If you are a U.S. citizen or resident alien living or traveling outside the United States, you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States. Your income, filing status, and age generally determine whether you must file a return. Generally, you must file a return if your gross income from worldwide sources is at least the amount shown for your filing status in the Filing Requirements table in Chapter 1 of Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad (available at www.irs.gov). The IRS web site has a wealth of information available for the overseas taxpayer. Follow the ‘Individuals’ and ‘International Taxpayers’ links, or search for IRS Publication 54.
U.S. Tax Information
Internal Revenue Service
P.O. Box 920
Bensalem, PA 19020
(215) 516-2000 (not toll-free)
Phone service available from 6:00 am to 11:00 pm (EST) M-F
After you have arrived in Scotland you will need to apply for a National Insurance (NI) number. An NI number must be provided to your employer as soon as possible after you start work. The NI number is used as a reference number for your UK tax and national insurance. To obtain a national insurance number, contact the National Insurance Contribution Office closest to you and make an appointment for an interview. It will usually take about 8-10 weeks from making your appointment until you are provided with a national insurance number. At your interview with the contributions agency, obtain a form CF197 as proof of your request for a national insurance number. Give this to your employer as proof that you are seeking to provide them with a national insurance number. To apply for a national Insurance number, you generally need:
- Evidence of employment (e.g. employment contract or payslips)
- Letter to confirm your new home address
When living and working in Scotland, you will pay income tax on what you earn at the same rate as a UK national. You will be treated as a UK resident for tax purposes if:
You are in the United Kingdom for 183 days or more in the tax year, or
You visit the United Kingdom regularly and your visits average 91 days or more a tax year over a period not exceeding 4 years, or
You come to the UK for a purpose that will mean you are in the UK for at least two years.
When you arrive in the UK you should contact the nearest HM Revenue and Customs office. If you are employed, income tax is deducted directly from your salary through the Pay As You Earn (PAYE) scheme. HM Revenue & Customs (HMRC) gives you a ‘tax code’, which you’ll see on your pay stub. Your employer uses your tax code to work out how much Income Tax to take off your wages through the PAYE system. At the end of each tax year your employer will give you a form – your P60 – showing your total gross pay for the year and how much tax you’ve paid. All EU countries have arrangements so that you are not taxed twice on the same income.
Not all income is taxable, and you are only taxed on ‘taxable income’ above a certain level. Even then, there are other reliefs and allowances that can reduce your Income Tax bill – and in some cases mean you have no tax to pay. Taxable income includes:
-earnings from employment
-earnings from self-employment
-most pensions income (State, company and personal pensions)
-interest on most savings
-income from shares (dividends)
-income paid to you from a trust
There are certain sorts of income that are non-taxable. These include certain benefits, special pensions and income from tax exempt accounts. These are ignored altogether when working out how much Income Tax you may need to pay. Everyone who is resident in the UK for tax purposes has a ‘personal allowance’, which is an amount of taxable income you are allowed to earn or receive each year tax-free. This tax year (2006-2007), the basic personal allowance – or tax-free amount – is £5,035. You may be entitled to a higher personal allowance if you are 65 or over. If you’re due to pay Income Tax, there are a number of deductible allowances and reliefs that can reduce your tax bill.
Rates and Allowances – Income Tax
|Income tax allowances||2006-07 (£)||2007-08 (£)|
|Personal allowance for people aged 65-74||7,280||7,550|
|Personal allowance for people aged 75 and over||7,420||7,690|
|Income limit for age-related allowances||20,100||20,900|
|Married couple’s allowance * (aged less than 75 are born before 6th April 1935)||6,065||6,285|
|Married couple’s allowance – aged 75 and over||6,135||6,365|
|Minimum amount of married couple’s allowance||2,350||2,440|
|Blind person’s allowance||1,660||1,730|
|Taxable Bands Allowances||2005-06 (£)||2006-07 (£)|
|Starting rate 10%||0 – 2,090||0 – 2,150|
|Basic rate 22%||2,091 – 32,400||2,151 – 33,300|
|Higher rate 40%||over 32,400||over 33,300|
The tax band applies to your income after tax allowances and any reliefs have been taken into account; you’re not taxed on all of your income. ‘Earned income’ includes income from employment or self-employment, most pension income and rental income. ‘Dividends’ means income from shares in UK companies. Savings and dividend income is added to your other taxable income and taxed last. This means you pay tax on these sorts of income based on your highest Income Tax band.
The tax year runs from April 6 to April 5.
HM Revenue & Customs – www.hmrc.gov.uk