Working freelance in UK for US employer

Hi,

DH will be working on contract for his previous employer in the US, but we now live in the UK. He will work from home (for his US employer) and be paid by wire transfer.

I assume we will pay tax in the UK instead of the US since we are now domiciled here. But how do we determine how much to set aside? I am not sure how to go about paying self employment taxes in the UK.

Thanks

Penny

You will need to file a US return as well, though it is unlikely you will owe taxes on it.

The Self-Assessment in the UK is dead easy.  I would check out a website like http://www.contractoruk.com/ for lots of information about how to pay your NI contributions when self employed.  Also the SOHO forum here has lots of advice for the self-employed.

This is assuming that your DH has the right to work in the UK.

I think her husband is British. 

Domicile is not (generally) relevant for self-employed individuals.

The important tests are residence and where the work is done.  Under the US/UK social security agreement the key test is ordinary residence for the self-employed.

You need also to bear in mind that just because someone is regrded for US purposes as an independent contractor does not mean that for the purposes of English employment law (and hence UK tax law) that they are not actually employed.

You need to look at the contractural relationship to find out if this is a contract of service (ie employed) or contract for services (eg one that permits him to work when and where he wants, use other subcontractors etc) (ie self-employed).

There are key employment law differences plus extremely different income tax, corporate tax, social security, US withholding, VAT and transfer pricing consequences in both countries.

Sorry if this note sounds scary, but tax is complex at times!

Personally, I think the IR35 rules are still a lot more lax then "1099" contractors in the States.  I am really the number of people that are still considered "self-employed" in the UK that wouldn't be in the States.  The US has been going after those type of employees a lot longer from what I can tell.