# US citizen living in the UK working remotely for a US company - tax situation?



## RemoteWorker (3 mo ago)

Hi there,

A bit of a complicated question to do with US/UK remote working and tax.

I’m a US citizen with a two-year UK graduate visa (commenced April 2022).

I’m splitting my time between my family home in the US, and my flat in the UK. I would say around a 70% of my time is in the UK, 30% the US.

A few months ago, I started working for a US company remotely, based from my US address. I carry out my work with them both when I’m in the US and the UK. On the side, I do a little bit of ad-hoc creative work in the UK (a couple hundred pounds a month max). I have a UK National Insurance number.

Doing little bits of work for UK employers, using UK address, (I have a national insurance number).

Based on all of that info, where should I be paying tax? Any advice would be hugely helpful, as I am at a complete loss.

Also, if anyone could recommend a good tax expert / lawyer / accountant who specializes in this kind of situation, I would really appreciate it!

Many thanks,

Paul


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## Bevdeforges (Nov 16, 2007)

As a US citizen, you are always and forever considered "tax resident" in the US, though there are some exemptions and exclusions and credits available to US taxpayers living outside the US. The issue for you is most likely to be whether or not you qualify for such things as the Foreign Earned Income Exclusion or the Foreign Tax Credit, both meant to help you avoid double taxation.

As far as the UK tax authority is concerned, generally as a long-term resident, you are expected to declare and pay taxes on your worldwide income. So basically, you declare all your income no matter where it is earned to both the US and UK tax authorities and then muddle your way through the various adjustments to each side to avoid (or actually to "minimize") the double taxation issue.

For the US tax side of things, take a look at IRS Publication 54 (available on the irs.gov website) and take a look through the US-UK tax treaty for those items that apply to your situation. I'm sure someone here can direct you to the relevant information for the UK side of taxes.


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## Harry Moles (11 mo ago)

Here's the not-very-legal advice...

Are you planning to stay in the UK indefinitely, or leave when your visa runs out?

If the latter, the simplest and possibly cheapest course of action is to pretend that you live in the US for anything to do with dollars, and pretend you live in the UK for anything to do with pounds. You just file a regular old US tax return for US income, and a regular old UK tax return for your UK income, and never tell one about the other. This completely illegal but if it's only for a couple of years you'll almost certainly get away with it.

If you plan to stay in the UK or you are a law-abiding sort, then you'll have some accounting to do. If indeed you split your time between the US and UK and work for an American company then you may not be able to claim the FEIE on your salary, but would need to figure out what is US-source income for the days in the US, and UK-source income for the days in the UK, then file US and UK returns and try to balance it all out with foreign tax credits so that you don't pay twice.

Are you an regular employee of the US company (with a W-2) or a contractor (with a 1099)? You don't want to have income tax withheld if you are going to owe more to the UK than the US. If you were fully remote you also wouldn't want US health insurance, but if you spend 30 percent of your time in the US, then it's probably worth having even if you need to pay for the full year.


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## Moulard (Feb 3, 2017)

If you are in the UK on a student visa chances are you are a non-resident of the UK for tax purposes either through UK tax law or through the tie breaking rules of the tax treaty (your permanent home would likely be considered the US)

I don't know the intricacies of UK tax law or the UK-US tax treaty, but ordinarily a country where you are not a tax resident will only tax you on income sourced within in this case the UK. 

That said, your wages (dependent personal services income) are considered sourced based on where you sit, not where the company employing you is registered.

Thus the work you perform for your US employer while in the US is US sourced. The work performed in the UK for the same employer is considered UK sourced.

There is an exception if your US employer sent you to the UK to complete your course- if that is the case the responses below are wrong or at least partly wrong depending on course duration.

First of all you will want to keep good records of the dates you are working in the US vs in the UK to be able to correctly allocate wages to the relevant sourcing pool.

So you would report that portion of your US wages earned while in the UK and other UK sourced income to HMRC. 

