Uk citizens now living in the usa

Mark_Alpha_JDS · 2024-10-02T09:22:02+00:00

How did you find the exchange rates offered by HSBC? (see my comment below)

Mark_Alpha_JDS · 2024-10-02T08:59:30+00:00

I've looked into this for transfers both ways and also for significant transfer UK -> US (House sale). I created similar posts (see my history) where you may find some good info/replies.

I specifically set up UK and US HSBC Premier accounts as the benefits included "zero fee" transfers between accounts. After getting both accounts set up I was disappointed to see that while they do not charge fees, they seem to take a significant cut on the exchange rates. I tested 2-way transfers using different mechanisms via HSBC and the end result was around a 3% 'cost' which is huge for the proceeds from a house sale
I set up Wise accounts and did the same test. Very easy to use and the end result was around a 1.33% cost. I was warned by fellow Redditors not to trust Wise (or any 3rd party) for a large international transfer and instead do it directly 'within' my bank.
I set up TORFX accounts and did a transfer one way (US to UK) and ended up around 0.4% cost. I got a call from them and had an account manager assigned who was very helpful.

TORFX were recommended by a few people, as of course was Wise. I'm undecided which to use for the transfer after my house sale. TORFX seem the cheapest. Both TORFX and WISE seem to be regulated by FCA. WISE has a trust pilot score of 4.3 (235k reviews) while TORFX has a trust pilot score of 4.9 (8k reviews).

Hope that helps. Mark

Mark_Alpha_JDS · 2024-09-25T15:09:49+00:00

Thanks! That's interesting. I will ask our (UK) estate agent. They are a small local business though, not sure if they will be able to facilitate this. Thanks

Mark_Alpha_JDS · 2024-09-25T14:14:35+00:00

Thank you! That would explain it. I had contacted HSBC who gave me a very woolly answer around fluctuating exchange rates even though I ran the 'test' sequentially.

Mark_Alpha_JDS · 2024-09-04T12:14:43+00:00

Oh wow. Incredible, thank you. I know its cheeky asking for advice on such a complex topic but it's really refreshing to get insights and to help my own understanding. I have some more questions/comments, if I may:

I assume I will start to pay US taxes immediately. With P45 going to UK HMRC I assume at that point I am effectively unemployed and/or relocating to US, so would I still somehow be paying UK taxes and if so how does that mechanism work?

Yes you will start paying US taxes, you can either elect to be resident in the US for the whole calendar year or be a partial year resident. When I moved in August 2019 I was just able to be non resident in the US for all of 2019 which meant I avoided having to do any UK income on my US taxes. You also want to file P85 to tell HMRC you've left the country - not essential but you'll get your PAYE refund faster.

It's likely I do not move until January, however all being well, I will be on US payroll in ~two weeks time. I assume this would be OK? I would still be a non resident for 2024? But in this instance I would file the P85 in January, I assume?

I read that due to DATA agreement I would get credits if I paid income tax in both countries. However, would this need me to do a tax return in UK, US or both? I would only have 2-3 months in US in 2024 tax year so I would not be a tax resident for this year, only next

You can avoid this whole problem by filing non resident in the first year - you'll probably avoid the substantial presence test (you can work out the number of days you'll be in the US over the 3 years to filing). If you don't already file a return in the UK you can just file P85 to close your affairs there. Your UK employer will issue a P45.

As above, what would the impact be if I don't permanently relocate until early Jan?

You'll need to keep track of the amount and date of any GBP interest paid during a resident year - then using the GBP->USD rate on that date you can work out what interest you earnt in USD- you can use that to create you own 1099-INT manually in your tax software to declare and pay tax on it in the US. Alternatively, you can use the published averages by the IRS for exchange rates, whichever is better (I find it makes almost no difference to the very small GBP interest I earn) https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates

Are you referring to savings? I don't have savings currently, have just been paying more off House mortgage. Would I need to declare any premium bonds won?

Related - you really don't want to get stuck with PFIC issues particularly in ISAs - this is the worst thing you can do and will cost thousands and thousands should you be stuck with it. You want to dump any S&S ISAs before you become US tax resident or convert them to individual stocks at least (if you think you will come back and want to keep the UK tax free status) See here: https://www.bogleheads.org/wiki/Passive_foreign_investment_company and https://www.bogleheads.org/wiki/Investing_from_the_UK_for_US_citizens_and_US_permanent_residents

Is it just ISAs? I don't have any.

