’s important to have a Tax Advisor who knows the ins and outs of taxes in your specific area.

Common problems U.S. expats have with the foreign income exclusion and Form 2555

U.S. expats have a lot of the same questions and issues when they file their FEIE, but these are the most common problems associated with the FEIE:

• You didn’t file Form 2555 – Many expats assume that if they qualify for the FEIE it will be automatically added to their tax filing. To claim the FEIE you must file Form 2555.
• You’re a government employee — Unfortunately, U.S. government employees cannot claim this foreign income exclusion.
• You failed to calculate the FEIE correctly – If you calculate your FEIE incorrectly you won’t get the correct amount excluded.
• You claimed the FEIE when you should have claimed the FTC – For example, if you’re retired abroad and you only have investment and passive income, you may have been better off claiming the FTC.
• You didn’t track your time properly – You must be vigilant about tracking your time if you want to pass the Bona Fide Residency or Physical Presence tests. Even being off by a few hours can mess up your qualifications.
• You had no active income for that year – If you’re living abroad off investment or passive income, you don’t qualify for the FEIE.
• You didn’t pay your U.S. self-employment taxes – You still have to pay self-employment taxes when you’re claiming the FEIE.

These are only a few of the most common issues and problems we come across. If you’re having difficulties or are a new American expat, it’s smart to leave your expat taxes to a specialist.

File your Foreign Earned Income Exclusion with H&R Block

Filing taxes while living and working abroad can be overwhelming and stressful. As an expat, your tax situation is very different and requires specialized expertise. Get started with H&R Block’s Expat Tax Services today.

The post What U.S. Expats Need to Know About The Foreign Earned Income Exclusion (FEIE) appeared first on H&R Block®.

Keep reading to find out more about the U.S./U.K. tax treaty below. Not sure about filing requirements for your U.S. expat taxes in the U.K.? We’re here to help. Get started now.

Why the U.S./U.K. income tax treaty exists

Most countries around the world have some form of income tax that residents are obligated to pay. This can create a problem because American expats pay U.S. income taxes in addition to what they may pay abroad.

Why? Because the U.S. is one of the few countries in the world that taxes based on citizenship, not place of residency. This policy led to some expats paying taxes twice — once in the U.S. and once in their country of residence.

While certain tools like the Foreign Earned Income Exclusion and the Foreign Tax Credit helped alleviate this, there were still some sticky situations — U.S. citizens living in the United Kingdom, for example, ran into trouble when it came to pension taxation. To solve those situations, the U.S. entered into individual tax treaties. The main purpose of these tax treaties is to solve the double-taxation issue, and the United States’ treaty with the United Kingdom is no different.

The U.S./U.K. tax treaty—formally known as the “Convention between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains”—also addresses tax evasion, income taxes, and capital gains taxes between the two countries.

What else should you know about the United States – United Kingdom tax treaty?

Now that you know the basics of the United States – United Kingdom tax treaty, we can get a bit more into specifics that affect U.S. expats. Within the tax treaty are specific provisions addressing individual tax concerns. While there are more than a dozen provisions, the ones that can affect Americans in the U.K. the most are the Saving Clause and Article 17 – U.S. taxation on U.K. pensions.

Saving Clause

Many U.S. tax treaties have what’s known as a Saving Clause. The Saving Clause essentially states that a country may tax its citizens as if the treaty never existed. As a result, it renders most provisions of the treaty ineffective for Americans living in the U.K., but leaves them open for U.K. citizens living in the U.S.

This is one reason you should get familiar with the Foreign Tax Credit (FTC) — so that if you need to, you can claim it against British taxes paid. The FTC is generally possible because of the exceptions to the Saving Clause. For most treaties, the paragraph immediately following the Saving Clause details the exceptions to the clause.

Article 17 — U.S. taxation on U.K. pensions

So, how do U.K. pensions work for U.S. expats? One treaty benefit is that, contributions to a pension in the U.K. can be tax-deferred, just like your U.S. 401k and other tax-deferred retirement vehicles.

Even though distributions are generally taxable, the double taxation article will help prevent you from paying taxes twice. Another perk of the tax treaty is that it allows your social security (U.K. state pension) to only be taxable in the country they are residing in.

How to claim U.S./U.K. tax treaty benefits

There are some situations you might run into where—despite all the exclusions and other treaty benefits—you may be double-taxed on income. For example, let’s say you’re employed by a British company and live and work in England. Your employer sends you to the U.S. for a business trip, and because income received for services performed in the U.S. is considered U.S. income, you’d owe U.S. taxes on the income you earned while stateside. Article 24 of the U.S./U.K. tax treaty, for example, would help alleviate this particular situation. To claim it, you’d file Form 8833 with your tax return and include your situation in the summary.

Before you run out and file this form, talk to a Tax Advisor. The majority of U.S./U.K. tax benefits you get from treaties don’t have to be claimed with Form 8833. You’d only have to file if provisions in the current tax treaty trump or change a provision of the Internal Revenue Code (IRC) in order to reduce taxes owed.

