Taxes

As I get ready to file my American taxes (yes I still have to) I realized that many of you might not know how different it is here in the UK.

First off, if you are an American abroad, you must file your taxes every year as if you were in the US but you get a two month extension on the filing but if you owe money, you need pay by the April 15. I am not going to pretend that I am an expert at filing because I am not. I just cross my fingers and toes and everything else hoping it goes smoothly. I will not pay someone to do it because I owe nothing. If you earn below the allowed threshold, you do not have to pay anything as long as you are paying taxes in the country that you are living in. BTW the United States is one of the only countries that require this of their expats. It has become even more increasingly difficult because of recent form that you need to fill in if you have money stored overseas.

Here is a good list of FAQs, remember that the foreign earned income filing usually only applies to expats not military stationed overseas.

So how is it done in the UK?

Well, the average Joe that works for a company does not file their taxes. There are tax codes that say how much the threshold you have before you have to pay taxes. Only the self-employed and higher tax earners have to file every year by the end of the tax year (30 January). This to me makes sense only because it reduces the amount of paperwork that is dealt with.

The threshold has just been raise to £10,000 before you have to pay taxes and then the basic rate of tax after that its 20% for the rest. There are no deductions like in the US for donating to charity and going to school. Instead some items that are bought like books for school are tax-free.

Also because we pay council tax monthly, that replaces the state tax that Americans would pay.

So really if you work for someone else, tax wise you have it much easier except if you are an American. Now I know Americans that have become British citizens and renounced their American citizenship because of dealing with taxes. Most of these people probably own their own companies and have to pay taxes to both places. It has not come to that for me yet but I thought I would share.