Dual nationality and taxes

Here's the situation: I am a dual citizen of the UK and US, as is my son. My wife is an American. We currently live in the US, but will be moving to Britain in a few months. We plan to live there permanently (we will NOT maintain a residence in the US), but I will continue to work remotely for an American company.

My questions are:

1. How can I avoid being taxed twice? I realize I can claim foreign tax paid on my US tax return, but does that mean I have to go the entire year paying the taxes, and get it back at the end of the year, or is there a way I can simply not pay that tax up front?

2. How do I "register" with the UK government so as to pay the taxes I owe there?

3. I noticed on my tax returns that they ask if I have any foreign bank accounts with more than $10,000. Does this mean I can't ever move my savings to the UK? For example, if I want to buy a house in the UK, and that money currently is in my US account, then what's the best way to get that money to my UK bank account such that I will not violate whatever $10,000 rule the US has?

If they are not already familiar with UK based compliance issues, your US employer will want to start learning about English employment law, UK corporate tax, PAYE and NIC.

Why would you be paying US tax in advance? You are a UK employee it sounds like? You should have UK withholding and claim credit for this on your annual US tax returns.

Every month, my US employer will continue to deposit my paychecks in my US bank account. I am an American citizen, and from their perspective, they are just paying an American who happens to live abroad, no? Presumably, the US Federal Government will want to still take federal taxes out of each paycheck. I'd like to avoid that, as I will obviously need to pay taxes in the UK as well.

Alternatively, could I move to a contractor status with my US employer and claim self-employment?

How are you going to be employed? As an employee or an independent contractor?

If you are working in the UK you must pay UK income and payroll taxes ie. National Insurance. You will still be liable to US income tax because of your citizenship, but won't have to pay FICA. You should not be paying US income tax throughout the year and by either using the FEIE or FTC should have very little if any US tax to pay.

There is nothing to stop you moving money from the US to the UK, the $10k limit you mention is just a reporting limit. You must tell the US Treasury about any foreign accounts you own if their aggregate goes over $10k during the year.

Every month, my US employer will continue to deposit my paychecks in my US bank account. I am an American citizen, and from their perspective, they are just paying an American who happens to live abroad, no? Presumably, the US Federal Government will want to still take federal taxes out of each paycheck. I'd like to avoid that, as I will obviously need to pay taxes in the UK as well.

As you will be working in the UK your employer must comply with UK employment rules. The way they are thinking tells me they understand nothing of the taxation and employment law implications of having an employee in the UK.

They don't understand it because I don't. This is a new situation for them and for me, hence this post.

If I were an independent contractor, then would that remove any obligation for them to comply with UK employment law?

Alternatively, could I move to a contractor status with my US employer and claim self-employment?

Ding, ding, ding.......we have a winner. That's the way to do it. This avoids the potential FICA, employment law and US tax withholding issues. make sure you charge an hourly rate that is large enough to cover your costs and income. You might want to look at the UK self employment rules too.

Also, thanks very much to both of you for this information. I really appreciate it.

Also, thanks very much to both of you for this information. I really appreciate it.

Once you have the basics sorted you should think about retirement and pensions and whether you want to use something like an Individual 401k and ROTH in the US or look at the UK schemes. If you want to do a US scheme it will be best to set it up before you move to the UK as US financial firms often refuse to open accounts with foreign addresses.

You and your employer may want to use HMRCs status indicator tool - and read up a little on PE issues to see to what extent the employer may have problems.

You'd want advice from an employment lawyer about the effects of your engagement.

Alternatively, could I move to a contractor status with my US employer and claim self-employment?

Ding, ding, ding.......we have a winner. That's the way to do it. This avoids the potential FICA, employment law and US tax withholding issues. make sure you charge an hourly rate that is large enough to cover your costs and income. You might want to look at the UK self employment rules too.

I do it that way, too. I'm a dual citizen working freelance in the UK. One of my freelance clients is an American company with an office in London. When I do projects for them, I invoice them, they pay me in pounds into my UK account, and I report this income on my UK taxes as a self-employed sole trader. Once you get set up with HMRC it's a piece of cake.

As for US taxes, I've got an accountant in the US who handles things on that end to make sure I don't get taxed twice, etc.

Once you have the basics sorted you should think about retirement and pensions and whether you want to use something like an Individual 401k and ROTH in the US or look at the UK schemes.

This is not meant to contradict nun's advice, and I'm not a tax person, so keep that in mind when I say my US accountant had me stop contributing to my Roth IRA. I don't remember the exact reasoning, but it had something to do with which country the money was earned in, and whether/when the money going in had been taxed by either country.

I'd suggest getting an accountant in the US to handle taxes, as there seem to be a lot of hoops to jump through.

This is not meant to contradict nun's advice, and I'm not a tax person, so keep that in mind when I say my US accountant had me stop contributing to my Roth IRA. I don't remember the exact reasoning, but it had something to do with which country the money was earned in, and whether/when the money going in had been taxed by either country.

For a US citizen or resident to contribute to a ROTH they must show earned income on their 1040. If the FEIE is used rather than the FTC then the ROTH contribution might not be possible. This also assumes that you meet the usual ROTH income levels.

It doesn't matter whether the money is earned in the US or the UK or if you use FTC to offset US tax.