Remote work made it possible to keep an American job and live in Britain. Plenty of people now open the same laptop in Manchester that they used in Minneapolis, for the same manager and the same salary.
Working remotely from the UK changes the tax, even though the job has not changed. This guide explains which country taxes the salary, what happens to Social Security, and the paperwork your employer probably has not thought about.
Where is your salary earned?
Where you physically do the work. The IRS states that the source of earned income is the place where you perform the services, and where or how you are paid does not change that. So a desk in Leeds makes the pay British-source income.
That rule surprises people whose payslip, bank account and employer all sit in America. None of them decides the source.
The IRS guidance on personal service income sets out the rule. Both countries apply the same basic idea when they decide who taxes the salary.
Keep a simple diary of where you worked each day. It costs nothing, and it settles almost every later question about which country taxes which pay.
What is a remote worker's tax position in Britain?
It is usually that of any other UK employee. Once you are UK resident, Britain taxes your salary like anyone else's, whoever employs you and wherever they pay you, and the employer's location changes nothing.
Residence follows the statutory residence test rather than your visa or your intentions. Our guide to the statutory residence test explains how the day counts and ties work.
Even before residence begins, pay for days worked in Britain can fall within British tax. A treaty exemption can protect short visits, but it has conditions that a long remote arrangement rarely meets.
What does the US do with the same salary?
It depends on whether you are a US citizen or green card holder. Citizens stay taxable in America on worldwide income, so the salary still goes on the US return.
Because the pay is foreign earned income, a citizen can use either the foreign earned income exclusion or foreign tax credits. With British tax rates usually higher, credits often remove the US tax entirely.
Our guide to choosing between the exclusion and the credit compares the two. The choice has knock-on effects, so it deserves a model rather than a guess.
| Question | US citizen working remotely from the UK | British citizen doing the same |
|---|---|---|
| UK tax on the salary | Yes, once UK resident | Yes, once UK resident |
| US tax on the salary | Yes, with exclusion or credits | Generally no, for work done in Britain |
| US return | Required above the thresholds | Usually not, unless other US income |
| Social security | Depends on the agreement | Depends on the agreement |
| Days worked in America | Taxed as usual | Can bring US tax on those days |
What if you are not an American citizen?
Then the US generally has no claim on pay for work you do in Britain. A British citizen working remotely from the UK for a US company is usually outside the US income tax system for that work.
Days worked while visiting America are different. Pay for those days is US-source, and it can bring US tax unless an exception applies.
Your employer needs to know your status. Without the right paperwork, a US payroll may withhold American tax that you then have to recover.
Does your employer keep withholding US tax?
Usually yes, until someone tells it otherwise. US employers generally withhold US income tax from the pay of American citizens working abroad, and many payroll teams simply carry on as before the move.
Where you expect to qualify for the exclusion, you can give your employer a statement to reduce that withholding. The IRS page for Form 673 describes the form.
Over-withholding is recoverable through the return, but it ties up cash for months. Meanwhile, the British tax on the same salary is also due.
Payroll tax is a separate question from income tax. Social Security withholding follows the agreement and any certificate of coverage, so fix both at the same time.
Which country's social security applies?
Usually the country where you work, under the social security agreement between the two countries. For a remote worker living in Britain, that normally means UK National Insurance rather than US Social Security.
The main exception is a temporary assignment. An employer that sends you to Britain for a limited period can often keep you in US Social Security, with a certificate of coverage as evidence.
The IRS page on totalization agreements explains the certificate. Our guide to the totalization agreement covers who qualifies.
Were you sent, or did you choose to move?
That distinction matters more than most people realise, and the answer is factual rather than a matter of labels. A temporary assignment arranged by your employer can fit the agreement's exception for workers sent abroad.
A personal decision to live in Britain while keeping your job usually does not. You then fall under the normal rule, and British National Insurance generally applies from the start.
In our practice we see this question decide thousands of pounds a year. Check the answer before the first payroll after the move, not at year end.
