If you’re a native of the UK seeking to escape to a different economic environment, then the prospect of a move across the Atlantic might be a tantalising one. Living and working in the United States can be enormously lucrative and rewarding. However, making the transition means paying attention to the way that your tax affairs are arranged.
Understanding Dual Taxation Risks
To minimise your liabilities, you’ll need to ensure that your income is not being taxed twice. In this case, this is handled by the double taxation convention that protects earners in both countries. The treaty, however, only determines which country has ‘first’ taxing rights, rather than ‘sole’ taxing rights. As such, it’s worth double-checking the amount you’re paying, and consulting with a tax planner to identify any double-taxation problems.
Residency and Domicile Rules
There are several slight mismatches between the tax rules in the two nations. These need to be accounted for. For example, US citizens are taxed on their worldwide income, and the tax-free status and capital gains exemptions do not apply. When you become a US citizen, you might find that several of the tax advantages you enjoyed in the UK no longer apply. It’s worth establishing what these are before you start filing your returns.
Managing Investments Across Borders
If you’re bringing pension funds and other savings across to the United States, then you’ll need to be sure to report them properly. A failure to do so could see you charged up to 5% of the pension’s value. You’ll be able to claim relief on certain contributions, however. Again, the taxation treaty that exists between the two nations can sometimes work in ways that you might not expect. This is partly a product of the Internal Revenue Service attempting to mitigate the reporting requirements for US citizens with non-U.S. pensions. The consequences can vary considerably depending on your circumstances. This is why the right advice can be so important.
The Value of Specialist Advice
As you might imagine, the process of poring through and optimising your tax affairs can be a gruelling one. This is why obtaining professional advice, and putting together a strategy that is tailored to your precise needs, can be so effective. Doing so can save you considerable stress, as well as reduce your overall liability. This way, your life in the United States can get off to the best possible start.
