Comprehensive Tax Guide for UK Actors Living in the US:

Filing, Deductions, and Recent Changes

Taxes for UK actors residing and working in the US can be intricate. Understanding tax obligations is crucial to avoid unexpected tax bills and penalties. This article provides a detailed overview of US and UK tax obligations, relevant tax treaties, FTC, and other international considerations for UK actors.

Our Expertise

Bambridge Accountants specializes in international tax services for actors, creatives, and UK citizens worldwide. We offer expert guidance tailored to your unique needs, ensuring you can focus on your acting career while we handle the complexities of tax compliance.

Understanding Employment Status and Tax Options for UK Actors in the US

Your employment status directly impacts your tax obligations, liability, and entitlements when working internationally.

Employment Categories

Registration and Compliance

Registering as self-employed is often one of the first steps an actor will take when they start earning income or land a new role.

Self-Employment Registration

In the US, you must obtain an Employer Identification Number (EIN) and register for relevant state and local taxes. The process involves applying for an EIN through the IRS website. In the UK, you need to register with HM Revenue and Customs (HMRC) and consider setting up a limited company for potential tax benefits.

Required Documentation When Filing Your Taxes

Below are some of the documents that may be required when you are filing your taxes:

• Income Documents: Pay stubs, wage and tax statements, dividend statements, interest statements, rental income records.

• Self-Employment and Business Income: Invoices, receipts, business bank statements, profit and loss statements.

• Investment and Savings: Investment statements, interest earned statements, and capital gains reports.

• Expenses and Deductions: Medical and dental receipts, mortgage interest statements, property tax records, and charitable donation receipts.

• Travel and Relocation: Travel dates records, travel expenses receipts, relocation expenses.

• Bank Statements: Monthly statements for all accounts, and foreign bank account reports (FBAR).

• Property and Assets: Property purchase and sale records, rental income and expenses, and depreciation records.

Claimable Expenses

Understanding deductible expenses can help optimise tax filings with both the IRS and HMRC.

Common Deductible Expenses for Actors

Travel and Accommodation

In the US, expenses like flights and hotels for film shoots are deductible if work-related. In the UK, travel for auditions or filming is allowable if incurred wholly, exclusively, and necessarily for work. For instance, if you travel from New York to Los Angeles for a film shoot, both your travel and accommodation costs can be claimed.

Professional Training and Education

Courses and workshops that improve acting skills are deductible in the US, such as acting classes. In the UK, professional development courses related to acting can be claimed. An example is attending an advanced acting workshop in New York to refine your skills.

Costumes and Props

In the US, expenses for costumes and props used specifically for performances are deductible. Similarly, in the UK, costumes and props used exclusively for performances can be claimed. For example, if you purchase a unique costume for a period drama role, these expenses are deductible.

Agent and Manager Fees

Fees paid to agents or managers for their services are deductible in the US, such as a commission for booking jobs. In the UK, necessary fees for professional representation can be claimed. For instance, if your agent takes a 10% commission on your earnings for securing a role, this amount is deductible.

Home Office Expenses

In the US, part of your home used exclusively for business purposes is deductible. File Form 8829 to claim these expenses. In the UK, similar claims can be made if part of the home is used for business, such as a dedicated rehearsal space or office.

International Income Reporting

UK citizens must report all income from all sources worldwide, including wages, dividends, rental income, and other earnings. Common forms in the US include Form 1040 with attachments like Schedule B and D, FBAR, and Form 8938 (FATCA). In the UK, a self-assessment form may be required if you have worked self-employed. Consulting an international tax accountant to identify exact forms and filing requirements is advisable.

Double Tax Treaties

The double tax treaty helps prevent paying tax twice and provides guidelines on how income earned in one country is taxed by both that country and the taxpayer's home country. The US-UK tax treaty outlines taxing rights based on residency and domicile status and specifies rules for different types of income. It offers exemptions or reduced rates on certain incomes and allows for tax credits to prevent double taxation.

Methods to Prevent Double Taxation

Foreign Tax Credit (FTC)

Claim a credit for income taxes paid to a foreign country. File Form 1116 to calculate and claim the credit. For example, if you pay US taxes on your acting income, you can claim a credit for these taxes on your UK return.

