UK Taxes on US Salary

I'm trying to calculate how much I need to save before the end of 2006 to pay my UK taxes. I am working remote for a US company and getting paid into a US bank account. There are three different totals on my paycheck: Medicare Wages, Gross, and Taxable Income. I am required - it's not optional - to pay into a tax deferred retirement savings plan and the medical plan. We don't pay into social security; our contribution to the retirement plan is matched by the company. Does anyone know which total I pay UK taxes on? And has anyone used a tax accountant in the Lancashire area that they could recommend?

This is very complex:

1. Your presence in the UK may create a permanent establishment of the US entity.  Has your employer taken UK corporate tax advice?
2. Your US pension plan may be able to obtain what was known as corresponding relief until 5 April 2006.  Has the plan applied for this?
3. Are you paying primary National Insurance contributions?
4. There are US/UK tax treaty implications on the structure as well.

I would not recommend trying to deal with this yourself.  I know of no dual qualified US/UK accountants in the Lancashire area.  I would go back to your employers and ask them to pay for aa accounting firm to handle this in London (perhaps an affiliate of whoever does their corporate accounting in the States).  The costs in accounting fees will be substantial, but these could have been ameliorated had the employer taken advice before you came over here.

Unfortunately, the employer doesn't want me here; they merely gave me a telework agreement to keep my services for a year or so. Any tax repercussions or hassles are solely my problem. I haven't yet begun paying National Insurance; I have an appointment to get my NIN this month, and then I must make sure I have enough to pay the UK taxes at the end of the year. I know I will need to save 35% to cover national insurance and national health, but my confusion is 35% of what amount? I'm no professional or executive; the main benefit to my job are the benefits, i.e., medical, dental, vision insurance, fixed retirement plan. In the US, I pay tax only on the taxable amount, not the gross. If I have to pay UK tax on the gross or medicare wages, while I'm still having to pay US taxes out of my paycheck and then file for reimbursement, I don't think I'll have much of a paycheck left to exist on over here. While the US taxes were complicated enough to figure out, the self assessment form is like a foreign language. Any ideas?

Sadly it IS their problem too.  They are failing to register with companies house, failing to get corporate tax advice, failing to consider transfer pricing and VAT, failing to operate PAYE, obtain a certificate of coverage, etc etc.  All of these actions carry penalties for the company.

You need to notify chargeability to UK tax and need advice on residence and domicile.  These will stand in advance of filing tax returns.  The ewntire package will run to a few thousand pounds in accounting fees for you.  I strongly recommend that you use the same adviser for your UK and US returns so that the two are co-ordinated and such things as tax treaty benefits are maximised.

My job will terminate some time this year, as my telework agreement is only for a year and cannot be extended beyond that. Unfortunately, the time frame spans two UK tax years. Telework agreements are extremely rare, never before done on a clerical level, and telling them they have to do this or that is only going to result in earlier cancellation of my work agreement. Whatever penalties come their way are their problem, probably long after I'm gone.

Some tax advice in these forums tell people to plan in advance. I tried; there were no international tax experts in my state. And I wasn't able to move at a time ideal for taxes; when and how my house sold were variables I could not predict. I was lucky to be able to take my job with me for the short term, but I didn't get to call the shots there either. In fact, I received a salary reduction for the privilege of working out of state.

What do people like me do if they 1) don't have a couple thousand pounds to consult an international tax specialist and 2) don't have a US tax accountant and 3) can't even find a local tax accountant who has some understanding of US/UK taxes? I am desperate to find some affordable tax advice! I realize that your advice is sound, and that long term that is the ideal thing to do. Simply said, I don't make enough money. Accountants don't want to bother with people in my salary range. There was a time in the states when I went to tax specialists to file my taxes every year, but I ended up correcting their errors and I got poor advice - costly, erroneous advice. Since then, I learned to do my own taxes, at least stateside.

Where to I find affordable assistance? Or is there some user-friendly UK tax program for foreign income?

It is not really a question of not wanting to bother.  However, all accountants have to pay for mandatory continuing education, expensive mandatory professional indemnity insurance, other overheads etc AND make a profit.

You can speak to (or visit) HMRC who will be glad to help.  You may not get the best advice however quite simply because the folks in local enquiry offices will not be familiar with international issues.  Similarly the IRS at the Embassy can assist.  This is the best I can suggest.

My job will terminate some time this year, as my telework agreement is only for a year and cannot be extended beyond that. Unfortunately, the time frame spans two UK tax years. Telework agreements are extremely rare, never before done on a clerical level, and telling them they have to do this or that is only going to result in earlier cancellation of my work agreement. Whatever penalties come their way are their problem, probably long after I'm gone.

Some tax advice in these forums tell people to plan in advance. I tried; there were no international tax experts in my state. And I wasn't able to move at a time ideal for taxes; when and how my house sold were variables I could not predict. I was lucky to be able to take my job with me for the short term, but I didn't get to call the shots there either. In fact, I received a salary reduction for the privilege of working out of state.

What do people like me do if they 1) don't have a couple thousand pounds to consult an international tax specialist and 2) don't have a US tax accountant and 3) can't even find a local tax accountant who has some understanding of US/UK taxes? I am desperate to find some affordable tax advice! I realize that your advice is sound, and that long term that is the ideal thing to do. Simply said, I don't make enough money. Accountants don't want to bother with people in my salary range. There was a time in the states when I went to tax specialists to file my taxes every year, but I ended up correcting their errors and I got poor advice - costly, erroneous advice. Since then, I learned to do my own taxes, at least stateside.

Where to I find affordable assistance? Or is there some user-friendly UK tax program for foreign income?

I sympathize with your situation, international taxation can be confusing and finding relevant information and help difficult.
I suggest that you first determine your residency status as that is the start of how you'll be treated wrt taxation and then
you can make a best effort at filing your taxes using the UK self assesment forms and the something like TurboTax for the
US stuff. Fill out your forms and the I'd ask for as much free help as you can so go to the local tax office and get their help.
Doing this you may not do exactly the right thing, but at least you will have made a good faith effort. Then I'd do as much
to simplify your situation as possible like working for a UK based company.