IRS. HMRC. 1040. SA100. Tax return. Self Assessment. National Insurance… When moving to the UK, it can be difficult to comprehend both the US and UK tax systems; what is different, what is similar, what you need to do to be compliant – and most importantly, how to coordinate your tax affairs to avoid double taxation. Here we have given a brief overview of the equivalent aspects of the two systems. (This chart is neither exhaustive or comprehensive and is for information purposes only; many exceptions, conditions and nuances apply. Figures accurate for US Tax Year (TY) 2025 and UK TY 2024/25).
IRS – First things first: the tax system in the US is managed by the Internal Revenue Service. Unfortunately, there is no longer an IRS office based at the London embassy, but there is a dedicated international taxpayers’ office in Philadelphia that you can speak to.
Income tax – In the US, income tax is payable on income exceeding your itemized or standard deduction ($13,850 for Single/Married Filing Separately taxpayers). There are many items which can be included in the itemized deduction, including mortgage interest, state taxes, charitable contributions etc., which allows the taxpayer to reduce their taxable income (although for TY 2018 to 2025 the suspension of the ability to deduct “miscellaneous” itemized deductions means claiming the standard deduction will in many cases be more advantageous).
Federal marginal tax rates start at 10%, then 12%, 22%, 24%, 32%, 35% and finally (!) up to 37% for single taxpayers with income exceeding $609,350. There are multiple filing statuses (Single, Married Filing Separately, Married Filing Jointly, Head of Household, among others) and each has its own thresholds for each tax rate.
Long-term capital gains and “qualified” dividends are taxed at 0%, 15% and 20% depending on the level of other income.
Those living in the US (and sometimes abroad) may also incur state or city taxes. And let’s not forget the Alternative Minimum Tax, too!
Social Security / Medicare – As well as federal income tax, Social Security and Medicare tax is also levied on wages and paid by both the employee and employer. These total to 15.3% plus an additional 0.9% for high earners.
Form 1040 – The federal tax return is called the Form 1040. Along with it, many taxpayers file additional Schedules including B (interest and dividends), C (self employment), D (capital gains) and E (rents and royalties). All single earners with gross income over $13,850 must file a tax return ($27,700 for married couples filing jointly and only $5 for married couples filing separate tax returns).
Dec 31st and Apr 15th – Everyone in the US knows April 15th… it’s the Federal tax return filing deadline! The tax year is the same as the calendar year, with the tax return (and tax itself) due on April 15th of the following year. An extension to file the return until October 15th is available by filing Form 4868; and taxpayers abroad are automatically granted an extension to June 15th.
Note: there is never an extension of time to pay tax; all tax is due on April 15th and interest and penalties may accrue if not paid by this date.
Property taxes – In the US, several authorities have the power to levy a tax on properties within their jurisdiction; it is a tax on the ownership of the property. The taxing authority is generally the city but can also be the state, county, school district and others.
Schedule C / C Corp / S Corp / LLC – Self-employed individuals in the US who have not incorporated into a legal entity report their earnings and expenses on Schedule C which is attached to their 1040. They usually also file Schedule SE to calculate their self-employment taxes. If you are residing and working in the UK, your income is excluded from self-employment tax under the US/UK Social Security Agreement.
If you choose to incorporate your business it becomes a C Corp, or you can elect to be an S Corp. These have similar legal structures but vary with regards to taxation.
An S Corp election turns the company into a “flow through” entity whereby the income flows to the shareholders and is taxed at the individual level.
An LLC (limited liability company) is similar to an S Corp with respect to taxation but differs legally.
Whatever the entity, the incorporation is done with the state authority rather than a federal one.
HMRC – In the UK,
His Majesty’s Revenue and Customs
is responsible for the collection and enforcement of taxation.
Income tax – Most of the UK tax-paying population enjoy the standard “personal allowance” of £12,570, above which they pay tax at the 20%, 40% and 45% rates.
The UK does not allow the myriad deductions that are permitted in the US, although charitable donations made via the Gift Aid scheme provide tax relief for higher and additional rate taxpayers.
Taxpayers in the UK always file individually, though relief can be claimed for certain married taxpayers.
There are no state or city income taxes in the UK.
National Insurance – Also referred to as NICs, the UK has a similar system of employee and employer Social Security taxes which they call National Insurance Contributions. It’s fairly complicated.
SA100 – This is what they call the personal income tax return in the UK.
Apr 5th and Jan 31st – The financial year end in the UK is April 5th.
Needless to say, the different US and UK financial years makes it very complicated when it comes to coordinating your tax returns. You should make sure that any UK tax you owe is paid in the same calendar year so you can apply it to your US taxes. See Your US Tax Liability details.
Council tax – The UK also has a system of property-based taxation to fund local governments.
SA103 / Limited Company / LLP – As in the US, self-employed individuals who are not incorporated
declare their earnings and expenses on their personal tax return.
US taxpayers should be aware that shareholders of closely-held foreign corporations are obligated to file
Form 5471.
A Limited Liability Partnership (LLP) is treated as flow-through in the UK.
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