US UK Accountants: What Goes Wrong When Two Firms Split Your Returns

US UK accountants: an introduction

When you hire US UK accountants, the real question is whether one file drives both returns. If a US firm prepares your Form 1040 and a separate UK firm prepares your Self Assessment, each relies on figures the other has not seen. Consequently, the same pound of tax can be credited twice, or not at all. This article shows where split returns break, with a worked example and a handover routine for people who keep two firms.

For the wider picture of filing in both countries, read our guide to US and UK tax returns. It explains every return an American in Britain can face each year.

Why US UK accountants talk about one file

A shared file is a single set of working papers that feeds both returns. It holds every income figure in pounds and dollars, the exchange rates used and the tax paid in each country. Both returns are then built from it, so they cannot disagree. In our experience, most errors in cross-border returns start where two sets of papers meet.

Why do two separate returns drift apart?

They drift because the two countries count different periods, in different currencies, and each return depends on the tax shown on the other. Small differences then compound year after year.

Two tax years that never line up

The UK tax year runs from 6 April to 5 April. The US tax year for individuals is the calendar year. Therefore, one UK return covers parts of two US years. A UK preparer works from a P60 that ends in April. Meanwhile, a US preparer needs income to 31 December. If neither splits the figures, the same bonus can land in the wrong US year.

The credit runs in both directions

The foreign tax credit is a dollar-for-dollar reduction in US tax for income tax paid abroad. IRS guidance on the foreign tax credit says you claim it on Form 1116 for foreign taxes imposed on you. The UK gives a similar relief, called Foreign Tax Credit Relief, for US tax on US income. GOV.UK explains it on its page about being taxed twice. Each relief depends on a figure from the other return.

Currency conversions that differ

The IRS page on yearly average currency exchange rates says the IRS has no official rate. It accepts any posted rate used consistently. As a result, two firms may convert the same salary at different rates. Neither is wrong on its own. Together, however, they leave gaps that are hard to explain later.

Where do split returns usually go wrong?

Most problems sit in five places: double-counted credits, missed credits, income reported in only one country, timing of payments and treaty positions taken on one side only.

Credits counted twice

This is the costliest error. A US firm claims a credit for UK tax on, say, US dividends. A UK firm also claims relief for US tax on the same dividends. Under the US-UK income tax treaty, Article 24 decides which country gives the credit for each type of income. Only one should. When both do, one tax office is owed money, often with interest.

Credits left unclaimed

The opposite also happens. Each firm assumes the other country will give relief, so neither claims it. You then pay tax twice on the same income. Furthermore, unused US credits can often be carried. Under section 904(c) of the tax code, excess foreign tax goes back one year and forward up to ten. A firm that never sees your UK return cannot track that carryover.

Income reported in only one country

Some income is visible to only one preparer. For example, a UK firm may never hear about US municipal bond interest, which is free of US federal tax but taxable in the UK. Likewise, a US firm may miss cash ISA interest, because it needs no UK return entry. The GOV.UK page on Individual Savings Accounts confirms ISAs are free of UK tax. The US does not follow that rule.

Payments made on different dates

Credits can depend on when tax is paid. IRS Publication 514 says cash-method filers generally claim the credit in the year they pay the tax. However, you can elect to claim it when the tax accrues instead, and the choice then binds later years. UK tax for one year is often settled the following January. If your US firm does not know that, the credit lands in the wrong year.

Treaty positions taken on one side only

Some reliefs exist only because of the treaty. For example, Article 18 lets a US citizen working in the UK deduct contributions to a UK workplace pension on the US return, within limits. A US firm may claim that relief without checking the UK figures it depends on. Many treaty positions also need disclosure on Form 8833. If the UK firm reports the pension one way and the US firm another, the two returns tell different stories. Therefore, every treaty claim should be checked against the UK return it relies on.

Corrections that never reach the other side

Returns change after filing. HMRC may adjust a figure, or you may amend a return yourself. GOV.UK says you can correct a Self Assessment return within 12 months of the deadline. However, a UK correction changes the UK tax available as a US credit. If your US firm never hears about it, your US return is now wrong too. Consequently, US UK accountants working from one file update both sides together.

A worked example: one credit claimed twice

Consider a typical case. Hannah is a US citizen living in Bristol. She earns a UK salary and receives $6,000 of dividends a year from US shares held in a US brokerage account. A US firm prepares her Form 1040 and a UK firm prepares her Self Assessment. This is an illustrative example, not a real client.

