Prepare the UK figures first, even if the US return is the one filed first. For most Americans resident in the UK, the UK has the first right to tax salary, rent and most other income, and the US return then claims a foreign tax credit (opens the official IRS page in a new tab) for that UK tax. The order of preparation and the order of filing are separate questions, and only the first has a fixed answer.
This post is for US citizens and green card holders who file in both countries and want to know what to do in which month. It goes further than the sequencing section of our guide to US and UK tax returns for Americans in the UK: how the mismatched tax years force the order, when to extend the US return, where US-source income turns the sequence round, and what to do when a figure changes after filing.
Which return do you prepare first, the US or the UK?
The UK computation comes first for income the UK taxes first, which for a UK resident is most of it. The US return needs the UK tax on each category of income before its credit can be worked out. For US-source income the order reverses, because the UK return needs the US tax.
Each return borrows a number from the other. Form 1116 asks for the foreign tax paid or accrued on each category of income, so the US return cannot be finished until the UK liability has been computed and divided between salary, investment income and the rest. The UK return, for its part, gives Foreign Tax Credit Relief (opens the official GOV.UK page in a new tab) for US tax on income the United States is entitled to tax first, and that figure comes from the US computation.
Preparing is not the same as filing. A return can be computed in full and held back until the other catches up, and a return can be filed first although it was worked out second. What causes errors is filing one return on an estimate of the other and never going back to it. We prepare both from one set of records through our cross-border tax service, so the borrowed figures are the same on both sides.
Why do the two tax years make the order matter?
The US taxes the calendar year and the UK taxes the year from 6 April to 5 April. One US return therefore draws on parts of two UK tax years, and the later of those UK years is still running on 31 December. Its return is not due for more than a year after that.
Take the US return for one calendar year. January to early April belongs to a UK tax year that ended that spring, whose online return is due by 31 January of the following year. The rest of the calendar year belongs to the next UK tax year. For an employee, PAYE settles most of the tax as it is earned, so the figures exist. For someone with rent, self-employment or investment income, the UK liability for the second part of the year may not have been computed by anyone when the US return first falls due.
How much this matters depends on whether you credit UK tax when it is paid or when it accrues, a choice explained in Publication 514 (opens the official IRS page in a new tab) and in our post on which year to credit UK tax. On the paid basis, PAYE deducted and Self Assessment payments made in the calendar year are counted, and the dates are known. On the accrual basis, the tax for the UK year that ended within the calendar year is counted, which needs that UK year's computation to be complete.
- UK tax deducted under PAYE in the calendar year, taken from payslips
- Self Assessment payments made in the year, with the date of each
- The UK computation for the tax year that ended on 5 April
- A split of the UK tax between salary, investments and other income
What if the US deadline arrives before the UK figures are final?
The US calendar has room built in. A filer living abroad has until 15 June without asking, and Form 4868 moves the date to 15 October. Extending is usually better than filing on estimated UK figures, although an extension gives more time to file and no more time to pay.
The automatic two-month extension (opens the official IRS page in a new tab) applies to US citizens and residents whose home and main place of work are outside the United States, and a statement is attached to the return to claim it. Form 4868 then extends the date to 15 October. A further extension to 15 December is discretionary and is requested by letter. Interest on any US tax runs from 15 April throughout, so where US tax is expected, a payment by that date limits the cost.
For most people who are fully taxed in the UK, the credit leaves little or no US tax on UK income, and the extension costs nothing. The UK side has less room. The online Self Assessment return and the balancing payment are due by 31 January, with a second payment on account by 31 July, and a late return draws an initial penalty of £100. Our post setting out US and UK tax deadlines in one calendar lists every date.
When does US-source income reverse the order?
Where the United States has the first right to tax, the US figure is computed first and the UK return credits it. That covers rent from US property and, up to the treaty rate, dividends from US companies. The UK credit is capped at what the treaty lets the United States charge a UK resident.
Take a US citizen employed in Manchester who also lets a flat in Chicago. Her salary is taxed first in the UK, so her UK computation feeds the US credit in the general category. The Chicago rent is taxed first in the United States, so the US tax on that rent, worked out on the US return, feeds the foreign pages of her UK return. Neither return can be completed alone. We compute the UK position on the salary, then the US return in full, then go back and enter the final US tax on the rent in the UK return before it is filed.
Dividends from US shares add a further step. The UK credits US tax only up to the treaty rate of 15%, and the United States then credits the remaining UK tax under the treaty's relief article, which is covered in our guide to avoiding US-UK double taxation. The practical point for sequencing is that this income needs both computations open at once. The UK side is reported on the SA106 foreign pages (opens the official HMRC page in a new tab) of the SA100 return.
What if a figure changes after you have filed?
Both systems expect corrections. If UK tax that was claimed as a US credit later turns out to be different, the IRS must generally be told on an amended return. If the US tax credited on the UK return changes, the UK return is amended within the period HMRC allows.
A change in foreign tax after the credit has been claimed is called a foreign tax redetermination. It arises when accrued UK tax differs from the amount finally paid, when HMRC refunds tax, or when a UK enquiry adds to it. Where the change alters the US liability, Publication 514 says the taxpayer must generally file Form 1040-X with a revised Form 1116 and a statement. A UK refund is the case most often missed, because it arrives long after the US return went in.
On the UK side, a Self Assessment return can be corrected (opens the official GOV.UK page in a new tab) for a limited period after the filing deadline, and after that a claim has to be made in writing. On the US side, a refund claim is generally open for three years from filing or two years from payment, whichever is later. A changed figure is therefore rarely urgent, but it does have to be dealt with. An estimate that was reasonable when it was made causes no difficulty. An estimate that was never replaced with the real number does.
What does a workable order look like across the year?
A workable order starts with one set of records, fixes the UK liability, builds the US return on it, then returns to the UK return with the final US figures. The account reports come last, from the same list of accounts. The sequence below suits an employee with some investment or rental income.
The FBAR is separate from both returns. It is due on 15 April, extended automatically to 15 October and is filed with FinCEN, as set out in its guidance on reporting foreign accounts (opens the official FinCEN page in a new tab). Someone on PAYE with no other income may not need a UK return at all, a question covered in our post on Self Assessment for Americans on PAYE. In that case the payslips supply the UK figures and the US return can be filed earlier.
The sequence shortens a good deal once both returns are prepared from the same file, which is the purpose of our individual tax return preparation and UK Self Assessment services. For the wider picture of who files what, return to the guide to US and UK tax returns for Americans in the UK.
- Spring: collect calendar-year records and the pay documents for the UK year ended 5 April
- By 15 April: pay any US tax expected and decide whether to extend
- Early summer: compute the UK liability for the year ended 5 April
- Summer: prepare Form 1040 and its credit forms, filing by 15 June or on extension
- Autumn: file the FBAR by its extended date, from the same list of accounts
- Before 31 January: finalise the UK return with the US tax on US-source income
General information, not advice. The right answer depends on your circumstances and the tax year concerned.