Need help claiming U.K. tax treaty benefits? Ready to file your U.S. taxes? Get help from the experts at H&R Block

Whether you’re an American who has recently relocated to London or are a full-on U.S./U.K. dual citizen, we’ve got the tax solutions for you. Your Tax Advisor will comb through your financial documents to find you the best solutions for your specific situation, so you can have the peace of mind your U.S. taxes are done right. Get started on your expat taxes today!

The post Understanding the U.S./U.K. Tax Treaty appeared first on H&R Block®.

Below, we’ll explain the basics of what the FBAR is, which Americans in the U.K. need to file an FBAR, and how to file an FBAR from the U.K.

Ready to file? With H&R Block Expat Tax Services it’s simple to file your FBAR (FinCEN Form 114) from wherever you are in the U.K. Get started and File your expat taxes and FBAR together using H&R Block’s online expat tax services, designed for U.S. expats abroad.

Who in the U.K. must file FinCEN Form 114 (the FBAR)?

FinCEN Form 114 (the FBAR) is formerly called the Report of Foreign Bank and Financial Accounts. It exists to help the U.S. government be sure Americans in the U.K. (and elsewhere in the world) are being honest about their worldwide income and assets. If you qualify, you submit it yearly.

Who in the U.K. must file FinCEN Form 114? You must submit FinCEN Form 114 if you’re a U.S. citizen or Green Card holder and you’ve held a combined $10,000 or more in non-U.S. accounts at any one time in the tax year. This includes Accidental Americans and U.S./U.K. dual citizens.

So, if you’re a U.S. citizen and have $9,000 in a London savings account and another $9,000 in a British pension account, you’d file an FBAR even though each account held under $10,000.

One question we hear from our clients in the U.K. is “Can I file an FBAR myself?” The answer is yes, even if you live in the U.K. you can still file an FBAR yourself online.

You can simply add on an FBAR to your expat tax package and get it all done in one go.

How to file an FBAR and expat taxes together while in the U.K.

If you need to file both your U.S. taxes and your FBAR from the U.K., then choose to file your FBAR and expat taxes together. These are the FBAR instructions to file with your taxes:

1. Head over to our Ways to File page, choose to file taxes yourself or with an advisor, register online and complete your tax organizer.
   H&R Block makes it simple to file your expat taxes and FBAR together from the U.K. After you choose to either file yourself or file with an advisor, you’ll be able to register an account. From there, you’ll complete your personal Tax Interview. This is where you provide information about your tax and financial situation, including information regarding your FBAR. After you have recorded all your information, you’ll get a personalized checklist of documents to upload according to your specific situation.
2. We’ll assign you the right advisor for your situation (if you choose to file with an advisor)
   If you choose to file with an advisor, we will match you with one well-versed in U.S./U.K. expat taxes. Your advisor will review your documents and FBAR and begin your return and U.K. FBAR submission.
3. We prepare your U.S. tax return and FBAR
   Even though you’re currently living in the U.K., you can trust H&R Block Expat Tax Services for all the following:
   • Federal tax preparation and filing
   • State tax return preparation and filing
   • FBAR filing (Report of Foreign Bank and Financial Accounts)
   • Past-due FBAR and tax returns from prior years, including Streamlined Compliance filings
   • Free extension filing
   • H&R Block’s 100% Accuracy Guarantee
4. Pay for and review the FBAR and return.
   When your FBAR and tax return are completed, you’ll see your FBAR filing cost and be asked for payment via your client portal. Know that protecting your information is important to us — we maintain the physical, electronic and procedural safeguards to protect the information you submit to us.
   After you pay, your H&R Block Expat Tax Advisor can walk you through your FBAR and return, answer your questions and offer relevant tax savings tips for next year.
5. We file your return with the IRS and FBAR with FinCEN.
   Finally, we’ll file your completed return with the IRS and FBAR with FinCEN. After filing, your tax return and FBAR will be stored in your secure online account, where it will be safe and easy to access, whenever you need.

Ready to get started? Head on over to our Expat Tax page to begin.

FBAR (FinCEN 114) filing requirements and due date

Regardless if you live in the U.K., your FBAR due date for the calendar year you’re reporting is the same as your U.S. tax filing deadline, but you can always see up-to-date deadlines on our expat tax deadline page. If you’re required to file an FBAR, you must file one every year.

FBAR requirements are pretty detailed, so have these documents and information handy for a smooth submission process:

• Legal name on the foreign account(s)
• Type of account
• The name and address of the institution or other person with whom the account is maintained
• The maximum value (converted to USD using the end of year exchange rate) in each account during the FBAR reporting period
• The number and/or other designation of the account

FBAR filing cost

Filing your FBAR with H&R Block Expat Tax Services will help save you time and won’t break the bank.  When you add FinCEN Form 114 to your assisted tax return, FBAR filing costs $99 and includes the same attention to detail and 100% Accuracy Guarantee as our Expat Tax Prep Services.

What if I live in the U.K. and I’ve never filed an FBAR before?

Yikes! If you live in the U.K. and it turns out you’ve accidentally skipped filing your FBAR in years past, don’t panic. Submitting a Foreign Bank Account Report isn’t exactly an everyday occurrence, and it’s easy to overlook if you weren’t aware of compliance laws.

