US Tax Accountant London: What to Look For and What to Ask

US tax accountant London: an introduction

A US tax accountant London residents hire prepares the US federal return and its foreign forms for Americans living in the capital. The best ones also prepare the UK return, or at least work from the same figures. That matters because the United States taxes its citizens wherever they live, while HMRC taxes UK residents on their worldwide income. Consequently, every American in London sits inside two tax systems at once.

This article explains what the work involves, the questions to ask before you hire anyone, and what to send at the start. Our full guide to US and UK tax returns prepared together sets out how the two returns fit, year by year.

Why your US tax accountant London choice matters

Most Americans in London earn a UK salary taxed through PAYE. Many assume the US side is a formality. However, the US return decides how much UK tax you can credit, and the UK return decides how much US tax HMRC will relieve. Therefore, a preparer who sees only one side works with half the facts. In our experience, most cross-border errors start at that gap rather than with any single form.

What a cross-border accountant is

A cross-border accountant is a preparer who works on the tax rules of two countries for the same person. For Americans in London, that means the Internal Revenue Code on one side and UK income tax law on the other. The two systems use different tax years, different currencies and different ideas of what counts as taxable. As a result, the job is mostly about making the two sets of figures agree.

What does a US tax accountant in London prepare?

The core of the work is your Form 1040 and the international forms that sit around it. A good preparer also files your foreign account reports and checks whether any state still treats you as a resident. Each item has its own rules, so the scope should be agreed at the start.

The federal return and its credits

US citizens and green card holders file a federal return every year if their worldwide income reaches the filing threshold for their status. The IRS confirms this on its page for US citizens and resident aliens abroad. Most Londoners then claim the foreign tax credit on Form 1116 for UK tax paid. Alternatively, some claim the foreign earned income exclusion on Form 2555. Because UK rates usually exceed US rates, the credit often works better. Nevertheless, the right answer depends on your figures, so we model both ways.

Foreign account and asset reports

The FBAR is a report of foreign bank and financial accounts filed with FinCEN, not the IRS. You must file it if your foreign accounts together exceeded $10,000 at any time in the calendar year, according to the IRS page on the Report of Foreign Bank and Financial Accounts. Separately, Form 8938 reports specified foreign financial assets with your tax return. For a single filer living abroad, it applies above $200,000 at year end or $300,000 at any time. The IRS sets out both tests in its comparison of Form 8938 and FBAR requirements.

Forms for funds, companies and trusts

Several other forms catch Americans in London by surprise. For example, a UK unit trust or ETF held outside a pension is usually a passive foreign investment company. That means an annual Form 8621 for each fund. Similarly, a US person who controls a UK limited company files Form 5471. Furthermore, certain foreign trust and gift matters need Form 3520. A US tax accountant London clients rely on will ask about each of these, not wait for you to mention them.

State returns after a move to London

Leaving the United States does not always end a state filing duty. Some states look at the ties you keep, such as a home, a driving licence or a family address. California, for example, publishes its own guidance on residency status. Consequently, a US tax accountant London clients rely on should ask where you lived before the move and what you kept there. If a state still claims you, it may not give credit for UK tax in the way the federal return does. Therefore, the state question belongs at the start of the work, not after the federal return is filed.

Why should the UK return come from the same file?

The UK return and the US return report the same income, so one cannot be right unless the other agrees. Credits flow in both directions, and each depends on figures from the other return. Therefore, preparing both from one file removes a whole class of mismatch.

Two tax years that never line up

The US tax year is the calendar year. In contrast, the UK tax year runs from 6 April to 5 April. Consequently, a single bonus, dividend or share sale can fall into different years on each return. Your US tax accountant London team has to split income between UK years and then map UK tax back to the US year. HMRC explains its own deadlines on the page for Self Assessment deadlines.

Credits flow in both directions

Under the treaty, the United States gives credit for UK income tax on UK income. Meanwhile, the UK gives credit for US tax on US-source income, limited to what the treaty allows. HMRC describes its side in its guidance on income that is taxed twice. For example, US tax on most dividends paid to a UK resident is limited to 15% under Article 10 of the US-UK income tax treaty. Hence, the UK credit is rarely the figure printed on a US form.

Currency conversion

Every UK figure on the US return must be shown in dollars. The IRS publishes yearly average currency exchange rates that many preparers use for income. However, sales of property and shares often need the rate on each transaction date. Additionally, the UK return needs US income in pounds. Using one consistent method on both sides keeps the credits clean.

What questions should you ask a US tax accountant in London?

Ask how they handle the UK side, which forms they routinely prepare, and how they manage the deadlines. The answers tell you whether you are buying one return or a joined-up service. Here are the questions we would ask in your position.

