Reporting US income to HMRC and claiming foreign tax credit relief on US income

I am a US citizen living in UK and therefore subject to both US and UK tax. I receive various items of US income such as dividends and IRA distributions. The US tax year is the calendar. Thus, the US tax year 2023, for example, spans the UK tax years 2022-23 and 2023-24. I understand from various posts on this Customer Forum that when reporting my US income for US tax year 2023 to HMRC I do not need to allocate the income proportionally to the UK tax years 2022-23 and 2023-24 but I can use the same income amounts as in my 2023 US tax return (converted to GBP) and report it all in my 2023-24 UK tax return. Is this correct? Please correct me if it is wrong. Assuming that the practice described in the previous paragraph is acceptable, does the same principle apply to a claim for foreign tax credit relief? Specifically, if I receive dividend income of $X in 2023 and am assessed US tax of $Y for that income, can I use these amounts (converted to GBP) in a claim for foreign tax relief included in my 2023-24 UK tax return, instead of allocating them proportionally to my 2022-23 and 2023-24 tax returns?

Hi

You are correct.  For your convenience, you simply take the income arising in the USA calendar year and apply that figure to the UK financial year.  
For example, if you had £20000 income from 1/01/23 to 31/12/23 in the USA  You would declare £20000 in the 2023 to 2024 tax year, as the end date 31/12/23, falls in the tax year ending 5 April 2024.

Thank you

Thank you for this clarification. But what about the supplementary question regarding foreign tax credit relief? If I pay US tax on US income of $20000 received from 1 January 2023 to 31 December 2023 and I wish to declare that income and claim foreign tax credit relief, is that all done in my self-assessment return for 2023-24, regardless of when the US tax is actually paid?

Hi
You can put in an estimate for the tax credit relief if not already paid and then make an amendment once the actual figure is known.

I infer from HMRC Admin 5's post in this string that if I had £1000 US income each month in calendar year 2022 and £2000 US income each month in calendar year 2023, I would declare £12000 foreign income in the 2022-23 UK tax year and £24000 foreign income in the 2023-24 UK tax year. I spoke to an accountant who is dubious about this, so can you refer me to the relevant provision in the self-assessment manuals?

Hi,

As previously stated for convenience of the income and working out the foreign tax credit, you will use the US calander year income to report it in the UK.

Thank you.

Thank you for this advice regarding the way to proceed for US income and foreign tax credit. Not being aware of this advice when I completed my UK self assessment return for 2022-23 I declared the US income that I received during the period 6 April 2022 to 5 April 2023, that is during the entire UK tax year 2022-23. I plan to follow this advice when completing my UK tax return for 2023-24. But what US income should I declare in my UK return for 2023-24? I've already declared my US income for 1 January 2023 to 5 April 2023 in my UK return for 2022-23 and I don't want to declare it again, and be taxed on it again. Can I omit my US income received from 1 January 2023 to 5 April 2023 and provide an explanation?

Hi,

You would be better to amend the 2022 to 2023 return so that the correct details are then showing for all years going forward.

Thank you.

Hello, I have a few clarification that were not answered by this thread: I am also a US citizen living in UK and therefore subject to both US and UK tax. 1) In the approach described above where income from the USA calendar year (eg 2023) is applied to the UK financial year (eg 2023/24), 1a) Does HMRC have a published yearly average exchange rate for sterling/dollars or should US citizens use the IRS published table with average exchange rates? Or should it all be converted from 31 December exchange rates? 1b) For the UK foreign tax relief from US taxes paid, what date should be used for the sterling/dollar conversion? i) It could be the average conversion rate for the US tax year, ii) the date that the transaction happened, or iii) 31 December (the end of the US tax year) or iv) April 16 (the date that the taxes would typically be due) 2) Another method of calculating US foreign income is to identify the US income transactions that were within the UK tax year. These then could be individually converted to sterling using the date-specific sterling/dollar exchange rate. 2a) For the UK foreign tax relief from US taxes paid, what date should be used for the sterling/dollar conversion? i) It could be the average conversion rate for the US tax year, ii) the date that the transaction happened, or iii) 31 December (the end of the US tax year) or iv) April 16 following the US tax year (the date that the taxes would typically be due) v) The tax paid could be proportioned to the individual gains and then converted to sterling date-specific sterling/dollar exchange rate.

Hello, I have another question/example that has not yet been covered. I am also a US citizen living in UK and therefore subject to both US and UK tax. 2023 US tax year, my spouse and I have a combined tax form 1) $26,700 - Capital Gains from selling stocks and shares (joint account) 2) $4,000 - Dividends (joint account) Subtotal $30,700 3) $27,700 - Standard Deductible So $3,000 Taxable income. And $450 in taxes. My questions: 1) For the self-assessment, the foreign income and the foreign tax in the US needs to be allocated 50% to me and my partner. correct? 2) Next, How should the foreign US taxes be input in the self assessment? Does it matter if the tax relief is put entirely into say the dividend tax relief? Thank you!

Hi 
1. Yes you both declare 50/50.
2. Foreign Tax Credit rleief can only be claimed against the source of income that it was paid against and if UK tax is due on the same source:
Relief for foreign tax paid (Self Assessment helpsheet HS263)
Thank you. 

Hi, You mention that US income earned from 01/01/2022 to 31/12/2023 (US Tax Year) can be shown on your 05/04/2024 tax return. Can you choose to include US income up to 05/04/2024 on your 2024 tax return instead? Thank you

Hi,
It is for your convenience that Self Assessment allows the use of the annual figures for a US tax year, as the eqivalent of a UK tax year. This means there is no need to apportion the income. It is your tax return and you are declaring your worldwide income, so if you choose to apportion it to accurately declare the income arising in a UK tax year, that is up to you.
Thank you.

Hi, I am looking into filing my tax for 23/24 on my self assessment as I own UK property which I rent out. I however lived in the US for 1 year and returned at the end of March 2024. I filed US tax jointly with my husband whilst living there for year 2023 Jan-Dec. All my UK income and expenses had to be notified and logged. Following this I was informed that I could claim a international tax credit of £514.32 as I paid this in dollars ($639.77) to US tax. I worked in the US briefly but only earnt £1010 totally. 1) Can I get this credit deducted off my 23/24 tax bill and if so, how? 2) Do I need to log the income of £1010 on my self assessment based on already filing in the US? 3) Can I still file my expenses for 23/24 tax year based on this? Thank you!

Hi Effie Mae,
1) No.  
2) Yes.
3) The only expenses you can claim would be those related to the rental property.
The property being rented out is a UK property and the UK/USA tax treaty, gives the UK the right to tax the income first.  
This income / expenses, should be declared in your self assessment tax return.  
As you were not resident in the UK in 23/24, you will need to complete the residence section of the tax return (don't forget to claim personal allowances).  
If any tax is payable in the UK, you claim a credit for that tax in the USA.
Thank you.