If you live in the U.K. and were honestly unaware of your FBAR filing requirement, the time to act is now. The IRS and FinCEN have a few disclosure programs that offer amnesty to Americans who have made an honest mistake in overlooking their filing obligations, including Streamlined Filing Compliance Procedures.

Streamlined compliance procedures allow Americans in the U.K. (and elsewhere in the world) get caught up on back taxes and delinquent FBARs with amnesty in order to avoid the large penalties that come from willfully not filing — penalties that can range anywhere from a few hundred dollars to a few hundred thousand dollars for serious offenders. All in all, it makes financial sense to be sure you’re up to date on all your reporting requirements.

If this all seems overwhelming, don’t stress — we’ve got your back. When catching up on multiple years of FBAR filings, choose to file your taxes and FBAR with a Tax Advisor, and our international tax advisors can help you decide on the best course of action for your unique situation.

Unsure how to file an FBAR from the U.K. or if you need to? H&R Block’s Expat Tax Services has your back.

Need help filing your FBAR or expat taxes from the U.K.? Don’t stress — taxes for expats in the U.K. are complicated, but H&R Block Expat Tax Services has your back. Get started and file your U.S. taxes and FBAR together.

You may be interested in:

• Filing an FBAR from Canada
• Filing an FBAR from Australia
• Filing an FBAR from France
• Filing an FBAR from Germany
• Filing an FBAR from Japan

The post Guide to Filing an FBAR from the U.K. appeared first on H&R Block®.

Understanding each form is key to avoiding a problem with the IRS or the Financial Crimes Enforcement Network (FinCEN), so below we’ll dive into the FBAR and FATCA Form 8938 filing requirements for Americans abroad. If you’re still unsure which tax documents you need to file or if you haven’t filed taxes in a few years, it’s always best to trust these forms to an experienced advisor.

Need to file FinCEN Form 114 or FACTA Form 8938? Whether you want to file your expat taxes yourself with our online DIY expat tax service designed specifically for U.S. citizens abroad or file with an advisor, H&R Block is here to help.

FBAR vs. FATCA: Do you file FinCEN Form 114, Form 8938, or both? What’s the difference?

A common question Americans with assets in foreign bank accounts ask us is if they need to file an FBAR (the actual form you’d file is FinCEN Form 114) or FATCA Form 8938. The answer is: You could have to file one, none, or both. While they both exist to report financial assets to the government, they differ in a number of ways. For starters, they get sent to different places — you send your FBAR to the Financial Crimes Enforcement Network and send Form 8938 to the IRS.

We’ll dive more into the individual FBAR and FATCA filing requirements below, but here’s the quick who-what-where-when comparing the two:

FATCA filing requirements

The Foreign Account Tax Compliance Act (FATCA) is a part of the government’s efforts to combat offshore tax evasion. American expats of all income levels with foreign accounts and assets should know about it. FATCA requirements impact U.S taxpayers and overseas financial institutions:

• U.S. taxpayers with foreign accounts and assets may need to file Form 8938: Statement of Specified Foreign Financial Assets with their annual U.S. Income Tax Return
• FATCA reporting requirements for financial institutions overseas mandates them to disclose information about U.S. citizens who hold accounts overseas

Form 8938 is similar to the FBAR in many ways. However, it has higher reporting thresholds and requires you to disclose certain “non-account” assets such as:

• Business and trust ownership
• Certain contractual investments with foreign parties

FATCA reporting deadline

As Form 8938 is filed with your U.S. income tax return, due dates applicable to Form 1040 apply. Automatic extensions for expats living abroad or additional extensions to October 15 can provide more time to collect needed information from foreign financial institutions and determine your filing requirements.

You can always see up-to-date FATCA declaration deadlines on our expat tax deadlines page.

Who files? FATCA Form 8938 filing thresholds

Who is subject to FATCA reporting? The filing thresholds differ depending on where you lived during the tax year.

If you live within the U.S. the entire tax year, you must file Form 8938 if the value of your reportable foreign assets exceeds either of these levels:

• More than $50,000 (or $100,000 if married filing jointly) at the end of the year, or
• More than $75,000 (or $150,000 if married filing jointly) at any time in the year

Expats living abroad have an increased reporting threshold. You don’t need to complete this form unless your foreign assets exceed either:

• $200,000 (or $400,000 if married filing jointly) at the end of the year, or
• $300,000 (or $600,000 if married filing jointly) at any time during the year

FATCA financial institution reporting

Many foreign financial institutions must report their U.S. citizen and resident clients’ accounts and if you’re an expat who hasn’t been filing FATCA information, that could affect you as you might face penalties and interest.

Ready to file FACTA Form 8938? Whether you file your expat taxes yourself with our online DIY expat tax service designed specifically for U.S. citizens abroad or file with an advisor, H&R Block is here to help.