Do you prepare both returns, or only one?

Some US preparers send the UK return elsewhere. Others prepare it themselves. Either can work, but someone must own the reconciliation. If two firms are involved, ask who checks that the UK tax figure on Form 1116 matches the UK return. Without a clear answer, the gap tends to fall on you. Ideally, your US tax accountant London adviser prepares both or works from the final UK computation.

How do you treat ISAs, pensions and UK funds?

These three items cause most surprises for Americans in Britain. An ISA is tax-free in the UK, but US law contains no matching exemption, so its income is reported in the United States. Workplace pensions get relief under Article 18 of the treaty in the right conditions. Meanwhile, UK funds usually fall into the PFIC rules described in the Form 8621 instructions. A good answer explains each treatment without hesitation.

How do you handle the deadlines?

Americans abroad get an automatic extension to file until 15 June, and Form 4868 extends that to 15 October. A further discretionary extension to 15 December is available by letter, as explained in IRS Publication 54. Interest, however, runs from 15 April on any tax unpaid. In contrast, the UK online return and payment are due by 31 January after the tax year. Therefore, ask how the preparer sequences the two, because the UK figures are needed for the US return long before HMRC's deadline.

Are you registered with the IRS?

Anyone paid to prepare a federal return must hold a Preparer Tax Identification Number. The IRS explains what to check on its page about choosing a tax professional. Furthermore, the preparer should sign the return and give you a copy before it is filed.

Will you explain the result before you file?

You should see a draft of each return, with a short note on what changed from last year. A US tax accountant London clients trust will explain why a credit or an exclusion was chosen. Moreover, they will flag any figure that depends on a judgement, such as a currency rate or a residence date. Ask for this at the outset. A preparer who files without a review step leaves you signing a return you have not understood.

What should you send before the first meeting?

Send last year's US and UK returns, your UK payslips or P60, and a list of every account you hold outside the United States. With those, a preparer can see the shape of your affairs in one sitting. The rest can follow once the scope is agreed.

The documents that matter most

Your previous returns show which elections and credits are already in place. Your P60 is the UK end-of-year certificate that shows salary and tax deducted through PAYE. Bank and brokerage statements give the maximum balances the FBAR needs. In addition, any share plan statements from a US employer show grants, vesting dates and sales. Finally, note any move between the two countries, because the arrival year changes the residence position on both sides.

An illustrative example

Consider a typical case. Daniel is a US citizen who moved to London three years ago for a banking job. His salary is taxed through PAYE. He also holds a stocks and shares ISA, a workplace pension and a US brokerage account. He has filed a US return each year using an online tool, but has never filed an FBAR or a UK return.

Here, the US tax accountant London firm he chooses would start with the FBAR, since his UK accounts clearly exceed the threshold. Next, the ISA funds would be checked for PFIC status. Then the US dividends would be tested for a UK filing duty. Consequently, Daniel moves from one partial return to a complete pair that agree with each other.

What if you are already behind with US filings?

If you have missed US returns or FBARs, the usual route for non-wilful cases is the Streamlined Foreign Offshore Procedures. Under them, you file three years of returns and six years of FBARs, with a certification of non-wilful conduct. The IRS sets out the terms for US taxpayers residing outside the United States.

Why the order of work matters

The catch-up returns must be accurate, because they become your history. Therefore, a US tax accountant London clients bring a backlog to should settle the UK position for the same years first. Our guide to IRS Streamlined Filing from the UK explains the steps and the certification in detail.

How US UK Tax Experts can help

We act as the US tax accountant London clients need when both returns matter. We prepare the US and UK returns from one file, so the credits on each side agree. First, we review your last returns and list every form that applies. Next, we work out the UK position for the relevant tax years and convert each figure. We then prepare the Form 1040, the FBAR and any information returns. In addition, we explain the result in plain terms before anything is filed.

Our US federal return service covers the Form 1040 and its schedules. Our UK Self Assessment service covers the HMRC side. Furthermore, our FBAR and FATCA service covers your account reports.

Conclusion

In summary, a US tax accountant London residents choose should prepare more than a Form 1040. The work covers credits, account reports, fund forms and a UK return that agrees with the US one. Therefore, ask who owns the reconciliation, how ISAs and funds are treated, and how the deadlines are sequenced. Ultimately, the right adviser makes two returns behave like one.

Contact us

Are you looking for a US tax accountant in London who prepares both returns together? Email us at hello@usuktaxexperts.com, or send a short description of your situation through our contact page. We reply within one working day with the filings that apply to you and the dates that matter.