As a UK resident you will pay tax in the UK. If you are being employed by an american company and paid there you will need to register with HMRC for self assessment unless they are set up for PAYE.

Though you will always need to file US taxes as a citizen. Not quite sure how ut works but there are some very knowledgeable people posting here.

 

For two years, yep, you'll need to pay UK taxes (and file US tax returns, though you won't pay twice).

In principle, not knowing much about how things work in the UK, I'd say there are two basic approaches:

If your company is moving you, they should figure out how to arrange things in the UK, make payments and take deductions - not just tax, but also health care and other stuff.

If it was you wanting to move and telecommute, you'd have to figure it out yourself and possibly set up as an independent contractor and pay for your own health care.

 

The fact of being paid in the US matters not at all. It's where you are physically located whilst performing the work. So, yes, you should be paying taxes in the UK while resident there.

As a US citizen, you will always have to file US tax returns - but your overseas work will be eligible for the Foreign Earned Income Exclusion, or you can take the Foreign Tax Credit for income taxes paid to the UK. The difference between the US and UK tax years can make either approach a bit tricky.

Normally, if the move or temporary assignment was arranged by your employer, you should at least ask about getting tax preparation assistance while you are located outside the US.
Cheers,
Bev

 

Thanks all for the replies. Looks like I have some discussion to do with our HR department.

 

And if you do continue to be paid in the US while resident in the UK, your employer should presumably not be taking US taxes off the paycheque, since you'll need that money to give to the Queen.

 

One other thing to note is that because the UK taxes are higher than the US taxes, sometimes you can even have a bit of tax credit left over to carry-forward on future years (if you take the Foreign Tax Credit instead of the Foreign Earned Income Exclusion).

So for a rough example (and you would want to speak with an accountant to see if this approach would work for you):

Let's say you paid 30K in UK taxes over the course of the year, with the foreign tax credit you could then take that 30K and put it towards your US tax bill. However, if in the US you would have only owed 25K in taxes, you now have 5K left over. You can carry that 5K over to next year, and do the same thing for every year in the UK.

Then, at the end of your contract, if you move back to the US, you could have a nice chunk of tax credit built up to use.

This obviously does not work for everyone, but is something to consider come tax time!