Living in the UK, US based salary or UK based salary

[sandetim]

I work for an IT company in London. I have the option of getting paid either in USD or in GBP, and have a contract from either country. Is there any tax benefit between the two?

Thanks in advance.

[nyclon]

Originally Posted by sandetim

I work for an IT company in London. I have the option of getting paid either in USD or in GBP, and have a contract from either country. Is there any tax benefit between the two?

Thanks in advance.

If you are living in the UK and you are paid in dollars you are going to have currency risk. I believe you will be taxed at whichever country has the highest tax rate for your salary regardless of what currency you are paid in.

[Joppa]

Originally Posted by nyclon

If you are living in the UK and you are paid in dollars you are going to have currency risk. I believe you will be taxed at whichever country has the highest tax rate for your salary regardless of what currency you are paid in.

If you are a tax resident in UK, as you will be, you will be subject to income tax, national insurance and other deductions in UK, which will usually be done at source (pay-as-you-earn or PAYE). As an American citizen, you still have to file your tax return with IRS, but you can claim foreign earnings exemption of up to $92,900, so unless you earn a lot, there should be no US tax liability.

Now being paid in US$, as stated, will have currency risks - you gain, lose or stay the same, depending on how $/£ rate fluctuates, as you have to convert $ into £ to pay bills etc. Whether being on US or UK employment contract shoudn't greatly affect your tax liability, as you will be paying tax and other charges in UK in either case. Generally, it's advantageous to be on the contract in the country you work in, as your employer can remunerate you in ways that will minimise your - and their - tax liabilities, such as paying part of your salary into your pension plan, share option and so on, taking advantage of favourable tax rules that exist in UK.

[Bevdeforges]

Technically speaking, you are "tax resident" in the country in which you are physically present most of the time and where you are doing the work. (There are other criteria, but this is the main one.)

You probably want to be paid in sterling with a UK contract because then you will have your social insurances and PAYE withholdings properly withheld. If you are paid from a US contract, chances are they will withhold US taxes and social security, which you'll then have to claim back. Or, they'll pay you from the US as a contractor, in which case you have to declare yourself self-employed in the UK and settle the social insurances and taxes yourself.

You'll still file US tax returns, but if your salary is your primary source of income, it's pretty much just an "information return" and once you learn how the forms work, it won't take much time at all.
Cheers,
Bev

[sandetim]

Great thanks for the information. I have been reading about my options and it was super confusing because although based in the UK I work throughout the EU.

Thanks again

Tim