You would report your global income to the IRS by virtue of the fact that you are a US citizen and the US claims the right to tax its citizens on their global income.

You would then have to rely on the tax treaty to eliminate the double taxation that would result. Bev and Harry are correct, you would not be able to exclude the UK earned income as you will not meet either the eligibility tests for the Foreign Earned Income Exclusion, and would have to rely on tax credits.

Basically you would claim a tax for taxes paid or accrued to HMRC when you complete your US tax return. The UK personal allowance and other tax free thresholds can be problematic as they lower your tax liability and thus at certain income levels you may actually owe the US depending on what the split looks like. What you don't owe to the UK you still end up paying to the US. Tax credit schemes are designed in such a way as to ensure you end up paying the higher of the two tax rates, sometimes split between the two countries.

Perversely there can be cases where it can be beneficial to claim to be a tax resident of both countries in which case you would then claim a credit for taxes paid to the US for your US sourced income. The downside is that you end up paying the higher of the two tax rates, but there can be upsides related to lowe tax rates, access to tax free thresholds etc.

While the totalisation agreement is intended to remove contributions to two social security schemes, because you have both US and UK employers, it would be quite difficult to get a certificate of coverage and so you may not be able to avoid both schemes on the short term.


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## RemoteWorker (3 mo ago)

Moulard said:


> If you are in the UK on a student visa chances are you are a non-resident of the UK for tax purposes either through UK tax law or through the tie breaking rules of the tax treaty (your permanent home would likely be considered the US)
> 
> I don't know the intricacies of UK tax law or the UK-US tax treaty, but ordinarily a country where you are not a tax resident will only tax you on income sourced within in this case the UK.
> 
> ...


Many thanks for your help! Can you recommend a tax accountant / organization that might be able to help me with this? Cheers


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## RemoteWorker (3 mo ago)

Bevdeforges said:


> As a US citizen, you are always and forever considered "tax resident" in the US, though there are some exemptions and exclusions and credits available to US taxpayers living outside the US. The issue for you is most likely to be whether or not you qualify for such things as the Foreign Earned Income Exclusion or the Foreign Tax Credit, both meant to help you avoid double taxation.
> 
> As far as the UK tax authority is concerned, generally as a long-term resident, you are expected to declare and pay taxes on your worldwide income. So basically, you declare all your income no matter where it is earned to both the US and UK tax authorities and then muddle your way through the various adjustments to each side to avoid (or actually to "minimize") the double taxation issue.
> 
> For the US tax side of things, take a look at IRS Publication 54 (available on the irs.gov website) and take a look through the US-UK tax treaty for those items that apply to your situation. I'm sure someone here can direct you to the relevant information for the UK side of taxes.


Thank you!


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## RemoteWorker (3 mo ago)

Moulard said:


> If you are in the UK on a student visa chances are you are a non-resident of the UK for tax purposes either through UK tax law or through the tie breaking rules of the tax treaty (your permanent home would likely be considered the US)
> 
> I don't know the intricacies of UK tax law or the UK-US tax treaty, but ordinarily a country where you are not a tax resident will only tax you on income sourced within in this case the UK.
> 
> ...


Many thanks for your help! Any chance you cam recommend a tax accountant / organization that specializes in this kind of thing? Cheers


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## KristinRemoteWorker (3 mo ago)

Hello,

I'm really glad I found this post, because I'll be in your exact situation in the next couple of weeks and the information online about how to handle it is overwhelming and sometimes conflicting.

I can't speak as much to your UK-based income and how much of that might be liable to US taxation, but I am also a US citizen starting work for a US-based company, and they are allowing me to work remotely from the UK, which I can do for two years on the same graduate visa. I have to wait for another couple of weeks for my final grades and results to be released before officially transitioning onto it, but that is my plan. Similarly, this company will be paying me through my US bank account and permanent address in the US, and withholding US taxes and social security. So it sounds like our situations are pretty close. 