FBAR filing requirements

The Report of Foreign Bank and Financial Accounts, or “FBAR” serves many of the same purposes Form 8938 does, with a few differences. A main one is that the FBAR goes to the Financial Crimes and Enforcement Network of the U.S. Treasury Department instead of the IRS. The FBAR came into existence in the Bank Secrecy Act of 1970 (BSA). Its purpose was, and still is, to prevent U.S. citizens from hiding assets overseas with the intent to commit tax evasion and money laundering.

By law, you must file FinCEN Form 114 if both of the following are true:

• You’re a U.S. citizen, resident taxpayer or domestic business entity
• You own, control, or have signature authority over foreign bank and financial accounts with a combined value over $10,000

If you were thinking of writing it off or ignoring your reporting obligation, beware: The penalties for willfully not filing can be $100,000 or more.

FBAR filing deadline 2023

The FBAR is filed separately from your tax return and does not go to the IRS. The FBAR deadline is the same as your income tax deadline, with an automatic extension to October 15 available.

You can always see up-to-date FBAR reporting deadlines on our expat tax deadlines page.

Who files? FinCEN Form 114 filing thresholds

You may be required to file an FBAR if you’re A U.S. citizen or green card holder using personal or business foreign accounts for everyday activities

The reporting requirement covers many types of foreign accounts maintained outside of the United States, including:

• Bank accounts
• Securities accounts
• Certain foreign retirement arrangements

The FBAR filing requirement isn’t new, but expats often overlook it. Recent international enforcement efforts have raised awareness of the requirement. Don’t worry, though — your FBAR is only an informational document. No additional tax will be added. However, penalties can be levied if you don’t file or file late.

Need to file FinCEN Form 114 (FBAR)? H&R Block makes it simple to file your U.S. taxes and FBAR together.

Not sure if you should file FBAR vs. FATCA Form 8938? The experts at H&R Block are here to help.

Confused whether you should file an FBAR, FATCA declaration, or both? Don’t go it alone — your H&R Block tax advisor will know exactly what to do with your specific situation. Ready to file?

Get started with H&R Block’s Expat Tax Services today.

The post FBAR vs. FATCA: Filing Requirements for Americans Abroad appeared first on H&R Block®.

Don’t worry, H&R Block has your back. Below, we’ll dive into the basics of what you should know about U.S. expat taxes in the U.K., and help you get started filing. Whether you’re an American in the U.K. filing taxes for the first time or a seasoned Brit with years of U.S. expat taxes under your belt, we’ve got a solution for you. Get started with our made-for-expats online expat tax services today!

What U.S. citizens working in the U.K. should know about U.S. taxes

Do U.S. citizens working abroad pay taxes? Do I have to pay both U.K. and U.S. taxes? How much do I pay? Here’s what you need to know if you’re an American filing taxes from the U.K.:

To start, U.S. taxes are based on citizenship, not place of residency. The U.S. has tax rules for U.S. expats that state you have a U.S. tax filing obligation no matter when or where you lived or worked in the U.K. Even if you’re only there a short time, working as an American in the U.K. can still affect your U.S. taxes. For example, if you earn income while on a short-term assignment, you’ll need to report that income on your U.S. taxes. The deeper your financial roots in the United Kingdom, the more tax considerations you’ll have.

You may need to report your U.K. financial accounts and assets. Generally, U.S. taxpayers with more than $10,000 in foreign bank or financial accounts are subject to FBAR filing and reporting requirements. You may also be subject to FATCA reporting requirements if you have foreign assets valued at $200,000 and higher.

You can lower your U.S. bill and avoid dual taxation with certain tax strategies. Expats may take advantage of one of two options, detailed below, to lower their taxes.

• The Foreign Earned Income Exclusion allows you to exclude your wages from your U.S. taxes. This option is available to those who meet certain time-based residency requirements.
• The Foreign Tax Credit lets you claim a credit for income taxes paid to a foreign government.

Due to higher tax rates in the U.K. (see below), it’s generally more favorable for U.S. citizens working in the U.K. to claim the Foreign Tax Credit.

One thing to understand is that it’s tricky when giving general U.S tax advice for U.K. residents because so much depends on your personal situation. When you file with an Advisor, they can confirm the best path for you.

Your U.K. tax-free investments are not tax-free in the United States. Americans living in the U.K. may consider investing in an Individual Savings Account (ISA). However, you should know that these accounts are not tax-free as far as your U.S. taxes are concerned—regardless if these investments are made up of cash or stocks and shares.

I’m retiring to the U.K. What do I need to know about U.S. taxes?

If retiring abroad in the countryside is your long-term goal, you should first understand how taxes work when retiring abroad:

• Even if you retire abroad you still may have to file a U.S. tax return
• You’ll still have to report money in any foreign financial accounts on your FBAR if you meet the requirements
• Your U.K. retirement investments can get special treatment. Thanks to the U.S./U.K. tax treaty (see below), you can deduct your contributions to a qualified U.K. pension scheme on your U.S. taxes. Plus, your account is treated similarly to a 401(k) or IRA, letting your retirement investments grow tax free. In most cases, your U.K. pension is subject to FBAR reporting and, depending on the amount in the account, it may be subject to FATCA reporting as well.

