Many of us will want to put 2020 behind us but before we do, there is some tax year end planning for US taxpayers in the UK to consider before 31^st December. Here is our checklist:

1. Review your capital gains

Both the UK and the USA have indicated possible plans around changes to their capital gains tax regimes (which can be read as increases). Therefore, 2020 brings an additional emphasis on the need to review your capital gains position and consider any action which can be taken to optimise your position. Potential action might include:

1. Balance gains with losses to reduce the overall net gain; and
2. Consider triggering additional gains now before tax rates rise.

Remember, capital gains are calculated in USD for IRS reporting but in GBP for HMRC, so bear that in mind when reviewing your position.

2. Foreign tax credits

To avoid double taxation in the US and UK, tax paid in one jurisdiction can be offset against the other.  However, be mindful of the different types of tax credits and timings issues. Points to consider when assessing this:

1. Do you have enough of the right tax credits to optimise your position?
2. Do you need to accelerate your UK tax payment from January to December?
3. Should you make UK pension contributions to ‘use up’ excess US credits?

3. Gifts and Donations

Gifts and charitable donations allow an opportunity to support individuals and/or organisations you care about, and also form part of your tax planning. An additional consideration for this year is that some believe the current $11.58 million estate tax threshold in America could well be reviewed in 2021. Therefore:

1. If you are considering whether to make gifts, review your allowances to decide if it is preferable to complete them before or after 31^st
2. If making charitable donations, consider making them to dual-qualifying (UK and American) charities or funds to maximise the benefit from tax reliefs.

These are just some of the areas to think about and discuss with your advisers. Partners Wealth Management has extensive expertise in working with US taxpayer’s resident in the UK. We would be pleased to assist you with your financial planning and investments, and work alongside your chosen tax adviser to optimise your planning.

 

Nathan Prior
Partner, Head of PWM International
nprior@partnerswealthmanagement.co.uk
020 7444 4053

 

 

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