The legalities of being an American in Britain

So much paperwork to do just to make it across! Eventually we get to it. And sometimes we find out, often accidentally, that some advice given, then followed, isn't actually correct.

I'm hoping this is a thread that gets added to as more information comes out. I hope that people will share their own knowledge and experience...maybe even set a few things straight.

This next stage of my life is getting things in order. Actually doing things that will ease a continuing life here, set the stage for retirement, etc. And it's for this reason that we started talking with people...insurance, financial advisers, solicitors...all those folks that are here to help in that that "Life" stuff.

And I may have some bad news for those who are American and are now living in the UK.

Initial stages, so most of this is NOT actually verified. I'll add as I know more...

Income Tax - I was told I didn't have to file income tax to the US if I didn't earn any money there.
I was told utterly wrong. I have since made all that up, so I am up-to-date. Just because your salaried income is not up to the minimum they state, that doesn't mean you don't have other income they can't tax.

Voting - Two years ago I stopped receiving absentee ballots that used to come happily in the mail to me. They had been automatic before.
I wanted to make sure I was voting in the Presidential election this year, so I phoned up my office of elections in the US and was told I had to request a ballot each year. This can be done online. But she did it on the phone with me. Imagine my surprise to get a new registration card in the post, all filled in with my official US address being the elections office. I wondered how they got past the 'I have no US address' bit.

Wills - I always felt I was fine to just have one will. A second one would confuse matters.
The US does not recognize UK wills, and your estate will be treated as though you have no will, even if you have one in the UK. The UK does not take inheritance tax, but the US does. Tip: get a will done up in the UK and have the same will filed with a US attorney. I am in the process of finding out more...whether this can be a UK attorney with US ties, such as being a Public Notary.

Insurance - I've never had a problem getting insurance here. But there may be a funny about this when it comes specifically to life insurance. Something was brought to my attention, but it needs investigating before I freak people out.

Domicile - You can be a UK resident, but chances are you will always have US domicile. And if you have US domicile, you will always be subject to US tax. Even things you pass on to your heirs will be taxed. If you do not want US domicile, you must cut off ALL ties. No bank account, no voting, no citizenship...don't even request to have your ashes scattered in your hometown.

Social Security - I changed my address with the Social Security Administration in the US Embassy in London, and I soon received a report on how much money I'd get upon retirement. The form said I'd get such a report each year.
I didn't. Because I hadn't been filing income tax, I hadn't been receiving the updated reports on future Social Security payments. I have since written to ask they send them to me again. I'll keep you briefed if I hear.

More on taxation - Many of the things "normal" British couples do in order to take advantage of tax breaks do not apply in cases of US/UK couple combos. This is because of how the US taxes. The EU and the UK have an agreement that does not allow for double taxation; the US does not follow this. It therefore does not make sense to put things in partner's names for any sort of tax break...instead of spreading the tax between the two earners, it does this PLUS makes the half taxed again in the US.

I knew about the wills thing - read it in the financial section of the Sunday paper one weekend.  Luckily, I work in a solicitors office where one of the fee earners does wills and she's looking into the legalities for me - including the fact that Phil has not legally adopted the boys and their residency/potential citizenship here is tied to me.

LisaE, this is good info! I do hope this gets added to. We are just starting to look at some of this (taxes and life insurance). Until now, taxes weren't an issue since I'm a student but I'm hoping to work come this autumn. Can anyon clarify - will the US tax just my income as as US citizen, or, when we're married can they tax Glenn's as well?  Thanks!

This is *very* good info, Lisa.  Great idea for a thread.

I'm just hoping my sweetie doesn't see it...he tends to get pretty worried about these types of things.  It doesn't help that I tend to just waddle through life desperately trying to ignore anything like all this grown up stuff.  

I'll be interested to hear anyone else's contributions!

LisaE, this is good info! I do hope this gets added to. We are just starting to look at some of this (taxes and life insurance). Until now, taxes weren't an issue since I'm a student but I'm hoping to work come this autumn. Can anyon clarify - will the US tax just my income as as US citizen, or, when we're married can they tax Glenn's as well?  Thanks!

Once you're married, it's easiest to file separately.  That way, Glenn won't have to have an ITIN (Individual Tax Identification Number).  You'll just check "Married, Filing Separately" and write in his name and NRA (non-resident alien) as your spouse.  He won't have to file anything with the US government.  If you WANT to file jointly, he'll have to apply for an ITIN and will have to file with the IRS, just as any other married couple filing jointly would do.

About the Wills thing,, one thing you can do, is put the name of who you want bank accounts, IRA's,  to be left to, is to simply add them as the second name on the account. Legally, when you die, the account is automatically theirs, without having to go thru probate. Thankfully my Dad did that with me, and when he died, I needed that money to find health care for my mom.  We just added hubby to my account when we were in the states this last December.

