# UK and US taxes - Double Taxes - Etc



## Highpass (Apr 3, 2014)

Hello, I have a two pronged question regarding taxes:-

Question 1:

I have a job in the UK and a job I do remotely for a US company.
The UK job is taxed via PAYE or whatever the normal thing is.
The US job is taxed by the employer and paid directly to the IRS.

Am I liable to pay double tax? Can someone explain any pitfalls in my arrangement?

Question 2:

My wife, a US citizen in the UK under settlement status, does not currently work but will one day. What pitfalls are there for her in regards to taxes?

Thank you very much


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## Bevdeforges (Nov 16, 2007)

You may want to take a look at the Expat Tax section here for an overview of what your situation may be.

Assuming you are resident in the UK, you probably need to be reporting the income from your US job to the UK tax authorities. Under most circumstances, you are determined to be "working in" whatever country you are physically in while doing the work - so even if working remotely for a US employer, you are "working in" the UK and subject to UK taxes and social insurances. 

Most employers are clueless about the international implications of hiring "remote" workers outside the US and may very well be complicating your tax situation beyond all belief. The US does not operate a tax system where "the employer pays and you're even at year end" - and technically speaking, if you're being taxed as a non-resident, the tax rate is a flat 30%. So I would do some careful checking into this arrangement.

As far as your wife is concerned, as a US citizen, she will ALWAYS be subject to US taxation - at least until she formally renounces her US citizenship, a step not to be taken lightly since it costs $2350 to do so and may foul up her financial situation if not carefully considered.


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## Highpass (Apr 3, 2014)

Hey Bev, thanks for the reply.

The US job is one I continue to do remotely after living in the US as a permanent resident with SS# for some years. 

After leaving and returning to the UK, I asked the employer to continue paying taxes as I had done previously whilst living there. I was planning on continuing to file my taxes in the US in addition to whatever must be done in the UK.

Does that help the situation/answers at all?


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## underation (Oct 25, 2018)

It sounds like you need to get straight with HMRC over the income you’re being paid from the US. As Bevdeforges says, your income is taxable in the UK, and you need to be paying National Insurance on that income. If it was me I’d ring up HMRC, or look on their website.


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## Bevdeforges (Nov 16, 2007)

to be honest, it kind of complicates matters a bit.

When you left the US to return to the UK, did you formally relinquish your green card? That's probably the first and most important step, because there are some big differences between the IRS and the State Department rules for recognizing you as "US resident." 

As Underation says, your primary tax responsibility is to the UK, as a UK resident - and you should be declaring your worldwide income to the UK rather than to the US. As a non-US-citizen who is not resident in the US, you would probably do best to work for your former employer as a "contractor" (unless the employer is willing to register with the UK as a non-resident employer or to pay you from whatever UK payroll/office they may have). 

If you elect to voluntarily file US taxes as "tax resident" in the US (i.e. because you would be filing jointly with your US citizen wife) you could take the Foreign Earned Income Exclusion on both your US and UK salaries. This issue, however, is that you probably can't get your US Social Security contributions back, and it's doubtful if you can get a refund for any US state taxes being withheld from your US salary.


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## Highpass (Apr 3, 2014)

Thanks very much for the responses so far.

I did not relinquish my green card. I do not expect to get anything out of Social Security now or ever.

The reason I chose to keep my US salary paid that way was so that it can be counted towards a mortgage in the UK. Freelance wages are much more difficult to use towards that. 

But perhaps it is simpler to just switch it to a freelance wage and claim it all in the UK.


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## JustLurking (Mar 25, 2015)

Highpass said:


> I did not relinquish my green card.


That leaves you still subject to US tax on your worldwide income. It also _hugely_ complicates your UK investing, since you cannot effectively use an ISA (the UK won't tax it, but the US will), cannot invest through mutual funds, ETFs or unit trusts (nothing you can easily access in the UK will avoid the US's horrible PFIC tax rules), and face problems with your pension contributions (potentially limited to the US's smaller annual allowance, issues with reporting and employer contributions, and so on).

In addition, if you do not have a 'reentry permit' your green card becomes invalid _for US residency purposes_ after a year of not living in the US, perhaps less, and two years even with a reentry permit. However, unless you affirmatively surrender it with form I-407 it _never_ becomes invalid _for US tax purposes_.

Unless you plan to return to the US very soon, it is probably worth surrendering the green card sharpish. That way you can then invest freely as any other (non-US citizen and non-green card holder) UK resident -- ISAs, and so on. Your wife will have to tangle with all these US tax complications forever, or until she renounces US citizenship, but you can free yourself from them. Being married to a US citizen means that you can get another green card relatively easily if you decide you need one again in future.

