[jackpen]

Hi All,

My US wife will be joining me in the UK soon on a settlement spouse visa - towards the end of August. We are a childless couple if that makes a difference to the following questions.

We've started to look at the issues surrounding tax, benefits, and finances, but are really confused and just looking for someone to explain it to us in simple terms. Can anyone please help in clarifying what we need to do in order to satisfy the rules and regulations in the following circumstances?:

(a) She continues to work for her existing US employer whilst living in the UK, but does so remotely over the Internet and phone.

(b) She quits her US job and gets one with a UK employer.

Regarding bank accounts, what is the best option for these? Assuming my spouse is being paid into her US account, is there a way she can access the money from the UK without being charged fees and getting hit by the exchange rate? It seems we can open a UK bank account easily enough if she gets a job with a UK employer.

Do we need the help of a professional or is this something we can manage on our own? Is there a step-by-step dummies guide to all of this?

Sorry for asking so many questions. I have tried searching the web, but keep getting hit by tons of information without a lot of context.

Thank you.

 

[Nononymous]

It's pretty straightforward actually.

Work and tax options:

(a) Even if she's working for a US employer, she would be resident in the UK so would pay UK taxes. If she stays on payroll (see recent threads on this issue) she should arrange with her US employer to not have US taxes withheld. She may also need or choose to opt out of health insurance and other benefits; it might be in her interests to continue contributing to social security or 401k plans etc. Alternatively, she resigns as an employee, sets up as an independent contractor in the UK, and submits a monthly invoice. Those are the two basic options for working remotely. Note that as a US citizen she would be obliged to continue filing US tax returns (should she wish to remain compliant, of course) but would very likely owe nothing, as the tax treaty ostensibly prevents dual taxation. I assume that as a spouse she's entitled to NHS health care etc.

(b) If she has a job in the UK, she's really no different from you. Pays UK taxes etc. The requirement to file US tax returns is still in effect. (See IRS Publication 54 for all the joyous details - don't forget FBAR reporting.)

If your spouse is being paid into a US account, she'd probably do best opening a UK bank account (or make yours joint assuming you don't mind the possibility of your data being reported to the US government) then making regular transfers using something like CurrencyFair. You will never avoid exchange rate risk being paid in one country while living in another, but at least this way you are lowering your transaction costs.

If the above makes sense, you can probably manage without professional help.

 

[Bevdeforges]

Pretty much what Nononymous has already said. Best I can do is offer a bit of further information.

Your situation is actually pretty common, so you really shouldn't need any expensive professional advice. On the tax side of things, there is an IRS office at the London US Embassy, but for online guidance, the website for the Paris office is usually much more useful. Internal Revenue Service | Embassy of the United States Paris, France

Practically speaking, your wife will probably want to "go contractor" with her US employer, if they will allow it. (Some US employers really dislike this option, as it subjects them to further scrutiny.) The main issue is that she should be paying UK "payroll taxes" - basically National Insurances - and, if possible, making periodic payments towards her UK income taxes (ideally, PAYE - though I don't know how that works for independents).

On the other side, some employers are very hesitant to let you cut your income tax withholding to 0 (again, because it means more scrutiny for them), so by remaining on US payroll, she will have to claim back all withholdings each year with her income tax forms. Be very sure that she isn't having state tax withheld as that can be very difficult to retrieve.

For my money, it's probably "easiest" to quit the US job and find one in the UK so that you're properly enrolled in the local system - though that depends on how transferable her job qualifications are and the state of the local job market. I know a number of folks attempting the telecommute route and there are a number of inconveniences, including that of isolation just at the time you should be getting out and making acquaintances in your new country, as well as not having local work "rights" such as holidays, vacations, sick days, etc.

As far as the 401K and US SS are concerned, take a good hard look at what her situation is regarding the UK pension system and opportunities there. Given the US-UK Social Security treaty, years worked either place will be counted in qualifying for US Social Security - and if she already has her 10 years in for vesting in the US system, then it's not an issue. (She'll get her US SS at retirement.)

She may want to look into one of the FAWCO expat clubs in the area. https://www.fawco.org/home/member-clubs Lots of American women there who have gone through much the same thing and will no doubt have advice and further guidance for her
Cheers,
Bev

 

[jackpen]

Thank you both so much for your replies, Nononymous and Bevdeforges. They are extremely helpful. I passed the information onto my wife and she is now much more confident about the issue