I will become a “contractor” to the US based company and they will deposit my check into a UK bank account. I understand that my paycheck should not have US taxes (fed, state, ss) taken out. What might my UK tax rate be and do I have to register as self-employed?
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Tax rate will depend on how much you earn. The self employed question may well depend on if your company has a UK legal entity / branch office or not– GagravarrCommented Mar 9, 2017 at 21:22
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My US company has no UK presence. That is why I need to be changed to contractor status. So if I'm an independent contractor (self-employed), Does that effect your general taxes?– BamBamBeanoCommented Mar 9, 2017 at 21:27
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1I think you need to look into DPNI as mentioned on hmrc.gov.uk/gds/nic/work/embassy.htm , as you'd only have a single company you did work for, under IR35 you likely wouldn't be considered "self employed", but we're probably into territory where you really want to pay a few hundred quid for an expert's help, rather than relying on strangers on the internet to help you avoid accidental tax-related fines...– GagravarrCommented Mar 9, 2017 at 22:33
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@Gagravarr thanks for the responses. I will definitely be working with an advisor. Just poking around to see what my options are. Thanks again.– BamBamBeanoCommented Mar 10, 2017 at 13:29
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1 Answer
Promoting comments to an answer, but with a big caveat - you need to talk to a proper advisor about this!
If you are only working for one single company long term, you are unlikely to be able to do that as self-employed in the UK. The term to google for is IR35. Basically though, with one long-term company / client, you'll be deemed to be effectively an employee not self employed, and therefore owe the additional employers taxes.
If your US company has any kind of UK presence, you'd probably need to be employed through that.
If not, you'd likely have to pay the employers taxes directly yourself, which is quite unusual in the UK. The term to google for is DPNI (Direct Payment of National Insurance), start somewhere like http://www.hmrc.gov.uk/gds/nic/work/embassy.htm for guideance.
There are 3 main kinds of UK employment taxes - Income Tax (normally done as PAYE = Pay As You Earn), Employers National Insurance (paid by the company) and Employees National Insurance (paid by you, normally taken off by your company and sent direct to the government). You can use official tools like https://www.gov.uk/guidance/hmrc-tools-and-calculators and https://www.gov.uk/check-income-tax to estimate what those will be, to get an idea of your effective tax rate
(Since you'll likely have a complicated situation, including things like earnings and interest from overseas, you'll likely also have to do a UK Self Assessment tax return once a year.)
You'll need to ensure that you're paying / not paying the right taxes on the US side, along with ensuring that you're correctly signed up for paying the UK taxes at the right time, including UK taxes that people don't normally pay themselves because their companies normally do it for them. That's why you need a proper advisor to ensure you do it all right!
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Oh, and don't forget that you'll still have to do US tax returns as you're a US citizen, and you'll likely also have to tell bits of the US government about overseas bank accounts, overseas shareholdings if you have a UK pension etc. We have some questions on those things here, check those too
answered Mar 10, 2017 at 14:26