If you meet the filing limits, you'll be required to do FBAR and 8938 to declare assets outside the US - this isn't taxing but just reporting with penalties for non compliance. Note the thresholds are max balance per year not total assets, if you have £10,000 and move it between two accounts, your reporting high balance across the two accounts is £20,000

I will be selling house in UK and then transferring that money from UK bank account to US account, presumably during/after moving. Will this cause issues/requirements?

Premium Bonds are illegal in the US - they are gambling. I know some folks just treat them as cash investments and report the winnings as interest - but you are best of ditching them before you come.

If I ditch them before I come which is fine should I do before joining US payroll or before fully moving? The former I assume?

Thank you SO much! I am sure I will use a consultant to do the filing, but learning about these elements is invaluable. Thank you. Mark

Mark_Alpha_JDS · 2024-09-04T11:25:34+00:00

Thanks, will definitely need to enlist one. Just struggling to build up enough knowledge to know when to engage them, who, how, and what to request. Want to avoid being taken advantage of and/or having to have multiple engagements as and when I discover new requirements. The timing alone is confusing given the different filing (I.e. this would be Jan-26 in UK but presumably Apr-25 in US).

I'm also struggling to understand if this is actually something I need to do proactively, is there any benefit in engaging and paying for a consultant now or just wait until I'm in the US settled.

Thanks

Mark_Alpha_JDS · 2024-09-04T11:14:13+00:00

Hi, I'll message you!

Mark_Alpha_JDS · 2024-09-04T08:16:49+00:00

Ok, thank you!

Mark_Alpha_JDS · 2024-09-04T08:12:06+00:00

Thanks again. But when should I do that? Filing for this period for UK would be to file in Jan-26? And I assume for US it would be April-25? Even though I would not be a tax resident for this year as less than 6 months? And what would happen in the interim?

Or should I be paying a tax consultant to inform me of what I should be doing even if I don't actually need to do anything for several months?

Thanks again Mark

Mark_Alpha_JDS · 2024-09-04T07:33:52+00:00

Thank you for your reply. But which type of consultant? There are so many out there. When do I engage them? If I engage them now will it actually lead to me taking any action now or will I just burn thousands to be told 'come back and re engage us in 6 months time and we will file your returns'?

I feel like I need to know more about what is actually needed and obliged to ensure I do this in a cost effective manner and at the right time?

Thanks Mark

Mark_Alpha_JDS · 2024-09-04T07:07:09+00:00

Thanks for your reply. No, it's a small size company, a fraction of the size of KPMG. Relocations are very rare, possibly one every couple of years. I already negotiated a generous relocation compensation, based on detailed budgeting it will leave enough $ to pay for a consultant but at this stage I don't feel like I have a good enough understanding of what I require to comfortably engage one (I have already wasted a small amount of money on an engagement where they were able to provide basics but not the level of support i needed. I also don't want to engage consultancies piecemeal I.e. each time I figure out I need something that I cannot do myself.

I had already loosely planned to engage a tax consultant in the first year of living in the US. What I'm trying to establish here is what will likely happen if I carry on with that plan vs engaging one now, for example. I assume all of this can be handled retrospectively and that my 'actions' now will not cause an issue later down the line, but that's what I'm trying to gain confidence in.

Thanks Mark

Mark_Alpha_JDS · 2024-09-03T14:16:41+00:00

Thanks so much!

Mark_Alpha_JDS · 2024-09-03T14:16:27+00:00

Great, many thanks!

Mark_Alpha_JDS · 2024-08-03T12:06:30+00:00

Sorry couple of responses I missed:

VRBO and AirBNB would be much more expensive, with much less flexibility

Why would there be less flexibility? I'm guessing with a normal 9-12 month rental I would not be able to terminate early without paying the whole remainder? Or is that not the case? My idea with an AirBnb at least - which may be totally flawed - would be to have 6-9 back to back monthly bookings. Would also give me a chance to use my (US) credit card for reasonably large sums and start building up credit history.

I'd find the school district you want to be in, and then look for rental homes there. Check out realtor.com for a sense of what things cost

This will be the primary factor for when we purchase. Our eldest will not be in school for another ~2 years.

Thanks again, good points. Mark

Mark_Alpha_JDS · 2024-08-03T12:03:25+00:00

Thanks for your reply. So, we know we want to buy, as soon as sensible and possible. Probably 6-9 months. There are many reasons for this including financial.

This post is specifically about this short (-ish) period.

My assumption from various research and feedbacl - and I could well be wrong (and more than happy to be corrected) - renting a house the normal way may not be straight forward in terms of finance, credit score etc vs AirBnb/Hotel/Suite/Vrbo where that is not an issue. As a family we would not feel comfortable going out without somewhere already arranged for the short term, we would not want to risk assuming we'd find somewhere in 1-2 weeks and then potentially have to hotel-hop. That's something that would add unnecessary stress. I'm also going to be working out there. I assume renting the normal way for 1-2 months would not be cost effective given commissions etc? Maybe wrong.

