uk2theusa

Me and my wife are both UK citizen and are full time employed in the UK. We are relocating to USA from our company this year and I and trying to assess how to time my move to get tax advantage. I have some investment income from India every year and I read that moving to USA in august would be more tax efficient as I will not be a tax resident in the USA for this year and therefore don’t have to pay US taxes this year. Can someone advise or share their experience. I would specially like to understand if I should delay moving to my move and file as Non Resident Alien in year 1. Is that beneficial? I understand there are tax treaty between US and UK which gives benefits for filing as NRA, but couldn't find much details about it. Also what happens to SIPP? I have SIPP with Wealthify - would that be an issue?

durham_lad

First thing I would do is check if you can claim a non resident alien status which you may achieve but I don’t know.

https://www.irs.gov/individuals/inte...-presence-test

https://www.irs.gov/individuals/inte...esident-aliens

tht

I assume you are moving on a non immigrant visa? , if you become a PR I believe you need to file as a resident anyway.

Not sure about DTA between India and the US, but there is one for the UK, however note that only applies to Federal tax, not state, so depending which state and or city you move to you may owe tax there. Also note that the US will tax on a world wide basis.

Your current citizenship or citizenships may also play a factor.

Also make sure you understand about the FBAR before you move here and plan accordingly:
https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar

Glasgow Girl

I believe that the difference between a non resident alien and a resident alien is that resident aliens pay tax to the IRS on their worldwide income whereas non resident aliens only pay tax on income sourced within the USA. With that said the IRS considers any income earned by doing work when you are physically located in the US to be US sourced regardless of where they may be paid. I don’t think you can apply the foreign earned income exclusion to US sourced earnings. Therefore the only advantages in delaying the move may be if you have substantial worldwide income that is not US sourced and you delay the move until after you receive that income, and/or you manage the timing to optimize the tax free thresholds in in the UK and the US such that you minimize the amount of tax due in each country.

Your SIPP will be fine so long as you declare it on both an FBAR separately from your tax return and Form 8938 with your tax return if you meet the thresholds. You will not be able to contribute any further though. Make sure you fully understand the foreign account reporting requirements which relate to the aggregate total of all financial assets in all foreign countries, this includes all bank accounts, investment accounts, pension funds, life insurance, just about anything except shares held in individual companies, property, bonds and collectibles. Make sure you comply with these requirements and report all foreign income (however small) from day one, Failure to do so can be extremely expensive and stressful to correct after the fact.

Pulaski

A relatively small point, but if you leave the UK after April 6 you will get your full 2023-24 personal allowance. So if you work in the UK long enough to earn your personal allowance (e.g. roughly two months if you earn £5k/mth), that will likely end up to be almost tax free income, with any PAYE tax refunded on filing a P85.

tht

This… when I move to NZ I timed my move specificity to use both the UK and NZ tax allowance. The tax year there runs calendar like the US.