Finally, when surrendering the green card, watch out for the US's execrable 'exit tax'. This kicks in at certain asset levels if you have held the card for around six to eight years, and can be retirement-destroying if you are unfortunate enough to have it apply to you.


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## underation (Oct 25, 2018)

Highpass said:


> The reason I chose to keep my US salary paid that way was so that it can be counted towards a mortgage in the UK. Freelance wages are much more difficult to use towards that.


Bear in mind that any UK mortgage provider will be subject to FATCA and CRS and will ask what countries you’re tax resident in. Being tax-resident in both the UK and the US may make it harder to get a mortgage - not easier.

Have a look at the totalisation ageeement (https://www.ssa.gov/pubs/EN-05-10199.pdf). There’s a table that tells you which country you should pay taxes and social security taxes to, in every category. If the only category you fit into is “Self-employed”, that’s your only option.

If you fit into one of the other categories, and can pay taxes and SS to America instead of the UK, I suspect you will need to get a certificate of coverage from the US to show to HMRC.

Personally, I would start by ringing HMRC and finding out what’s required.


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## Nononymous (Jul 12, 2011)

@Highpass

Not to sound cruel, but what you've done appeared simple at first - just tell your US employer to just keep you on the payroll as if you were still in the US - but is probably the worst possible course of action going forward. Currently you are filing both US and UK taxes incorrectly and by not giving up the green card have maintained US tax residency, but without the right of return. 

That being said, you have two courses of action: (1) Fix it by getting rid of the green card and departing the US tax system, re-engaging with your US employer as a contractor, and doing your UK taxes properly. (2) Continue doing quasi-illegal things for as long as you can get away with it, which might be a very long time. Above all don't report US person status to any UK banks so there is no FATCA or FBAR to worry about, and no US tax to deal with on ISAs etc. if you don't report them on US returns. That being said, your marriage to a US citizen makes option #2 more challenging.


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## underation (Oct 25, 2018)

Nononymous said:


> @Highpass
> 
> Not to sound cruel, but what you've done appeared simple at first - just tell your US employer to just keep you on the payroll as if you were still in the US - but is probably the worst possible course of action going forward. Currently you are filing both US and UK taxes incorrectly and by not giving up the green card have maintained US tax residency, but without the right of return.


Yep.



> That being said, you have two courses of action: (1) Fix it by getting rid of the green card and departing the US tax system, re-engaging with your US employer as a contractor, and doing your UK taxes properly.


Yep



> (2) Continue doing quasi-illegal things for as long as you can get away with it, which might be a very long time. Above all don't report US person status to any UK banks so there is no FATCA or FBAR to worry about, and no US tax to deal with on ISAs etc. if you don't report them on US returns. That being said, your marriage to a US citizen makes option #2 more challenging.


It would be even more challenging to persuade a UK mortgage provider to hand out a mortgage on the basis of US-taxed US-source income while claiming non-US-tax-residence.

The OP said s/he is prepared to pay double tax on the US income if necessary, so is presumably not trying to fiddle his/her taxes. Fortunately, double taxation’s not necessary - just paying the right country, as per the first option.


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## Highpass (Apr 3, 2014)

Thanks for all the guidance. I am in my thirties now and the days of attempting dodgy dealings and shortcuts (option 2) long behind me, so I plan to do the following:

1. Relinquish green card status (really I was keeping this only on the off chance my wife hated the UK, which she does not)
2. Switch US salaried income to freelance/contractual basis 
3. Pay all taxes to the UK government

...as a side note I called HMRC and their response was the following:

1. As a UK resident, you are subject to tax on all incomes whilst working in the UK
2. The UK gov will expect 40% of my income taxed, whether it's all in the US, all in the UK, or a mix. If I paid 35% tax to the US I'd owe 5% to the UK gov, etc
3. File taxes as self assessment and note the US income


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## Dunedin (Aug 12, 2013)

PAYE 
The normal position is that a UK employer would apply the PAYE system to an employee’s salary. Under PAYE, deductions would be made for the employee’s income tax and the employee element of National Insurance, and payment of the employer element of National Insurance. 

Highpass is an employee of a non-resident employer which would appear not to have any UK establishment. The above position is adapted under a Direct Payment (Tax and NI) scheme. Highpass needs to operate this. See guidance here
https://www.gov.uk/guidance/when-and-how-an-employee-operates-paye-on-their-employment-income

Double tax relief
Highpass is a UK resident. The UK therefore has primary tax powers. In other words, Highpass pays UK income tax under UK rules. It is then for the US to give credit for the UK tax against US tax. 

Accordingly the sentence “If I paid 35% tax to the US I'd owe 5% to the UK gov, etc” is misconceived.


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