uspostdoc

Hi folks,

I'm a British citizen who has just moved out to the U.S (California) to do a 1 year postdoc (Oct 22 to 23) as a J1 research scholar. I'm trying to make sense of the tax laws and the UK-USA double taxation treaty, mainly from the UK side (as my university covers the U.S side). There are a few posts on here from others who have made the move, so I thought I'd see if others were willing to share their experiences.

Prior to moving to the U.S, I've lived in the UK all my life (and therefore am classed as a UK tax resident). From what I understand, as a J1 research scholar, I am exempt from U.S taxes for the first 2 years of arrival (though if I stay more than 2 years, I'll have to pay tax retroactively - fortunately, I'm only planning to stay for 1 year). My questions are:

1) When I fill my UK tax return for the April 2022-23 tax year, will I have to report my U.S income as foreign income (and pay UK taxes on it)? From what I've read, you are automatically classed as tax resident in the UK if you are in the UK for 183 or more days (I have been in the UK for just under 183 days this tax year); while for under 120-183 days, the 'sufficient ties' test applies, of which I have two (accommodation and work). I therefore believe I count as a UK tax resident for the 2022-23 tax year, though I'm unsure if there is anything in the double tax treaty which states otherwise. I was wondering whether, when I file my UK 2022-23 tax return, I will need to report as foreign income (and pay UK tax) on my U.S-derived postdoc salary?

2) I'm not 100% sure which U.S taxes I will be exempt from based on the double tax treaty (e.g I believe I'll have to pay California state taxes as California doesn't appear to abide by double tax treaties, though I'm happy to be corrected). If I do have to pay U.S state/other tax on my postdoc income, and I also have to pay UK taxes on this income for the 2022-23 tax year, will I be eligible for a foreign tax credit from the UK's HMRC to offset the foreign tax I have paid?

Thanks in advance for any help!

RICH

Hello and welcome to BE. I am afraid I cannot answer your questions but I know there ae knowledgeable people around here that will help you!

tht

Surprised you file a UK tax return, are you a company Director or self employed.

In my experience of being both UK and US tax resident at the same time the UK does not have a tax treaty for city, state or Social Security, Medicade etc. You also need to understand that you only get credit for tax’s you are required to pay, not ones you choose to pay.

One term you should also research is “remittance basis”.

uspostdoc

- Most of my UK income was PAYE, but I think I'll have to fill in a self assessment as I earned just over to £1000 Misc allowance from teaching.

- Thanks for clarifying - I'm only planning to pay taxes I am required to pay!

- Thanks, I'll check out remittance basis in more detail (though I'm classed as UK domiciled so from my initial readings, I didn't think that was applicable to me).

tht

You’re missing what I am saying, if you get your assessment wrong and pay in the wrong jurisdiction you may have issues. Residence, domicile etc are complicated. I ended up having to choose a tax residence one “year” because I did not meet any of the days requirements and my domicile of origin was not one of them. Also note the US has a calendar tax year so you have to report income and taxes paid from 2 partial UK tax years for 1 US tax year. Make sure to keep detailed records and pay stubs for everything so you know how to declare it. Because your end of year summaries will only be correct in the country it was issued.

You also need to think what will happen if you and are offered a job to stay or if you meet a future significant other.

And make sure to understand your FBAR requirements and look at if your UK employer will continue to pay NI contributions for you or is you can pay class 2 or 3 while in the US.

S Folinsky

BTW, there are certain US taxes that F-1 scholars are exempt from. It is not uncommon for payroll departments to miss this and withhold for hose taxes.

RICH

Is F1/J1 the same, or was that just a typo?

S Folinsky

I seem to recall that they are treated the same on that front. In my experience, it has been more of a problem with F-1 because unlike J-1, work authorization is most often not employer specific. Hence, the employer will be unaware of the difference. If the non-citizen should take up residence in the US, there are advantages to having those few extra quarters. (We had learned a few years back that my spouse’s earning records were missing earnings from 1984. Of course underlying IRS records no longer existed. We appealed and SSA said to take a hike. We then did administrative judge appeal. Pandemic delayed the ruling - in our favor. We got a sizable check. Point being, that a year of extra quarters can make a difference).

uspostdoc

Thanks for clarifying, I'll bear this in mind. I'm pretty certain to be returning to the UK for a variety of personal reasons so that shouldn't further complicate things at least. I believe I'm exempt from FBAR as I'm classed as non-US resident.

Thanks for the heads up! I'll keep an eye out on my pay checks.


Any advice on the UK side - were any of you folks classed as UK tax resident in the year you moved over and, if so, did you have to declare your U.S income as foreign income to HMRC + pay tax on it?

PetrifiedExPat

Worth noting that residency for tax purposes is different than residency for immigration purposes