Paying your tax early to avoid potential double taxation
As an American living in the UK, you are subject to two tax systems with differing deadlines and tax periods. To avoid a potential mis match in tax credits, you could consider making early UK tax payments.
Why is a pre-payment required?
US taxpayers may need to claim Foreign Tax Credits to reduce a US tax liability on income and capital gains.
The amount of foreign tax credits available in a US tax year is usually the amount of foreign taxes actually paid to tax authorities in the same year.
As a general guideline, you should aim to settle the balance for your 24/25 UK tax return by 31st December 2025. However, in certain cases, an additional payment may be required as an advance on UK taxes for income earned and gains realised in 2025.
Example
- The HM Revenue & Customs (HMRC) tax payment deadline for the current 2025-26 UK tax year is not until 31st January 2027.
- If you have made a large gain before the end of December 2025, this will not be subject to UK tax until 31st January 2027, but the US require you to have paid the taxes in the calendar year to get the credit – before 31st December 2025.
- If the taxes are not paid by 31st December 2025, no credit will be allowable for these taxes and there is a risk of double taxation.
What do I need to do?
Given that many people have realised capital gains prior to year end, this becomes even more important.
Therefore, we recommend speaking to your tax advisors as soon as possible to calculate if any early payments are required.
Please note that there are exceptions, but if you have made significant gains in the year, we urge you to speak to your tax advisors before the end of the calendar year.
How to calculate and organise payments
To calculate whether a payment is needed, you should share details of all income and capital gains from 1st January 2025 – to date with your US tax accountant.
To organise the payment with HMRC, you should liaise with your UK accountant to make sure it is accounted for properly. The timing and reference attached to this can be important to ensure you are not refunded the early payment.
You may use one accountancy firm to handle both US/UK tax filings and they should be able to assist with both estimating and paying the tax.
How we can help
If you are a client of W1M, we will be able to help with the following:
- We can share with you or your accountant directly all year-to-date US/UK reporting information including all 2025 income and gains.
- Once the UK tax payment amount is known, we can also assist with how best to make this payment should you need to make it from your portfolio.
If you do require additional information, please reach out to us before 6th December 2025 so our team can help and allows sufficient time for your tax advisors to calculate any tax due and to ensure you can make any required payments in good time.
This material is provided for informational purposes only and does not constitute tax, legal or financial advice and should not be relied upon as such. W1M and our affiliates do not provide legal or tax advice. Investors should consult their financial and tax advisors to assess the tax implications of any investment. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
The views expressed reflect current market conditions and are subject to change without notice. Any references to taxation are based on current understanding and may change.
This material is provided for informational purposes only and does not constitute investment advice or a recommendation. It should not be considered an offer to buy or sell any financial instrument or security.
Any investment should be made based on a full understanding of the relevant documentation, including a private placement memorandum or offering documents where applicable.
