# Joint income tax for American/British couple?



## MRSSMITH (Jul 27, 2012)

Hi. I'm an American citizen - been living in the UK for the last year whilst doing an MA programme. I'm getting married to a UK citizen in a couple of months, and plan to stay in the UK indefinitely. I don't plan on renouncing my US citizenship...

My question is about taxes:: I'm currently working as a contractor for a US company. They don't have a branch in the UK so I'm under the impression that they will be mailing me checks when I submit fee statements. Then I am to pay taxes myself as a contractor to the UK? I read that there is an exclusion act that if I pay taxes in the UK, I still have to file US taxes but won't have to pay extra taxes most likely. - but _I have to exclude myself from social security in the US via a social security website?_ _Also, when I file both sets of taxes, do my partner and I then file a joint income tax statement to the US or the UK? Or does he only file in the UK and I file in the US & UK separately? As an independent contractor, I will also be working for clients who live in the UK. Do I include both sets of income on both statements? _

Sorry so many confusing questions but this process is baffling. Thanks a lot! Mrs. Smith


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## Bevdeforges (Nov 16, 2007)

OK, these things get confusing when you're dealing with cross-pond finances.

First of all, as an American citizen you will ALWAYS file US income taxes just like you always have. You declare all your worldwide income to the IRS each year. For "earned income" (i.e. salary and salary-like payments) made while you are resident in the UK (or anywhere else outside the US - with a few exceptions), you will file a form 2555 (or 2555-EZ) to exclude your foreign earned income up to the current limit - now about $92K.

For all other income (interest, investments, rental income, etc.), you must declare it to the US and if you have paid taxes on it in the UK, you can then take a foreign tax credit on your US return for what you have paid on that "unearned" income. 

So, technically, you don't get taxed twice on the same income - but things get tricky as you have investments and other forms of "unearned income."

You will file your US returns as "married, filing single" unless your husband has a US tax obligation for some reason (which does not appear to be the case). 

I don't know that much about UK taxation, but basically if you are working while resident in the UK, you're subject to UK taxation and social insurances. You may need to register your contracting activity in some manner in order to sign up for the UK social insurance payments and pay the appropriate UK taxes. (Someone with more knowledge about UK tax laws needs to chime in here.) But as long as you are properly registered and paying your UK social security (i.e. national insurance) contributions, then you're off the hook for US Social Security.

For more information about the US filing requirements for citizens living overseas, download Publication 54 from the IRS website.
Cheers,
Bev


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## nikkisizer (Aug 20, 2011)

Bevdeforges said:


> I don't know that much about UK taxation, but basically if you are working while resident in the UK, you're subject to UK taxation and social insurances. You may need to register your contracting activity in some manner in order to sign up for the UK social insurance payments and pay the appropriate UK taxes. (Someone with more knowledge about UK tax laws needs to chime in here.) But as long as you are properly registered and paying your UK social security (i.e. national insurance) contributions, then you're off the hook for US Social Security.


Hi MRSSMITH,

From the UK taxation side of things, as you are not an Employee working for a Company under the UK PAYE (Pay As You Earn) scheme you will be classed as self employed.

You need to register your self employment income for self assessment with HMRC and you will be given a UTR (Unique Tax Reference) number which will then create a record in their system for you and you will be issued with a notice to complete a tax return each tax year where you will declare your income/expenditure and then pay any tax that is due on any profits.

When you register for self assessment the National Insurance office will be aware also and will invoice you for any contributions that need to be made.

The deadline to file your tax return online is 31.01.13 for the tax year ended 05.04.12 or 31.10.12 if you wish to submit your tax return by post.

Whatever you do do not miss your deadline as the new penalty system in place is now very harsh!


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## robnw (Jul 18, 2012)

There's possibly a tax planning opportunity to discuss with a UK 'chartered tax adviser' (tax specialist). If you have duties outside the UK as part of your contract, you might produce two sets of accounts to show income less expenses earned in the UK, and those outside the UK. If you're resident but not ordinarily resident, your UK tax liabilities may be calculated only on your UK earnings. 
As Bev says above, you'll still pay US tax on everything, but since the UK tax bill is often higher, you should end up paying less globally - and you'll have to number-crunch to see if that works for you.
As a separate planning point (see a qualified UK/US 'certified financial planner'), it's usually worthwhile to maximise the eventual pension income from both (basic) Soc Sec systems (because they're both cheap to buy for what they give) and the above suggestion may give you a means to do that. The four together (two countries, husband, wife) are (currently) worth £750k in capital equivalent.


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