Taxes, healthcare, etc!

[thisamericanlife 3]

I've tried searching for information on taxes, but haven't found anything concrete yet. So I was just wondering if any UK citizen who have made the transition to the US could explain how the tax situation works!

I understand there is a 'double taxation treaty' - so if you're paying tax in the US, you don't have to in the UK, but it still goes towards your social security back home. Is that right? How does it work? Although I plan to move to the US permanently, none of us knows what the future holds, and I am concerned that I wouldn't have contributed any NI and ineligible for any support, if required.

Secondly, if I continued to work for my UK employer while I was in the US (I could, in theory, work remotely) - how would this work? Would my UK employer continue to pay my UK taxes, and I don't have to declare it to the US? (see above, double-taxation treaty)

Thirdly, I have an outstanding student loan. I will continue to make small payments each month, once I depart from the UK, to make sure I am in keeping with the terms and conditions. But has anyone had any trouble with the SLC? Or can anyone tell me about their experiences with the SLC when living abroad?

As an aside, can anyone share experiences with obtaining healthcare in the US? My partner is unable to add me to his insurance, as we'd be paying an extra $700/month. It looks as if it'd be cheaper if I got temporary insurance. I just don't understand a single thing about it!

And finally... can anyone suggest a good, reliable shipping agent? I've been through the epic shipping thread, but wondered if anyone had more recent experiences they could share!

Thanks guys

[Rebecca Jo 1,962]

You don't contribute to a UK pension by working for a US company. You contribute to US Social Security when you work in the US. There is no provision in the Totalization Agreement for employers contributing to pension systems in other countries.

If you wish to continue to contribute to your UK pension, you need to go to your local Tax Office/Pensions Branch and speak to a representative about making voluntary contributions from your own pocket.

Once you are resident in the US, you will have to claim foreign income on your US tax return. Fortunately there is an exemption from double taxation for the first $95K (or so - it changes annually). Most "regular working class folks" therefore have no issue with double taxation.

Others will have to answer your questions regarding your student loans.

For healthcare - Welcome to America. Any private policy you buy will cost even more than your partner adding you to his insurance.

[JoannaV 174]

You'll have to fill in the Oversees Income Assessment form every year and send it to the SLC. You can pay by direct debit, or online, I think, not sure as I don't have to pay anything. Just make sure they have your US address and everything should work out fine.

You should be able to buy individual health insurance for cheaper than $700, unless you live in a stupid state or have bad health or are older than one would assume from your discussion of student loans. Maybe it is a stupid state, because normally health insurance through employer is cheaper. But you should be able to get a more basic plan for less.

[thisamericanlife 3]

Thanks both.

I'm still not 100% sure of the tax situation – HMRC doesn't make it easy. I've tried reading through the attached PDF a couple of times, but I must say it baffles me a little. I couldn't see anything about the $95k threshold in it - but I could be wrong! Thanks for the advice, though. hmrc6.pdf

Going back to my original post, how does it work if my UK employer continues to pay me while I am in the US? There is no American arm of the company. I'd be working on a contract basis for the UK employer, paid in Sterling to a UK bank account. It's here where I get a little confused about exactly which country I should be paying tax to, and also why I am looking into personal healthcare.

Thanks for the advice with the SLC. I plan to have a direct debit or standing order and pay a little each month – I'm quite fearful of the whole we're-going-to-add-£250-a-month thing, and the SLC is not the easiest or most competent of companies to work with. Before they attributed a cheque I'd paid towards clearing it quicker to someone else's account!

As for health insurance, I'm young and fit (as far as I know!), so I'll keep investigating.

Thanks both!

[TracyTN 237]

You are allowed to work for a foreign employer while in the US, but that income is subject to US taxation. That's where the double taxation rule Rebecca Jo mentioned comes into play. When the time comes, seek assistance from a tax professional here in the US if you're confused - but basically if you make less than a certain amount (she mentioned $95k but I thought the threshold was lower than that), it's not an issue.

How the UK taxes it when you're not living there is beyond me. Isn't there an HMRC helpline available where you could call and ask (or a UK tax professional)? I would imagine if they're still paying your income into your UK bank account, it'd be about the same - but I'm sure there are some 'domicile' rules that they take into consideration.

[Reyan 56]

The maximum amount you can exclude is $92,900 for 2011.

http://www.irs.gov/newsroom/article/0,,id=108276,00.html

[thisamericanlife 3]

Brilliant, thanks to both of you - superstars. I think I'll just ask my company to hire a tax professional. If they still want me to work for them, I'm sure they'll be willing to pay and know we're all doing it the correct way.

Thanks again!

[HikerMark 5]

Both you and your UK employer need to get tax advice on this situation.

By employing you in the US your UK employer might be establishing a US presence and could then become subject to US taxes. Similarly your wages maybe subject to US withholding. This employment needs to be structured correctly to minimize the taxes due.

As for you, as a Green Card holder you will be treated as a US resident for tax purposes. That means you file a US tax return every year and you report and are taxed on your world wide income. So by default any UK income gets taxed on the US tax return with credit for any UK tax that is paid on that income.

However, if you are non-resident for UK tax purposes (because you no longer live there)some of the UK income will not be taxed by HMRC, plus there is a double tax treaty between the US and UK which will affect which country taxes your income.

Several people have mentioned the US foreign earned income deduction. Note that is only available to US residents with foreign wages who were working outside the US. That probably won't apply to you as you will be living and working in the US albeit for a UK employer.

As you can see there are quite a few issues to consider which is why professional advice would make sense before you commit to the employment.

[Trompe le Monde 1,107]

I'm not sure what your arrangement is with your employer but my husband continues to work for a couple of UK companies on the basis of a freelance consultant. They do not tax his income but we declare his income here in the US and are taxed accordingly.

[HikerMark 5]

Thanks for raising that point Trompe le Monde.

It was one of the solutions that crossed my mind. Provided it is set up as true self-employment that should work well for the UK business and for the US sub-contractor. i.e the UK business does not have to pay any UK NI contributions or be subject to employment laws/tax in the UK or the US. For the US sub-contractor they get the benefit of self-employment deductions plus they will get a US social security credit based on the US self-employment tax they will pay.