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Moving to the UK
Robert Paul, Partner in the US Family Office spoke to Steven Bostock, Partner at Mishcon de Reya and James Murray, Director at Frank Hirth about the process for Americans moving to the UK. If you don’t have time to listen to the whole podcast, we have summarised their discussion below.
Despite the weather, the UK is a popular destination for American expats. With an estimated 170,000 US-born residents, Great Britain has one of the largest populations of US citizens outside of their home country. The reasons for this are multiple. Weather excluded, the UK speaks the same language, is frequently the home of family connections, and perhaps even more importantly, boasts one of the world’s largest financial centres.
Moving abroad may seem simple on the surface, but in practice it is much more complicated. Apart from the mechanics of actually moving, there are two major hurdles that need to be overcome. The first, for those who do not hold British citizenship, is to gain the right to reside in the UK. The second is to develop a financial plan that ensures compliance with both the American and British tax regimes.
Gaining immigration status
No matter who wants to move to the UK, everyone needs to earn the right to live in the UK through an appropriate visa category. In the past there were various visa types, covering a myriad of categories. These days there are just four broad forms of visa:
- Investors, entrepreneurs and people of exceptional talent
- Work permits for skilled workers
- Student visas
- Family visa
Prior to applying for a visa, it’s a good idea to investigate your family history and find out whether there are any connections that might make the immigration process easier. For example, anyone who is a citizen of a European Union country has a direct route to UK residency for as long as the UK remains in the trading bloc. An option for people married to, or in a common-law relationship with, a British citizen, is to apply for a family visa. If neither of those arrangements are an option, then it is time to consider the different visas offered by the UK government through the points-based system.
Investors, entrepreneurs and people with exceptional talent can apply for a Tier 1 visa that allows them to live and work in the UK for three years, with the possibility of extending for a further three years. While the pure entrepreneur category no longer exists, it is possible to be granted entry to the UK as an investor, an innovator, a graduate entrepreneur, a person of exceptional talent, or someone who wants to launch a start-up.
To be eligible for an investor visa, you must be willing to invest a minimum of £2m in the UK economy. The more money you invest in the economy, the sooner you can apply to settle permanently. For example, someone investing £2m can apply to settle after five years, while someone investing £5m can settle after three years. For innovator visas, applicants need to have an idea for a new start-up business, and have £50,000 in investment funds to set it up. A start-up visa also requires an original business idea, but instead of having an investment fund requirement, applicants need to be endorsed by a UK higher education institution or a business organisation that supports UK entrepreneurs.
The other options include working visas and student visas. Tier 2 work visas are for skilled people employed by a UK-based company. These allow businesses to either transfer employees to their UK branch or hire people from outside of the UK if they are highly skilled and there aren’t similarly qualified professionals in the local labour market. Finally, student visas allow people to live in the UK for the duration of their studies and in certain circumstances there is the possibility to apply to extend their stay.
Taking care of tax
After you are granted a visa to live and work in the UK, you then need to put a financial plan in place that ensures compliance with tax authorities in both countries. The US is one of two countries in the world where tax liability is based on citizenship, rather than residence. This means you will need to file an annual tax return with the Internal Revenue Service even if you are living in the UK and not generating an income in the US.
While US tax rules cannot be avoided, the objective is to mitigate double taxation as much as possible. When Americans move to the UK, they can choose to pay tax on all their worldwide income and gains like any other UK taxpayer, or they can choose to pay on the remittance basis. Under the remittance basis, US citizens will pay tax on any income and gains generated in the UK and only pay tax on foreign income and gains when they are brought into the UK. This option can be attractive in the first seven years of living in the UK, but it comes with a £30,000 annual charge in the eighth year. As a result, it is important to examine your tax position at a global level and put in place a wealth plan that is as efficient as possible in both jurisdictions.