Put the arrangement in writing either way. A clear record of who decided the move makes the social security answer easy to evidence.
What if the employer runs no UK payroll?
Then British tax still applies, but the collection works differently from an ordinary job. HMRC guidance says an employer with no UK presence may choose to operate PAYE voluntarily, and some do.
Where nobody operates PAYE, the employee often has to pay the tax and National Insurance directly to HMRC. HMRC's manual on employers with no UK presence explains the rules.
This is the part employers most often miss. The salary arrives gross, and the British tax on it becomes your responsibility to organise.
Why some employers refuse remote work abroad
It is not only about your tax. An employee working from Britain can create British obligations for the company, including payroll, employment law and, in some cases, corporate tax questions.
Some employers solve that with an employer of record, which employs you locally on their behalf. Others convert you to a contractor, which raises its own employment status questions.
Either way, get the arrangement in writing. Tax follows the facts, and a clear contract helps both returns match what actually happens.
What about pension and benefits from a US employer?
They follow you, but the tax treatment may not. A US 401(k) contribution from salary reduces American taxable pay, while Britain may not give the same relief for a foreign plan.
Employer health cover works the same way. A benefit that is tax-free in America can be a taxable benefit in Britain once you live and work here.
Ask your employer for a statement of every benefit, and check each one against British rules. Surprises here usually surface in the first Self Assessment return.
Does your old state still want tax?
Possibly, especially if you kept strong ties there after the move. Leaving the country is not automatically the same as leaving a state, and some states look at domicile rather than presence.
A remote worker who keeps a home, a driving licence and a voter registration in the old state can stay within its reach. Severing those ties at the time of the move is far easier than arguing about them later.
Our guide to filing a US return from the UK covers state residence in more detail.
Does tax registration give you the right to work?
No. Paying British tax and National Insurance says nothing about whether you may work in Britain. Immigration permission is a separate question with its own rules, and its own consequences if you get it wrong.
A US citizen without the right to work here should resolve that first. Tax compliance on work that should not be happening does not make the arrangement lawful.
Many people working remotely from the UK hold British or dual citizenship, or a visa that allows work. Confirm yours before anything else.
Setting up remote work from Britain, step by step
This order covers the employee and the employer. Most problems arise because the first payroll after the move runs on old assumptions.
Share the list with your employer's payroll or HR team.
- Confirm your right to work in the UK.
- Establish when UK residence starts under the statutory residence test.
- Decide with your employer whether this is a temporary assignment or a permanent move.
- Apply for a certificate of coverage if the assignment exception fits.
- Agree whether the employer will run UK payroll, use an employer of record, or leave you to pay directly.
- Adjust US withholding if you expect to use the exclusion.
- Register for Self Assessment if your UK tax will not all come through payroll.
An illustrative example
Take an illustrative example: an American product manager moves to Edinburgh to be near family and keeps her job with a company in Denver. The company has no British entity and keeps paying her through US payroll.
Once she is UK resident, Britain taxes her salary. Nobody runs UK payroll, so she pays the British tax and National Insurance directly, and she claims foreign tax credits on her US return.
Her US payroll kept withholding American tax for the first months, and Social Security too. Sorting the social security position and the withholding in the first quarter would have saved her a long wait for refunds.
Common mistakes when working remotely from the UK
The first is assuming a US payslip means US tax only. The place of work decides the source, and Britain taxes its residents on their salary.
The second is calling a personal move an assignment. The social security exception depends on the facts, not the label.
The third is waiting for the employer to sort it out. Where there is no UK payroll, the British tax often becomes the employee's job.
How US UK Tax Hub helps
We set up remote arrangements across both returns through our treaty relief service, including withholding, credits and the social security position. Where the employer runs no UK payroll, we explain exactly what you need to pay and when.
If you are working remotely from the UK, or about to be, send us the details and we will map both countries at a fixed fee agreed first. Our guide to registering for Self Assessment covers the first step on the British side. This article is general information, not personal tax advice; take advice on your own facts from a qualified adviser.