You have moved to the UK – Now what?
As an American living in the UK, almost nothing related to your financial affairs is easy. The consequences of seemingly simple decisions – such as how to pay for a new home or purchase a mutual fund – may create unnecessary tax charges and complexities. There are a number of key milestones that occur, from the time you arrive in the UK to the time you approach retirement. Many of these changes will impact the appropriate wealth management strategies for American expats. Understanding how rules will change for you over time will allow you to plan ahead and make prudent financial decisions. We begin these series of articles with some initial considerations for your first three years in the UK.
As long as you live in the UK, you will be dealing with taxation in two jurisdictions and it is important to gain an understanding of how the UK and the US tax systems interact with one another. It is true that a Double Tax Treaty exists between the two countries but this does not mean that all types of income or all tax-advantaged savings methods and accounts are treated the same way. Therefore, as you settle into your new life here, you should begin to familiarise yourself with the similarities and differences. Gaining a high level understanding of the tax traps to be aware of will help you avoid making detrimental financial decisions without taking advice first.
If your work in the UK will take you on frequent foreign travel, there may be an opportunity to exclude some of the foreign earnings from UK taxation if your employer pays your salary into an offshore bank account and you do not bring the foreign earnings onshore. If you think this might be applicable for your individual situation, you should seek advice from a US-UK tax adviser on the specific steps to take to ensure you do this correctly.
The UK and the US also have different tax years. The US follows a calendar tax year whereas the UK tax year runs from April 6 to April 5 each year. Staying organised and keeping good records of all financial transactions that take place will inevitably make your life easier when tax time comes around.
As you can never be certain whether your move to the UK is permanent, you should take steps to maintain good credit standing back home in the US. This can be useful both for your visits back home and, more importantly, if you decide to return permanently. Keeping your US credit active may be as easy as using your US credit card to pay for your Netflix account each month. However, keep in mind that whilst you are in the UK, if you use US dollars to pay for something it may be considered a remittance for UK tax purposes.
Lastly, as you settle in, subscribing to some useful sites online may help answer some of the routine questions that expats have. Sites like Focus-info.org, UK Yankee, Expats Plaza and Expat Exchange all may be useful places to begin.
For more wealth planning tips and tidbits from MASECO read our 39 Steps to Smart Living in the UK.
Risk Warnings and Important Information
The value of investments can fall as well as rise. You may not get back what you invest.
The above article does not take into account the specific goals or requirements of individual users. You should carefully consider the suitability of any strategies along with your financial situation prior to making any decisions on an appropriate strategy.
MASECO LLP trading as MASECO Private Wealth is authorised and regulated by the Financial Conduct Authority, the Financial Conduct Authority does not regulate tax advice. MASECO Private Wealth is not a tax specialist. We strongly recommend that every client seeks their own tax advice prior to acting on any of the strategies described in this document.