UK tax planning for US taxpayers: How to maximise cash flow

18 November 2024 / Insight posted in Articles

UK tax planning for US taxpayers can be an effective way to manage financial obligations and reduce overall tax liability. Considering UK tax payments as part of a broader US tax strategy is beneficial but can be overlooked. For US citizens and residents who have tax responsibilities in both countries, adjusting the timing of UK tax payments can be worthwhile.

The benefit of timing in UK tax planning for US taxpayers

For US taxpayers with UK obligations, the timing of UK tax payments can influence cash flow. While the UK’s tax balancing payment deadline is 31 January, paying by 31 December can provide an advantage. This acceleration can allow US taxpayers to claim the tax credit on that year’s US tax return, offering financial relief sooner than waiting a month to make payment. For example, a UK tax payment made in December 2024 can be applied to the 2024 US tax return for a ‘paid’ basis taxpayer, while a payment made in January 2025 would be part of the 2025 return.

Choosing between the ‘accrued’ and ‘paid’ basis for US tax reporting

US taxpayers can elect out of the default ‘paid’ basis and instead choose the ‘accrued’ basis when reporting non-US tax payments. This decision, once made, is permanent and can affect future flexibility. The ‘accrued’ basis may align tax reporting across jurisdictions but requires careful consideration to ensure it supports the overall tax strategy.

Points to consider when accelerating UK tax payments

Accelerating UK tax payments has potential benefits but also requires thoughtful planning. Early payments can impact cash reserves and liquidity, and unforeseen financial obligations or changes in tax regulations could affect this decision. US taxpayers should assess whether early payments align with their financial position and cash flow needs.

How Moore Kingston Smith can help

Moore Kingston Smith can guide US taxpayers on whether accelerating UK tax payments is suitable for their situation. Our team helps ensure your tax strategy aligns with both US and UK filing requirements. For personalised advice on your US tax return or questions about UK tax payments, please get in touch with us.

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