Taxation from the Other Side of the Pond


Alexander Boris de Pfeffel Johnson was educated at Eton and Oxford. He began his career as a reporter, columnist, and editor for The Times, the Daily Telegraph, and the Spectator. He then turned his sights towards politics, serving as Member of Parliament for the constituency of Henley and rising to Shadow Minister for Higher Education. He's served as Mayor since 2008, and there's even talk of him succeeding Prime Minister David Cameron as head of the Conservative Party.  

So why on earth would Johnson attract attention from tax authorities on our side of the pond? Well, he was born in New York City, when his English father was studying on a Harkness Fellowship, and lived there until age 5. This means he holds dual American and United Kingdom citizenship. And that, in turn, makes him subject to U.S. tax on all his worldwide income, wherever earned.  

Back in 1999, Johnson and his wife paid £470,000 for a house on Furlong Road in the London suburb of Islington. (That's about $750,000 at today's exchange rate.) Since then, London real estate prices have shot through the roof, and in 2009, they sold the house for a £730,000 profit. Her Majesty's Revenue and Customs doesn't tax home sale gains, but the IRS taxes anything above a $500,000 allowance. The bottom line on Johnson's gain is a six-figure tax bill in either currency.  

Naturally, Johnson is unamused. An NPR correspondent recently asked him point-blank if he would pay, and he literally sputtered: "No, is the answer. I think, it's absolutely outrageous. Why should I? I think, you know, I'm not a — I, you know, I haven't lived in the United States for, you know, well, since I was 5 years old."  

That may not be the only tax issue lurking in Johnson's past. He earns £144,000 per year as Mayor, plus another £250,000 as columnist for the Telegraph. Theoretically, he should be paying U.S. tax on everything above a "foreign earned income exclusion" of about £62,000. No word yet on whether he's been paying all these years, or whether the IRS wants to confront that sticky wicket.