Expat in the UK – Know Your Rights!
Being an expat in the UK is exciting — you get to explore a completely different culture and really expand your thinking in many ways. Also, it really does look good on a resume to say that you have gained steady employment in another country. Being able to see another culture in a different way can make you grow as a professional. However, what really stresses out a lot of new expats is the UK tax system. They don’t knows where they stand, and many in the UK will not always be as knowledgeable or helpful as you want them to be. If you’re not careful you can end up having to pay some stiff penalties.
Keep in mind that if you’re going to go to the UK to work for someone else, they’re going to be taking care of a lot of your tax issues for you. They will be taking out your taxes, which should make things simple.
The trouble comes from people that have income or gains that come from other sources. You will need to file a return to disclose these sources of income and capital gains.
Generally speaking, most expats will find that they owe taxes on their entire income base for not just the UK, but their country of record. if you are a US resident working in the UK, you’re going to owe taxes. However, there are policies in place that protect you from being double taxed. In the US, you can exclude 80,000$ of your taxable income to lower your tax bill. This is because it’s assumed that you’re going to also be paying UK taxes.
Getting a tax professional to help you with your taxes can be one of the best decisions that you can make.
Watch out for being a tax resident, though — you will want to make sure that you know exactly when that happens. As mentioned before, it’s 183 days in a single tax year. The tax year for the UK runs through April 6 to April 5th. So that might be a little different than how you’re used to taxes going.
Being self employed will also change things as well. All of your business profits could be at risk for taxation, and double taxation policies might not be as clear. If you are doing permanent trading, you might have to pay stiffer taxes. Make sure that if you are at risk like this that you get the help of a professional to help you guide your steps a bit better. As always, these are just general points of advice and should not be construed as professional financial help.
Capital gains tax will only be an issue for the expats that are coming with significant assets and they end up selling them while being considered a UK tax resident.
If all of this sounds confusing, it’s okay. There are a lot of different things that you’re going to have to keep in mind in order to do business in the UK, so make sure that you get some professional help on your team right away!