Foreign Earned Income Exclusion (FEIE)

Exclude a certain amount of foreign earned income from US taxable income by filing Form 2555. The 2023 exclusion amount is $112,000. For instance, if you earn $120,000 from acting in the US, you can exclude up to $112,000 from your US taxable income, significantly reducing your US tax liability.

Housing Exclusion/Deduction

Exclude or deduct certain foreign housing costs if qualifying for the FEIE. File Form 2555 to claim these benefits. For example, if you rent an apartment in New York while working on a film, a portion of your rent and related expenses may be excluded from your US taxable income.

Remittance Basis

The remittance basis allows non-domiciled individuals to pay UK tax only on income remitted to the UK. This can be particularly beneficial for UK expats, including actors, who earn income from various sources worldwide.

If you are considered non-domiciled and intend to stay in the US temporarily, you can benefit from the remittance basis. This means you only pay UK tax on UK-source income and any foreign income remitted to the UK. For example, if you earn $50,000 from a US project and keep it in a US bank account, it won't be subject to UK tax unless you transfer it to a UK account. However, be mindful that after 7 years of residence in the US, a Remittance Basis Charge (RBC) applies.

IR35 Considerations for UK Actors

IR35 is a UK tax legislation designed to combat tax avoidance by workers supplying their services to clients via an intermediary, such as a personal service company, but who would be considered employees if directly engaged? For UK actors working in the US:

Determining IR35 Status

The status depends on the nature of the contract and the degree of control, substitution, and mutuality of obligation in the working relationship. If you are deemed inside IR35, your income will be subject to PAYE (Pay As You Earn) and National Insurance contributions.

Implications of IR35

If you are inside IR35, your client or agency will deduct income tax and National Insurance contributions before paying you. This reduces take-home pay but ensures compliance with UK tax laws. Actors must ensure their contracts and working arrangements are reviewed to determine IR35 status accurately.

UK Treatment of Income Earned While Living Abroad

UK tax rules apply to UK residents earning income abroad. As a UK citizen living in the US, you must consider how the UK treats foreign income.

Reporting Foreign Income

If you remain a UK resident, you must report worldwide income, including US earnings, on your UK tax return. Double taxation relief may be available through tax treaties and claiming Foreign Tax Credit (FTC).

Remittance Basis for Non-Domiciled Individuals

As a non-domiciled individual, you may opt to be taxed on a remittance basis. This means only UK-source income and foreign income remitted to the UK are taxable. This can be advantageous for UK expats with substantial foreign income that is not brought into the UK.

Pension and Retirement Planning

Understanding pension options and the impact of the US-UK tax treaty is crucial for effective retirement planning.

Pension Options

In the US, you have options like Traditional IRA, Roth IRA, and 401(k). In the UK, you can contribute to Self-Invested Personal Pensions (SIPPs), employer-sponsored pensions, and the State Pension.

US-UK Tax Treaty

The US-UK tax treaty prevents double taxation on pension income. It allows for foreign tax credits or exclusions for taxes paid on pension income. For example, if you contribute to a US pension scheme, the treaty can help you avoid being taxed on the same income in both countries.

Sales Tax and Other Local Taxes for UK Expat Actors in the US

Sales Tax (US)

Sales tax in the US is a state-level tax on goods and certain services, varying by state. If you provide services like performances, workshops, or merchandise sales, you may be subject to sales tax depending on the state. For instance, if you sell DVDs of your performances, you may need to collect sales tax from customers and remit it to the state.

To set up sales tax collection, register for a sales tax permit in each state where you conduct business. Maintain detailed records and adhere to the state's filing frequency requirements (monthly, quarterly, or annually).

Other Local Taxes (US)

In addition to state sales tax, some cities and counties impose additional local taxes on services and goods. These taxes can vary significantly by jurisdiction, affecting your overall tax liability. For example, New York City imposes a local income tax in addition to state and federal taxes. Register with local tax authorities if required and ensure timely payment and filing to avoid penalties.