The U.S./U.K. tax treaty

There is a U.S./U.K. tax treaty in place that offers benefits and provisions to Americans working in the U.K. This tax treaty has provisions around everything from personal pensions to corporate taxation, and even has a clause that allows the U.S. and the U.K. to exchange tax information on individuals within their borders.

While you typically don’t need to file additional forms to claim most of the perks from the U.S./U.K. tax treaty, there are cases where you’ll need to get familiar with Form 8833.

Learn more about taxes for expats in the U.K.

Want to know more about U.S. taxes for expats in the U.K.? Check out these resources:

• U.S. Taxes on U.K. Pensions
• U.S./U.K. Dual Citizenship and U.S. Taxes
• The U.S./U.K. Tax Treaty
• How to File an FBAR from the U.K.

Basics of U.K. taxes for American expats

If you’re a U.S. citizen living in the U.K. you should also get a basic understanding of U.K. taxes — you may have to pay them, and they may affect your U.S. taxes (especially if you want to use the Foreign Tax Credit). Here at H&R Block, we dedicate our expertise to U.S. taxes. If you have questions specific to your U.K. tax return, it’s best to speak to an expert on local U.K. taxes.

Your U.K. income taxes are based on your residency and domicile status. Where U.K. taxes for expats are concerned, your domicile is generally where you have your permanent home and typically follows the residency of one’s father. Your residency is where you spend your most of your time. You can be a resident in more than one country, but you can only have one domicile.

• Residents who are domiciled pay taxes on all their income and capital gains, regardless of where they’re earned.
• Residents who are not domiciled pay taxes on U.K. source income and a remittance basis — meaning you’re only taxed on foreign income or gains brought to the U.K.

Nonresidents are taxed on U.K.-sourced income but not on capital gains in most cases.

Who qualifies as a U.K. resident?

How do you know if you qualify as a U.K. resident? We recommend you speak with a U.K. residency expert, but generally, you may be considered a resident if you pass either the Automatic Residence Tests or the Sufficient Ties Test (Statutory Residence Test, or SRT).

There are other factors that go into being considered a U.K. resident, so always talk to a professional before you make any decisions regarding U.S. or U.K. taxes.

U.K. income tax rates for U.S. expats

U.S. expats in U.K. cities have set income tax rates, ranging from 0% to 45%. Similar to taxes in the U.S., the percentage of tax that you pay increases as your income increases into different bands (known as brackets in the U.S.). Due to the wide ranges of the U.K.’s top bands, many Americans would pay higher income tax rates than at home. It’s worth noting that tax rates are different for expats in Scotland.

2022/2023 U.K. tax rates

The British tax year is different than in the United States. The U.K. tax year starts on April 6 each year and ends the next year on April 5. If you file your U.K. taxes by paper, they are due by October 31. If you file electronically, you’ll have until January 31.

As your U.S. tax documentation and reporting generally follows a calendar year, you may need to combine your P60s with pay stubs and other payment records to reflect a full tax year.

How to file U.S. taxes from the U.K.

It’s simple to file U.S. taxes in the U.K. with H&R Block’s Expat Tax Services. Whether you file expat taxes yourself with our online DIY expat tax service designed specifically for U.S. citizens abroad or file with an advisor, we’re here to help. Here’s how to file your U.S. expat taxes online:

1. Head on over to our Ways to File page
2. Pick your journey—in the driver’s seat with our online DIY tool or letting a Tax Advisor take the wheel.
3. Once you’re through your chosen journey, you review your return and pay
4. We file your return with the IRS
5. You sit back knowing your taxes were done right

How H&R Block can help U.S. citizens living in the U.K. with taxes

If you’re a U.S. citizen living in the U.K., tax returns likely aren’t at the forefront of your mind until it’s time to file. Luckily for you, our highly trained experts have helped thousands of Americans as they file their U.S. expat taxes in the U.K. Get started with our made-for-expats online expat tax services today!

The post How Taxes Work for U.S. Citizens Living in the United Kingdom appeared first on H&R Block®.

To make it easier on you, we’ve addressed the common questions and concerns about dual citizenship taxes for U.S. citizens living in the U.K. and distilled them into five things you should know.

Not a dual citizen but live and work in the U.K.? Learn more about U.S. expat taxes in the U.K. Ready to file your U.S. tax return? Get started now.

1. Yes, U.S./U.K. dual citizens have to file U.S. taxes

The most common question we hear is, “do dual citizens in the U.K. have to file U.S. taxes?”

Yes, if you are a citizen or resident alien of the United States, you must file U.S. taxes, even if you’re a dual citizen of the U.S. and U.K.

The U.S. is one of two countries in the world that taxes based on citizenship, not place of residency. That means it doesn’t matter where you live—if you’re a U.S. citizen, you pay taxes. This is true even if you earn no income in the U.S.

You should know the U.K. tax year is different than the U.S. tax year. The U.S. tax year starts January 1 and ends December 31. In the U.K., the tax year starts on April 6 and ends April 5 of the following year. If you choose to file your U.K. taxes by paper and mail, they’re due on October 31. If you file online, you have until January 31.

