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Where Taxpayers and Advisers Meet

UK income tax on US rental income

Posts: 3
Joined: Wed Jan 31, 2018 1:00 pm

UK income tax on US rental income

Postby chris_harvey » Wed Jan 31, 2018 1:09 pm

My UK accountant just filed my return today and I have a multi-thousand pound tax bill due to the rental income received in the US. To explain a bit more, a couple of years ago we moved back from the US to the UK. I'm dual national and we still own a house so we have to file US taxes. In the 2016 US taxes our rental income minus exemptions meant we went negative and had a $0 tax bill (yay). Our assessed tax rate was still 32% but it was wiped out by the deductions. That was the good part.

In the UK, our accountant said that since we physically PAID no tax in the US, the full amount of income (after deductions allowed by the UK) was taxable at UK rates of 40%.

I understand that since we physically paid no tax in the US there's an argument to say we ought to pay tax somewhere, i.e. the UK. But another side of me says we were assessed the tax, but our deductions outweighed the income. So shouldn't the tax in the UK be simply the difference between the US assessed rate of 32% and our UK rate (40%)?

I realize this is somewhat of a fine line distinction, and perhaps i'm being greedy. But the result means the difference between a tax bill of a few hundred pounds or thousands, so I thought it worth asking for second opinions.


Posts: 192
Joined: Thu Aug 16, 2012 4:31 pm

Re: UK income tax on US rental income

Postby DavidTreitel » Mon Feb 05, 2018 7:09 pm

Chris - I assume in the UK you are paying tax on the arising basis. In the US you are required to claim a depreciation expense on the building. This is not allowable for UK purposes, so the profit for UK purposes is typically higher. The fall in Sterling after June 2016 would also affect the result by appearing to increase UK tax. Our firm would certainly be delighted to take a look at no charge at US & UK tax returns and reporting prepared by any other adviser to re-assure you that they minimise your risk and look reasonable.

David Treitel | Managing Director | American Tax Returns Ltd
The Old Exchange, 12 Compton Road, London, SW19 7QD

Tel: 020 3542 6330


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Joined: Wed Aug 06, 2008 3:25 pm

Re: UK income tax on US rental income

Postby maths » Tue Feb 06, 2018 6:18 pm

The problem is that for US tax purposes the $ is used whereas for UK tax purposes it's the £.

In addition, as pointed out above, the rules for computing profit in the UK and US are different.

Bit of a pig's breakfast!

Posts: 3
Joined: Wed Jan 31, 2018 1:00 pm

Re: UK income tax on US rental income

Postby chris_harvey » Tue Feb 13, 2018 11:11 am

We can do conversion from $ to £, that's frankly pretty easy.

The fundamental issue is whether tax 'assessed' but subsequently written off as a result of US deductions on the US tax forms, i.e. we had no tax bill in the US, is grounds for paying UK tax on all the income.

Like I said, I can see the logic here, because we didn't pay any tax in the US due to write-offs, but there's a side of me that then says paying tax against all of it in the UK seems extremely unfair.

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