There definately is inheritance tax in the UK, http://www.inlandrevenue.gov.uk/cto/iht.htm, but in the US, they have been working to do away with it, and the amount has increased each year, of the amount that is taxable. I know when my parent's died, it was $600,000 and over that was taxable,, but that number was to increase each year. This year the amount is $1.5 million.  Have just been thru all this in the last two years and reasearched it to death

 Thanks all for the very good info!This is something for me and G to know for future reference.

One thing I would want to know is how the agreement of reciprocity works with social security.  I know there is one and that the years worked in one country can be used for the other, but that's about all  I know.

I think that even if you are living in the UK, you are still entitled to your Social Security (if there's any left at that point, there is... :-/ ) when the time comes.  Regardless of any pension scheme or any other retirement you have going in the UK.

Thanks, Lisa...that's great info!

Yeah, the uK inheritance...the guy said none, but I disagree too. I think it's "anything above £X gets taxed" but again, am not sure. I just hate when there are loose ends, but it's better knowing than getting caught out by something that could have been avoided. I learned the hard way on a few things.

Am still learning.  :-/

I definately agree with you that it's important not to have these things sneak up on you. It's easy to not worry about them, until it's too late.  

To add one thing to list,, if you are diabetic, it could affect your getting a driving lisence in the UK.

Income Tax - I was told I didn't have to file income tax to the US if I didn't earn any money there.
I was told utterly wrong. I have since made all that up, so I am up-to-date. Just because your salaried income is not up to the minimum they state, that doesn't mean you don't have other income they can't tax.


Huh???

Wow, I haven't looked into any of this stuff yet-I'm not moving til next year, but there's enough to worry about for now.


Wills - I always felt I was fine to just have one will. A second one would confuse matters.
The US does not recognize UK wills, and your estate will be treated as though you have no will, even if you have one in the UK. The UK does not take inheritance tax, but the US does. Tip: get a will done up in the UK and have the same will filed with a US attorney. I am in the process of finding out more...whether this can be a UK attorney with US ties, such as being a Public Notary.


Huh, again???

What if you don't need it recognized in the US(i.e., you leave everything to your UK spouse??)


I'm sorry for being so ignorant of all this...

snupy, the tax stuff...the first step is informing them that you have a new address. You can do that once you get settled and then go to the US Embassy in London. While there you can change your address with Internal Revenue and Social Security. (I also needed to change my name on my passport and that was the main reason for my visit.)
    After that, the IRS will send you your next income tax forms to fill in. Then you just file as usual. There will be some slightly different issues to deal with, so you might want to get some professional advice.
    It's not that difficult to keep it up, it's just that I was told there I didn't need to file if I earned less than £x. I was told wrong. And I think a few others got tripped up as well.

And the will, apparently the US won't recognize a foreign will, and it will tax inheritance. So, they will see it that you don't have a will, and take it from there. Whether they are nice and generous, or mean and money-grabbing, I don't know. Not having a will does not mean the partner automatically gets it. I was told in the UK, the partner gets the first £125,000 and the rest go to the children...if there is no will. And that is just one for instance.
    My guess is that it's a simple enough procedure...have a will made up here, then take the same exact wording to someone who can file it in the US. I'm still looking into this one.

Anyway, I can't see there there's too much complication in any of this, it's just that if you don't know and do it differently, or if you just figure it's going to go away and it doesn't affect you, a small amount of work on your part to make it right could have a significant benefit. Doing nothing may make things really really hard. And you don't know what affects what. Could not filing taxes mean you can't vote, for instance? It certainly means you can't collect social security...not that any would be left, but I worked for 25 years in the US, and that added up to something.

As I said, I'm in the process of getting some of these questions answered. My head spins at the moment, so I might be fuzzy, and in some cases wrong. Frankly, the guy I spoke with the other day didn't have a clue about how the US does things, but he threw up enough warning flags for me to go "oh s**t" and to start looking into it, trying to get things on the right track.

I hope we can all keep expanding on this, and then come up a clear, concise checklist for those who follow on. Like I said, it's not hard...but it does require knowing about it.

(Whoever came up with that phrase "Ignorance of the law is no excuse" must have been a souless jerk. Sadly, a line has to be drawn, otherwise you'd have murder trials with people getting off on "gee I didn't know killing someone was illegal in this country.")

Since all of this is totally new to me....let me be the one to ask the stupid question.

I have to file US taxes, even if I don't live in the US? What does that mean? I will owe them money on anything I make abroad? And please excuse my ignorance, but won't I be paying taxes to the English government as well? If that is the case, does anyone make any money? I am soooo confused.