If you’re a dual U.S. citizen living in the U.K., taxes go both ways — so you may end up having to file not only U.S. taxes but also U.K. taxes. Where you fall in the U.K. and U.S. tax brackets can influence decisions on how to file your U.S. taxes, so it’s important to understand the U.K. tax bands and taxation rates. The table below contains the U.K. tax bands for 2022/2023*, as well as the taxation rate for each band.

2. Most dual citizens of the U.S. and U.K. do not owe U.S. taxes

Now, just because you have a U.S. tax obligation doesn’t mean you’ll end up owing anything—there are a few tools the U.S. provides to ease the tax burden on dual citizens, including the U.S./U.K. tax treaty, the foreign tax credit, and the foreign earned income exclusion.

The U.K./U.S. tax treaty explained

The U.S. has entered into tax treaties with more than 50 countries around the world. Among other things, they serve to clarify what income is taxable and therefore affect whether or not you can take a tax credit, tax exemption, or qualify for a reduced tax rate.

The U.K./U.S. tax treaty is no different, and offers benefits for dual citizens as well as U.S. citizens who are currently living in the U.K. In fact, it covers more than other treaties. Take your retirement investments, for example. The current treaty states that money you put in your U.K. pension scheme can be deducted from your U.S. income, too—just like a domestic IRA or 401(k) contribution. Not all U.S. expats around the globe get that additional advantage.

This pension provision of the tax treaty doesn’t apply to all your U.K. investments, however. For example, some U.S./U.K. dual citizens have invested in an Individual Savings Account (ISA). These types of investments are not tax-free in the U.S., regardless what assets they hold.

The Foreign Earned Income Exclusion for U.S./U.K. dual citizens

The Foreign Earned Income Exclusion (FEIE) is the most commonly used tool to lower U.S./U.K. dual citizen taxes. What it does is exclude your foreign earned income on your tax return, therefore lowering (or completely eliminating) your U.S. tax obligation. If you qualify, you’re able to exclude up to $120,000 of foreign earned income in 2023. You qualify if you live and work outside the U.S. and pass either the Bona Fide Residency test or the Physical Presence Test.

For example, say you’re a dual citizen who was born in the U.S., now lives and works in London, and has a total U.K. income of $105,000. You would be able to exclude all that income from your U.S. taxes, lowing your U.S. tax obligation to $0.

The Foreign Tax Credit for U.S. citizens living in the U.K.

Another important tool for lowering your U.S. tax obligation is the Foreign Tax Credit (FTC). The FTC gives you a dollar-for-dollar credit on taxes already paid to the British version of the IRS, Her Majesty’s Revenue and Customs (HMRC). Because U.K. taxes are generally higher than U.S. taxes, we recommend you explore this option when doing your U.S. taxes.

3. If you were born in the U.S. or have a U.S. parent, you may be an Accidental American and have U.S. tax obligations

In some cases, Brits will find out that they’re “Accidental Americans.” These dual citizens aren’t aware they have a U.S. tax obligation because they’ve lived and worked in the U.K. their entire lives. They may have been born in the U.S. while their U.K. parents were employed there, or they may have one U.S. parent. It’s important to understand that if you were born in the U.S. or have a U.S. parent, you may be considered a dual citizen of the U.K. and U.S.

Boris Johnson is one example out of thousands of Accidental Americans. Johnson was born in New York while his parents were working there and moved back to the U.K. when he was five years old. He didn’t know he had a tax obligation until many years later, when the IRS requested that he pay a capital gains tax on the profit of selling his North London home.

To avoid a similar situation, make sure you’re either caught up on your U.S. taxes or verify you don’t have a tax obligation. If you find out you do in fact have a tax liability and you haven’t been paying, you’re in luck. Which brings us to…

4. U.S./U.K. dual citizens can catch up on U.S. taxes with Offshore Streamlined Compliance Procedures

If you’ve never filed U.S. taxes while living in the U.K. and just found out you need to, don’t panic. While getting caught up on U.S. taxes can seem daunting, there’s good news: The IRS is pretty understanding when it comes to not filing because you honestly didn’t know you had to, and they have a program to help you get caught up—Streamlined Foreign Offshore Procedures.

Streamlined Foreign Offshore Procedures helps U.S. dual citizens in the U.K. (as well as elsewhere in the world) get compliant with prior year filings while helping reduce penalties. To qualify, you must:

• Have lived in a foreign country for at least 330 days during one of the last three years and not maintained a U.S. abode.
• Confirm that your failure to file U.S. tax returns and FBAR was due to an honest misunderstanding of your responsibilities.

5. You may have financial reporting obligations in addition to filing U.S./U.K. dual citizen taxes

As a U.S. dual citizen in the U.K., filing your U.S. taxes may not be the end of your paperwork—if you have a U.K. bank account, you may also have to file your Foreign Bank Account Report (FBAR) and FATCA Form 8938.

The U.S. enacted the Foreign Account Tax Compliance Act (FATCA) to increase transparency of U.S. citizens with foreign bank accounts, and your FBAR serves a similar purpose. One difference between the two is you submit Form 8938 to the IRS while you submit your FBAR with FinCEN, the U.S. Treasury Department’s Financial Crimes and Enforcement Network.

