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I am a US citizen living and working in the UK on a spousal visa. (My husband is British.) I've got the opportunity to do some freelance work for a US company on top of my full-time job, getting paid in US dollars to our own US bank account, but I will have to do the work from the UK. I will of course need to declare it for US taxes, if I do the work while resident in the UK, will the UK be able to claim it for tax purposes as well? I am hoping I can keep income earned from a US company by a US citizen in US currency in the US without involving the UK, but my husband is concerned that I will get double-taxed. Does anyone have any advice on this? Many thanks!

  • How are you doing this as a sole trader, umbrella(to avoid ir 35) or your own company ( which can work out better from a tax perspective) – Pepone Dec 9 '14 at 23:51
  • Since you seem to be unaware of the UK tax treaty CedricP mentioned, just want to check: are you aware you need to file taxes for your in-UK job (that is, your main job, not the U.S. freelance work) income with the U.S., and then claim the exemption with the Foreign Earned Income Exclusion (it's up to about $101k per person)? You need to file to get this exclusion. U.S is one of the only countries that wants taxes on all worldwide income, no matter where you live (though it has this exclusion, and some treaties). – Chelonian Jan 22 '16 at 7:41
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I believe you do have to pay UK tax on it. In particular see http://www.hmrc.gov.uk/cnr/hmrc6.pdf, section 10.2:

Unless you are able to use the remittance basis, when you are resident in the UK you are liable to UK tax on the arising basis of taxation. This means that you are liable to UK tax on all of your earned income, wherever it arises.

The "remittance basis" is something you can use if you have "non-domiciled" status - but even if you do use it:

You will be liable to UK tax on the arising basis for any UK employment income and for any overseas employment income where any of the duties of employment are carried out in the UK.

I would hope/expect that the UK/US double taxation agreements will mean that you only have to pay the higher of UK and US tax in total - i.e. probably UK tax.

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There is a comprehensive tax treaty between the US and the UK. For self-employment, the location of the work defines where the tax is due. So if you are performing the work from the UK for a US company on a self-employed basis then tax is due in the UK.

You are able to then claim an exemption on your US tax return using either the Foreign Earned Income Exclusion, or the Foreign Tax Credit method. Which is more favourable depends on the circumstances, but in any case, you will not be taxed twice.

  • Is the FEIE applicable to self-employment, though? I thought that one still has to pay self-employment taxes (SS/Medicare, ~15%) if you're self-employed unless you are in one of the 25 countries with a tax treaty, in which case you just pay the self-employment taxes to your home country. FEIE would apply for her main UK job, though, she she definitely get that exemption. – Chelonian Jan 22 '16 at 7:44

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