I've done a lot of research on this, but it's only my understanding and the bottom line is definitely to get a tax advisor to help you navigate all of this. It's a complicated situation, because the US does taxation/social security based on citizenship, so you have to file and pay that regardless. However, you would also be considered a UK resident, since you spend over half the year here, so are responsible for filing in both countries because the UK tax system is based on residency. However, since you are a non-UK citizen working for a foreign-based company and only intend to stay in the UK for two years, you likely would qualify as a non-UK domicile. If you Google this, it will explain the intricacies of what domicile status is and how it is determined. If this applies to you, you would only have to pay taxes on the foreign income that you bring into the UK (by depositing into a UK bank account, using it to pay rent, living costs, any credit cards used for purchases in the UK, etc.). Because your income is foreign-based, you would have to file UK taxes through a self-assessment, and it would require tracking how much of your foreign income you remit to the UK, which is then taxable (which is lengthy/complicated to track and thus would be useful to have a tax adviser help with). Since the US and UK have a tax treaty, any income tax that you pay through the self-assessment in the UK can then be reported on your US filing to receive a tax credit in order to avoid double taxation. 

Social security versus national insurance is where I am at more of a loss. The US and UK have a totalization agreement to avoid people double paying into social security in both countries, but you need a certificate to verify this, which you then have to provide to the other country in order to not pay there. Since you are presumably having social security withheld by your US company, you need to figure out how to work out national insurance in the UK. To get a US certificate exempting you from UK national insurance, you typically have to be seconded/sent to your company's UK branch for under five years, in which case your company submits an exemption request to the US Social Security Administration which you then provide to the UK when filing taxes/national insurance (but this doesn't sound like your situation), or you have to be self-employed and you request an exemption yourself (which also doesn't apply to you). I'm in the same boat, so I don't know how to handle this aspect to avoid double-paying social security in both countries, and is the main part I'm getting advice about. 

Lastly, if your company does not have any UK branch or presence, the burden is on you to make sure that you are paying your UK taxes and national insurance properly, because they cannot deduct UK taxes/national insurance from your pay. If this is the case, then you can't have your taxes and national insurance deducted through the normal Pay-As-You-Earn scheme, which a UK-based employer would handle. However, there are different schemes that you can set up with the HMRC to pay taxes and national insurance directly yourself (similar to setting up your own payroll), but again, talk to an adviser about helping you with this process. Taxes you could just file and pay through the self-assessment filing process, but for national insurance, you'd likely need to set up what is called a DCNI scheme to pay what you owe in national insurance directly into. Again, I still don't know how to offset the social security being withheld in the US and the national insurance you are responsible for paying based on your income to avoid paying double. But this is something to be aware of if your company has no presence in the UK, because you are then responsible for everything on the UK end. 

Sorry for how long this is, but I hope it was helpful! I'm planning on using a tax adviser anyway, but I'm curious if you found a tax adviser or accountant that was able to provide answers on any of this, particularly the social security/national insurance issue? If not, a quick Google search shows that there are a lot who focus specifically on advising US expats in the UK, and have expertise in the US-UK tax relationship and DCNI/DPNI schemes that you might have to open to handle your UK taxes/national insurance. Someone who has expertise in both tax systems is probably your best bet to do everything correctly and above-board, while avoiding double taxation and charges as much as possible.

Good luck!
Kristin


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## Bevdeforges (Nov 16, 2007)

Be careful with all this, because there are some tax advisers out there who don't know what they are talking about. In very general terms, you are considered to be working in whatever country you are physically present in while doing the work. US companies are fond of just letting folks work remotely while continuing to maintain them on their US payrolls (for taxes and social benefits/insurance) but that may not work out and you risk paying double.

The further complication is that, for the US, "social security" refers to the national retirement system, whereas in the UK (and other European countries) "social security" is considered to be primarily the health care system. Obviously, if you are living in the UK, you need to be covered by the local health care system in some manner because there isn't any reciprocity between the (non-existent) US health care system and the NHS.


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