What each firm did

The US firm reports the dividends and the US tax on them, which was small after her UK credits on salary. The UK firm reports the dividends on her foreign pages. It then claims Foreign Tax Credit Relief for the US tax shown on her Form 1040. In fact, much of that US tax arose only because Hannah is a US citizen. Article 24(6) of the treaty limits the UK credit to the US tax a UK resident who is not a citizen would pay. Hannah's UK credit was therefore too high.

How it came to light

Two years later, HMRC opened an enquiry into the foreign pages. Hannah needed to show how the US tax was worked out, and neither firm held both sets of figures. The answer took weeks to rebuild. In contrast, one file would have shown the treaty source rules and the correct credit from the start. That is the case for US UK accountants preparing both returns together.

What Hannah's case shows

Neither firm was careless on its own terms. Each applied its own country's rules correctly. The error lived in the gap between them, which is why a cross-border review matters even when both preparers are competent.

If you keep two firms, how do you keep them in step?

You can keep two firms if you run a fixed handover each year. The UK return should usually be finished first, because its tax figure feeds the US credit.

Step one: agree who owns the reconciliation

Name one firm as the owner of the cross-border reconciliation. That firm reviews both drafts before either is filed. It checks every credit against the treaty source rules. Without a named owner, each firm reasonably assumes the other checked.

Step two: share a single income schedule

Build one schedule of income by source, in pounds and dollars, split by month. Give both firms the same version. Additionally, record the exchange rate used for each line. The schedule should show which country taxes each item first under the treaty.

Step three: file in the right order

The GOV.UK page on Self Assessment deadlines sets 31 January 2027 for online returns for the 2025 to 2026 tax year. On the US side, the IRS allows an automatic two-month extension to 15 June for people living abroad. Further time to 15 October is available through the six-month extension. Consequently, many split cases file the UK return early, then finish the US return.

Step four: compare the final figures

Before filing, compare the UK tax used as a US credit with the tax on your UK calculation. Then compare the US tax used as a UK credit with your Form 1040. If the figures do not match, ask why in writing. Keep the answers with your records.

When does one file matter most?

It matters most when your income crosses the border in more than one way, or when your circumstances change in the year.

Moving between the two countries

In the year you arrive or leave, both countries may tax part of the year. The UK has split-year rules, and the US taxes you all year as a citizen. Therefore, income must be allocated by date in both returns. Two firms working from different dates often allocate the same income twice.

Share plans and bonuses

Restricted stock units, options and deferred bonuses are often earned over several years. Each country sources them by working days. Our article on RSU tax in the US and UK shows how the split works. Both returns need the same day count, or the credits will not reconcile.

Funds, pensions and property

UK funds often bring US PFIC reporting on Form 8621. Pensions raise treaty questions, and property sales are taxed differently in each country. Each item needs one consistent treatment across both returns. Our treaty relief service covers the credit side of these cases.

What should you ask US UK accountants before hiring?

Ask who prepares each return, who reconciles them, and how they handle the different tax years. The answers tell you whether both returns come from one file.

Questions about process

Ask whether the UK return is finished before the US return. Ask which exchange rates the firm uses and why. Ask how it records carryovers of unused credits. Good US UK accountants answer these without hesitation, because they follow the same routine every year.

Questions about registration

Anyone paid to prepare US returns needs a Preparer Tax Identification Number. The IRS page on choosing a tax professional explains what to check. On the UK side, ask how the firm files with HMRC and who signs off the return.

Questions about past years

If earlier returns were split between firms, ask whether the new firm will review the last few years. Errors in credits often repeat, so one year's mistake may appear in several. If past US returns are missing altogether, our guide to IRS Streamlined filing explains the usual route back.

How US UK Tax Experts can help

US UK Tax Experts prepares your US and UK returns together, from one file, so the credits on each side agree. We prepare the Form 1040, Form 1116, the FBAR and your Self Assessment, with one income schedule behind them. If you prefer to keep your current UK firm, we can prepare the US side and share the reconciliation with them. Our US federal returns service sets out what is included.

Conclusion

Split returns fail in the gap between two correct sets of rules. The UK and US years differ, currencies differ and each credit depends on the other return. Therefore, the safest approach is one file and one reconciliation. If you keep two firms, name an owner for the reconciliation, share one income schedule and file the UK return first. Working with US UK accountants who own both sides removes most of the risk.

Contact us

If you would like US UK accountants to review or prepare your returns, email hello@usuktaxexperts.com or use our contact form. Tell us who prepares each return now and which years you want checked. We reply within one working day.