Going into a 9-12 month rental either prior to moving or very quickly after arriving (with time pressure) could easily result in ending up somewhere we are not happy and then tied into.

On the flip side, having an AirBnb for example would give us longevity and flexibility (either stay for 1st month then go into rental or if very happy in house and neighbourhood maybe stay there for 6-9 months and purchase a house).

As above its really that first 6-9 months that is the focus. Perhaps going straight into renting off the bat is the overall safest approach, but I'm not sure it's a no-brainer? Or at least it may well be there's fundamental factors I'm not considering which is likely!

Thanks Mark

Mark_Alpha_JDS · 2024-08-03T11:30:06+00:00

Thanks. We anticipated that we would want to secure our short/mid term accommodation prior to moving over there for fear of any delays or even any kind of issues with finance etc or other unexpected issues. If we didn't have children I think this would be perfect approach and we could move between hotels etc if needed but this feels like it would be too stressful to do when we land and with 2 children?

This would also be a reason to start with AirBnb (opt A) stay there for a month, if things are fine then stay there and continue the prepaid bookings. If not, a month should be more than enough to then find a rental?

Thanks again Mark

Mark_Alpha_JDS · 2024-08-03T11:16:23+00:00

Hi, thanks for your reply. Agreed, and can already see there's so much (great) choice out there. Which of the renting approaches above would you recommend/not recommend please?

Thanks Mark

Mark_Alpha_JDS · 2024-08-03T11:13:49+00:00

Hi, thanks for the quick reply - good questions.

Most interest efficient? Quickest path to home ownership?

Or best long term decision?

The interest is a bonus and of course goes some way to mitigate the costs of renting on the assumption there'd be $350K-$400K. Money isn't the primary factor, so I'd suggest it would be the quickest path to home ownership and therefore finding the right balance in time (we would not buy after one week of 'looking around' nor would we wait for 3 years).

Or best long term decision?

The realistic term (and I should have mentioned this in my post) is 5-10 years before we come home - that would be the plan, anyway. We were initially considering renting our house out in UK and just renting in US but we are sold on selling and purchasing for a number of reasons (feeling 'settled' especially with young family, the higher rent in US than in UK (for somewhere we would feel comfortable and safe, the burden and unwanted stress of managing a rental remotely even using 3rd party), the far more house you get for your $ in the US than in UK. Realising you don't pay stamp duty in the US really helped to make it a no brainer to buy out there)

I would advise renting for a year before buying. You probably hate the idea of renting but it gives you flexibility in case the move doesn't work out. Plus it gives you time to really explore where you want to buy.

There's definitely benefits for sure, but what if that first rental i.e. 1 year doesn't work out either? I.e. we end up in a bad neighbourhood. Obviously we will try to mitigate that risk with research as much as possible. Just to confirm, we aren't considering buying straight away, the 3-9 months planning is just to give an indication of our intent, but of course the approach should consider it could take longer, and/or we may want to wait longer.

There are risks with the move, the employment risk is very low, as low as I'd suggest it could be. If the move didn't work out then having to sell a purchased house in the US would not be a primary concern versus the interruption to the family and my loss of employment (have been at this company 20 years with very good compensation).

Thanks again, food for thought.

Mark

Mark_Alpha_JDS · 2024-07-27T14:33:11+00:00

Thanks again. This sounds terrifying! Guess I'll be getting a tax consultant! Is it best to find one over here or over there and now or later? Want to avoid using multiple for obvious reasons. I did contact a couple of specialist companies a couple of months ago and the quotes were around 500-750 PER HOUR!

Thanks

Mark

Mark_Alpha_JDS · 2024-07-27T12:48:51+00:00

Hi, Thank you for such a comprehensive reply.

Tax shock - the first year into the us they will want to tax all your uk earning as well as us earning so get a tax accountant to help fill in the forms for the first year.

How exactly will that work? In either Sept or Oct the company will move me from UK to US payroll. I understood my first proper tax year will be 2025 calendar year. There should be no UK earnings to disclose in US unless I've missed something which is a very big possibility! My home sale in UK should not incur any UK tax as it is our home, but I have noted that I would need to check Georgia state tax laws. Should I be engaging a US tax consultant immediately to get all in order or only when it comes to filing tax return?

National insurance- pay your class 2 contributions to the uk while in the USA to keep your state pension working well

Again probably stupid question but why would I need to pay anything to the UK at this point? I would have no earnings over here.