UK VAT (Value Added Tax)

VAT is a consumption tax on goods and services in the UK. If your taxable turnover exceeds £85,000 in a 12-month period, you must register for VAT. Acting services, performance fees, and workshops can be subject to VAT. For instance, if you earn over the threshold from acting gigs, you need to register with HMRC and include your VAT number on invoices.

Issue VAT-compliant invoices, maintain detailed records of all sales, purchases, and VAT charged and paid. File VAT returns quarterly and pay any VAT due to HMRC.

State-Level Tax Considerations for Actors in New York and Los Angeles

New York Tax Considerations for Actors

New York State and New York City have specific tax regulations that affect actors:

State Income Tax

New York State has a progressive income tax rate ranging from 4% to 8.82%. Actors must file a New York State income tax return (Form IT-201) if they earn income while living or working in New York.

New York City Tax

New York City imposes its own local income tax, which is also progressive and ranges from 3.078% to 3.876%. This tax applies to city residents and non-residents who earn income in the city.

Tax Incentives

New York offers various tax incentives to encourage film and television production in the state. The New York State Film Production Credit provides a credit of up to 30% of qualified production costs. To qualify, productions must meet specific criteria and apply for the credit through the Governor’s Office of Motion Picture and Television Development.

Los Angeles Tax Considerations for Actors

California has its own set of tax regulations and incentives for actors:

State Income Tax

California's state income tax is also progressive, with rates ranging from 1% to 13.3%, the highest marginal tax rate in the US. Actors must file a California state income tax return (Form 540) if they earn income while living or working in California.

Tax Incentives

California offers significant tax incentives to attract film and television productions. The California Film & Television Tax Credit Program provides a credit of up to 25% of qualified expenditures for eligible productions. Actors working on qualifying productions can benefit indirectly through increased employment opportunities and potentially higher pay due to the tax savings for production companies.

Marital Status and Tax Impact for UK Actors Working in the US

IRS Considerations (US)

Your marital status affects your tax brackets and rates. Filing statuses include Single, Married Filing Jointly, Married Filing Separately, and Head of Household.

Marital status also impacts deductions and credits such as the Standard Deduction, Child Tax Credit, and Earned Income Tax Credit (EITC). For instance, married couples filing jointly often benefit from wider tax brackets and higher deductions compared to single filers.

If you are claiming the Foreign Earned Income Exclusion (FEIE), your marital status affects how much you can exclude. Both spouses can claim the exclusion if they both have foreign earned income and meet the requirements. Use Form 2555 to claim the exclusion.

HMRC Considerations (UK)

In the UK, tax codes vary based on marital status. Single individuals typically use the standard tax code, while married couples can benefit from the Marriage Allowance. This allows one spouse to transfer part of their personal allowance to the other, reducing the overall tax bill. For example, if one spouse earns less than the personal allowance, they can transfer up to 10% of this allowance to their partner, provided the higher-earning spouse is a basic rate taxpayer.

Joint income and expenses must be split equally between spouses for tax purposes unless a different ownership ratio is proven. For example, if you and your spouse own a rental property, rental income and expenses must be reported according to your ownership share.

Budgeting with Pre-Payments

US: Estimated Quarterly Taxes (Form 1040-ES)

Payments made four times a year on income not subject to withholding help avoid penalties and manage cash flow. Use Form 1040-ES to estimate total income, deductions, and credits. Payments are typically due on April 15, June 15, September 15, and January 15 of the following year.

For instance, if you estimate your annual income and deductions, you can divide the estimated tax liability into four equal payments. This ensures you stay compliant and avoid a large tax bill at the end of the year.

UK: Payments on Account

Advance payments to HMRC  for the current year’s tax liability are required if your last tax bill was over £1,000 and less than 80% of tax was collected at source. Payments are due on January 31 and July 31, with a balancing payment due on January 31 of the following year. Payments are automatically calculated based on the previous year’s tax bill.

For example, if your last tax bill was £2,000, you would make two payments of £1,000 each in January and July. If your actual tax liability for the year is higher, you would make a balancing payment the following January.

For More Support

For tailored support, contact Bambridge Accountants to consult with our team of international tax professionals. We help you navigate the complexities of international taxation and ensure compliance, allowing you to focus on your acting career.