If you’re confused about your FBAR and FATCA filing requirements, it’s best to leave your tax filing to the experts at H&R Block.

Need U.S. tax advice for U.K. residents? Trust the dual citizenship tax experts at H&R Block Expat Tax Services

Paying taxes in one country is enough to give anyone a headache, and it only gets more complicated for dual citizens. That’s why it’s crucial you leave your U.S. expat taxes to seasoned pros who will dig into your specific tax situation to find the most beneficial filing options. No matter how complicated your dual citizenship taxes are, there’s an expert Tax Advisor waiting to help. Start your U.S. taxes today!

The post 5 Things to Know About U.S./U.K. Dual Citizenship Taxes appeared first on H&R Block®.

If that makes you worry, you can relax—we’re here to help you out. Below, we’ve highlighted some things you should know to stay compliant and have a smoother tax season.

What U.S. citizens with U.K. pensions should know about taxes

It’s common for U.S. expats working in the U.K. to hold a British pension plan—most U.K. employers have them, and some are even required to offer them. While U.K. pension schemes are tax-favored in the U.K., they don’t necessarily qualify for the same U.S. tax treatment as U.S. retirement plans do.

The U.S. has tax treaties with a number of countries that clarify rules about taxation, and—luckily for U.S. citizens with U.K. pensions—the U.S./U.K. tax treaty extensively covers U.K. pension schemes. This is unique to the U.S. and U.K.—most other tax treaties don’t explicitly cover foreign pension taxation in such detail.

The U.S./U.K. tax treaty & pensions

Thanks to the U.S./U.K. tax treaty, U.S. citizens with U.K. pensions can deduct contributions from income to their U.K. pension just like they could for an American 401(k) or similar retirement vehicles. However, you must reside within the U.K. to get this preferential treatment—the minute you move back to the U.S. you’re taxed on your U.K. pension contributions just like you would be for any other nonqualified plan.

For 2023, you may be able to deduct or exclude up to $66,000 ($73,500 if age 50 or older) of contributions to a qualified UK pension scheme for U.S. tax purposes. This can overcome the problems that often arise when U.S. taxpayers participate in foreign pension arrangements and end up being double taxed because of the timing of the tax event in each country.

Can I get the 25% U.K. pension tax free lump sum as a U.S. citizen?

One perk of U.K. pensions is the 25% tax-free lump sum allowance. Her Majesty’s Revenue & Customs (HMRC)—the U.K.’s version of the IRS—allows residents to withdraw up to 25% of your pension tax-free, with the remaining 75% treated as income. However, this U.K. pension benefit is a one-way street – in the U.S. the lump-sum amount will be taxed as regular income.

How to report a U.K. pension on a U.S. tax return

You’ll have to report your U.K. pension on your U.S. tax return, but it can get complicated because of the tax treaty benefits. Not only will you have to include distributions on your 1040, but you may also have to file Form 8833 along with other financial reports like FBAR and FATCA. If you’re a U.S. citizen with a foreign pension, it’s best to let a seasoned tax pro (like the ones at H&R Block’s Expat Tax Services) handle your taxes for you.

Are you a U.S. citizen with a U.K. pension? H&R Block is here to help with your expat taxes

As a U.S. expat with a U.K. pension, getting your U.S. taxes done right can seem like an uphill battle. Don’t worry, though! We’ve got a tax solution for you—whether you want to be in the driver’s seat with our DIY online expat tax service designed for U.S. citizens abroad or want to let one of our experienced tax advisors take the wheel. Head on over to our Ways to File page to choose your journey and get started.

The post U.K. Pensions for U.S. Expats appeared first on H&R Block®.

But there’s good news! the IRS Streamlined Filing Compliance Procedures are there to help you get caught up — penalty free (as long as you qualify).

If you’re an American living abroad and haven’t filed your annual U.S. income tax returns for several years — or maybe ever — since moving abroad, H&R Block Expat Tax Services can help. Understanding filing requirements in the U.S. and your host country can be overwhelming, but we’ll get you back on track.

What to do if you’re a U.S. citizen abroad and have never filed U.S. taxes while overseas

It’s common for U.S. expats to think they only have to file taxes for the country they live in now, causing them to accidentally overlook their U.S. tax obligations. In the face of honest mistakes, the IRS has historically shown lenience. However, you could face serious penalties for things like failure to file your foreign bank account reports (FBAR).

If you’re a U.S. citizen abroad and have never filed taxes while you’ve lived overseas, don’t panic — we’re here to help you through your options. You’ll have to get caught up on your U.S. expat taxes, and you’ll also have to get caught up on your FBAR.

You can do this with the IRS’ Streamlined Filing Compliance Procedures and Delinquent FBAR and Information Report Procedures. It can be a bit confusing, so if you’re unsure about your responsibilities or how to file, let us do the heavy lifting for you with our Expat Tax Preparation Services.

Catch up on past taxes with Streamlined Foreign Offshore Procedures

Offshore Streamlined Filing Compliance Procedures are an option for U.S. taxpayers abroad who need to get caught up on expat taxes. The program supplemented the now-defunct Offshore Voluntary Disclosure Program and helps U.S. expats who were unaware of their obligations catch up with prior year filings while minimizing penalties.