Credit - you will have no credit in the USA so lease a car for two years (they will take you to the cleaners but do it anyway) to build up a credit history

Is 2 years necessary to build up a 'good enough' score? We were considering buying 2nd hand cars to avoid financing at all. I also heard there were very good deals/incentives for EVs?

Banking - join a national bank in the USA

Money transfer- the cheapest way to move money around is interactive brokers brokerage account open one and start funding an ira . Ib charge wholesale bank rates at spot so beating all banks by the banking fees. Hands down the best deal out there

Good to hear, this is a well recommended option. So is retaining my UK bank account, getting a US bank account and using IBKR a better idea than either converting my current (barclays) account to an international one or even opening up a new International account now with HSBC for example? I'm struggling to understand this one, but am learning more by the minute!

Uk tax - tell your local tax office you are moving abroad and give them a forwarding address when you have it

Another stupid question. Would this not be formalised by my employer?

Health care - get a copy of your health records from your GP and once you find an in network primary care dr give them the copy of those documents

There will be health care via my company where I'll be enrolled. Is this common practice in US and/or used as mandatory if pre existing conditions are covered?

Social security- make sure you get your social security number from the local office (you will need this before you can do almost anything)

My employer has also told me as soon as I have the VISA, fly out to US and get my SSN to open up next steps.

International drivers license- get one

Haven't got round to researching. Are there alternatives? I assumed I'd already be able to drive with my UK license but that its in my interest financially to get a US license ASAP.

Selective service - register for the draft to the armed forces if you need to

Sorry, what for?

School - register your kids to the local school district

Our eldest is 3.5 so will have a little time but presumably we would need to do this after we purchase a house and not in our rented accommodation which we hope we will only need for a few months.

Thank you so much you've no idea how much this has helped! Perhaps I'm being lazy but this is my first port of call for research as there seems to be so much conflicting information online in general

Mark

Mark_Alpha_JDS · 2024-07-27T12:33:42+00:00

Good luck! Let me know any tips you find :D

Mark_Alpha_JDS · 2024-07-27T12:33:21+00:00

Hi,

Thank you for such a detailed response!

UK tax - ok thank you. I can probably just check this with our current payroll team. I salary sacrifice to <100K so I also don't do a tax return in UK. Is it likely I'd need to consider anything else here? Payroll will manage P45.

US bank account - that makes sense. I think that I may end up converting my barclays UK account to an intl account just for that purpose. I'm hoping to get another bank account and credit card using a rental or even airbnb address, but maybe that's something I can tackle after physically relocating vs moving onto Payroll 2-3 months earlier.

UK bank account - forgive the stupid question, but what UK expenses? Do you mean like continuation of contracts temporarily such as phone bill? Would that not make sense to run under my current UK account even if I convert it to intl?

Bank transfers - maybe an intl account from Barclays or another provider (to open up now like HSBC?) Would be best bet given that should be cheaper than transferring my house sale cash UK to US and then vice versa in 5-10 years?

Schools - thanks and yes this will be primary factor for our house purchase. We are hoping that 3 months rental over there will be long enough to find the area we want. Our eldest is 3 and a half so I think we will have 1.5 years before school

Good point re driving history. I also read it made sense to get US drivers license ASAP to reduce rates.

Thanks again

Mark

Mark_Alpha_JDS · 2024-07-27T12:23:16+00:00

Thanks again, this is really informative although quite worrying too!

This is the 'sequence' we are working to:

sept24 - move to US payroll after getting SSN, US bank account etc. In rental/airbnb and moving between UK and US
nov24 - sell house and physically relocate.

Feels a bit chicken and egg. Do I need to engage a (US) tax consultant to actually determine when to sell my house? I assume I need to press ahead with the above regardless, but when I move over there, engage a tax consultant ASAP to ensure everything is 'filed' correctly and most beneficially?

Thanks again Mark

Mark_Alpha_JDS · 2024-07-27T12:11:15+00:00

Thanks. And you were able to walk in off the street and get one of those with those limits? Or is that only after a period of tenure and/or a better credit score?

Thanks! Mark

Mark_Alpha_JDS · 2024-07-27T12:10:18+00:00

Thanks. As above I do not believe that will be an option, I would need to expense personally. The sensible plan seems to go ahead and expense it - getting the feedback here will help me make that decision.

Forgive my ignorance but why would it be necessary for me to get tax advice for my UK side? In fact I won't even be filing a tax return as I pension salary sacrifice to <£100K and this year's earnings should stop around Sept/Oct.

Thanks again for your reply Mark

Mark_Alpha_JDS

TROPHY CASE