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I am an American who is about to work in Bristol on a long-term contract for a financial services company. What financial plans do I need to make and how will I be taxed in the UK compared with the US?

In many cases, salaries are lower in the UK than in the US but the standard of living is different. The UK can be more expensive than the US but UK lifestyles have different priorities. Generally, a higher percentage of a UK salary is spent on a rent or mortgage and less on entertainment and leisure.

However, in all probability, your compensation will be higher in your overseas post than in your job back home.

A useful international salary converter can be found at calc/intsalcalc.html .On arriving in the UK, you will be required to complete and submit questionnaire P86 to HM Revenue & Customs. It will use the information on this form to determine how you should be taxed for the duration of your stay in the UK.

The taxation basis of expatriates is one of most difficult areas to understand. To work out your tax position, it is important to know two things:

An individual’s domicile of origin is usually the same as that of his or her father. A person’s domicile is determined basically as their natural home.

Residency is based on the number of days spent in the country in any tax year. If you live in the UK for more than six months of each tax year, you will generally be treated for tax purposes as UK resident.

Being able to hold on to as much of your income as possible by legally minimising your taxes is the goal of most expatriates. One of the problems of being a US expatriate is that your worldwide income is taxable regardless of where you are stationed, where the assets are located or where the income is earned. This is not the case in many other countries.

In the UK, if a non-domiciled UK resident is employed by a non-UK resident employer and performs all his duties outside the UK, the compensation arising is taxable only to the extent that it is received in or remitted to the UK.

What applies to your specific circumstances is generally determined by US tax law and by whatever tax treaties exist between the US and your host country. The US has negotiated treaties with many countries so that US expatriates are not double taxed. The IRS gives expatriates credit for taxes paid to foreign governments with which the US has such treaties. An employee of a US company coming to the UK for between 30 and 91 days in a UK tax year is, strictly speaking, liable to UK PAYE taxation on their employment income for the period of time they are here. However, it is normally possible to reach an agreement with the Revenue that, under the terms of the double taxation agreement, PAYE is not required on the basis that no tax will eventually be payable here.

Tax Planning
A little planning can produce big savings, particularly as UK tax can be higher than in the US. Do let the IRS know that you are overseas by filling out change of address form 8822 and read the Tax Guide for US Citizens and Resident Aliens Abroad which is available from the IRS website.

Even if you think that you do not have any income taxable in the US, file to the IRS anyway as you are required to. Be aware that US citizens employed in the UK by a UK company will have to pay full National Insurance contributions for the duration of their employment here.

The probability is that you will have more disposable income than your friends back home. It is important that these funds be well managed.

Almost inevitably, you will have money invested in US mutual funds as two in every five US adults hold a mutual fund of some kind. The mutual fund companies across the US hold roughly $7tn under management. You may want to look at offshore funds to balance your existing portfolio.

Many banks, insurance companies and asset managers in offshore centres are subsidiaries of major UK, US and European institutions.

You may also wish to have access to investments or savings that are denominated in another currency.

It makes sense to have an independent financial adviser at home and abroad who understands the host country’s rules and regulations and the investments available to you.


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