To qualify for the Offshore Streamlined Filing Compliance Procedures, you must:

1. Have lived in a foreign country for at least 330 days during one of the last three years and not maintained a U.S. abode.
2. Confirm that your failure to file U.S. tax returns and FBAR was due to an honest misunderstanding of your responsibilities.

If you do qualify for Streamlined Filing Compliance Procedures, you will need to:

1. File income tax returns for the prior three delinquent tax years.
2. File an FBAR (FinCEN Form 114) for the prior six tax years.
3. Complete a statement of explanation detailing why your tax returns and FBAR weren’t filed.
4. Pay the tax and interest due for the last three years.

If you don’t qualify for Streamlined Filing Compliance Procedures:

Don’t qualify for streamlined filing? You still have options to try and get caught up with minimal penalties:

• IRS-Criminal Investigation Voluntary Disclosure Program
• Delinquent international information return submission procedures

If it sounds like a little too much for you, we’re here to take over. Simply create an account and upload your documents to your tax portal. Our seasoned Tax Advisors will look over your documents and help you with next steps.

Avoid FBAR penalties with Delinquent FBAR and Information Report Procedures

Not only do you have to file U.S. taxes each year, but you may also have to report money in foreign banks with a Foreign Bank Account Report (FBAR). The actual form you’d file is FinCEN Form 114, and you’ll have to file it if the combined balance of all your foreign accounts totals more than $10,000 at any point during the calendar year.

If you’ve been filing your tax returns annually and reporting your income but were unaware of your foreign bank account reporting requirements and the associated FBAR penalties, or other informational reports, you might be able to claim amnesty with a different procedure.

Delinquent FBAR or International Information Return Procedures allow you to file and amend your FBAR and return to include omitted information. A detailed explanation is required with each report to make sure your failure to file was an honest mistake.

Need help with Streamlined Filing Procedures or a delinquent FBAR? Start now with H&R Block’s Expat Tax Prep Services

If you’re a U.S. taxpayer, and you honestly made the mistake of not fulfilling your U.S. tax and FBAR duties, H&R Block U.S. Expat Tax Services can help. While your process does require a few more steps, we’ll help you tackle them all. Want help? Get started now and we’ll take over from there.

Warning! The programs listed above are for U.S. taxpayers who have honestly overlooked their past U.S. tax responsibilities. Severe civil and criminal disciplinary action and penalties, such as FBAR penalties, can be assessed against taxpayers who have willfully avoided U.S. tax. H&R Block does not provide legal services. If you are concerned that your failure to file was willful, consult an attorney.

The post The Basics of Streamlined Filing Compliance Procedures and Delinquent FBAR Penalties appeared first on H&R Block®.

However, if you’re living abroad, the rules for expat tax filing and deadlines are a little different.

Expat tax deadlines for 2024

Typically, expat tax deadlines are consistent each year, with the exception of 2020 and the Coronavirus extensions. Review coronavirus (COVID-19) tax impacts for U.S. expats living abroad.

The U.S. reports on a calendar-year basis, meaning you’re taxed on income on a January 1 – December 31 basis. Your expat tax deadlines are as follows:

Do I have to pay U.S. taxes if I live abroad?

Expats are required to file U.S. tax returns each year, but sometimes tax benefits (like the Foreign Earned Income Exclusion and Foreign Tax Credit) available to them result in no U.S. taxes owed. However, if any of the following situations apply to you, it’s possible that you may still owe U.S. taxes.

• You live and work in a country with lower tax rates than the U.S.
• You’re not taxed on your foreign investments, or
• You still receive income from U.S. sources

Estimated tax payment deadlines for U.S. citizens overseas

If you’re living outside the U.S. and usually owe U.S. taxes, you may need to make quarterly estimated tax payments to the IRS. An expat tax expert can help you figure those quarterly payments so you can avoid end-of-year penalties.

Quarterly Income and Expat Self Employment Tax Deadlines

Tax extensions for expats

Your U.S. tax information is still reported on a calendar-year basis even if you are living in a country that taxes on a fiscal year rather than a calendar year basis (the United Kingdom and Australia, for example).

If you’re worried about getting your taxes done by the deadline, requesting an extension can give you more time to gather information before the end of the tax year of the country where you live. H&R Block’s Expat Tax Services is here to help you with tax extensions — simply choose to file with an Expat Tax Advisor and they’ll handle your paperwork for you.

FBAR filing deadline

The FBAR filing deadline is the due date of your income tax return, though FinCEN has provided a regulatory extension to October 15th for most filers.

Visit the FBAR overview page to learn more.

Get your expat taxes done on time with H&R Block’s Expat Tax Services

No matter if you’re early, on-time, or behind, we’ve got a tax solution for you — whether you want to be in the driver’s seat with our DIY online expat tax service designed for U.S. citizens abroad or prefer to let one of our experienced tax advisors take the wheel.

Ready to get the tax season over with? Start the process with virtual Expat Tax Preparation from H&R Block today!

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