Being self-employed in the UK can be exciting—you get flexibility, control, and access to a dynamic global market. But if you’re also a U.S. citizen or green card holder, you have one extra thing to juggle: your U.S. tax obligations.
Yes, even while living abroad, you’re still required to file U.S. taxes. But don’t worry—this guide breaks down everything you need to know about how to handle your U.S. taxes while running your own business in the UK.
Do U.S. Expats in the UK Need to File Taxes?
Short answer: Yes.
The U.S. is one of the only countries that taxes its citizens based on citizenship rather than residency. That means if you’re a U.S. citizen or green card holder, you’re required to file an annual tax return with the IRS—no matter where you live.
This includes self-employed income, even if it was earned entirely in the UK.
What Self-Employed Income Must Be Reported?
If you’re a freelancer, contractor, consultant, or run your own business in the UK, all income you earn—whether in pounds or dollars—needs to be reported to the IRS.
You’ll report your earnings on Schedule C of your Form 1040 and calculate self-employment tax (for Social Security and Medicare) using Schedule SE.
Threshold: If you earned more than $400 USD (or equivalent) from self-employment during the year, you must file.
Here’s How to Manage Your U.S. Taxes as a Self-Employed Expat
- Keep Accurate Records (in both currencies)
Maintain detailed records of:
- Income (invoices, bank statements)
- Expenses (software, office supplies, travel, etc.)
- Currency conversion rates for GBP to USD
- Know Your Deductions
You’re allowed to deduct business expenses, including:
- Professional fees
- Marketing costs
- Home office expenses
- Internet and phone bills
- Avoid Double Taxation
Here’s where things get helpful:
Foreign Earned Income Exclusion (FEIE)
Use Form 2555 to exclude up to $120,000+ (2024 limit) of foreign-earned income.
Foreign Tax Credit (FTC)
If you pay UK income taxes, you can usually offset your U.S. tax liability by using Form 1116.
In many cases, the UK tax rate is higher than the U.S., so the FTC can eliminate your U.S. tax owed—but you still need to file!
Deadlines & Extensions
- Standard deadline: April 15 (automatically extended to June 15 for expats)
- Extension available: Until October 15 (Form 4868)
- FBAR (Foreign Bank Account Reporting): Due April 15 (with automatic extension to October 15)
What About UK National Insurance?
If you’re self-employed in the UK, you may be paying Class 2 or Class 4 National Insurance contributions. These are separate from U.S. self-employment taxes and do not count toward your U.S. Social Security credits.
Unfortunately, the U.S.-UK Totalization Agreement doesn’t cover self-employed individuals unless specific conditions are met—so you may be double-paying Social Security.
Pro Tip: Consider an Expat Tax Professional
Tax rules for self-employed expats can get tricky fast—especially when juggling deductions, foreign credits, and potential treaties. Working with a tax advisor familiar with both U.S. and UK rules can save you time, money, and stress.
Final Thoughts
Being self-employed in the UK brings a lot of freedom—but don’t forget your IRS obligations. With good recordkeeping, smart use of exclusions and credits, and maybe a little professional help, you can stay compliant and keep your business thriving.
Need help filing your U.S. taxes from the UK?
At RIWA Tax Services, we specialize in helping U.S. expats and self-employed individuals navigate cross-border tax compliance with confidence.
Contact us: +1 (972)-996-6644
Email us : info@theriwa.com Visit our website : https://theriwa.com/
