Why would a US citizen want to move to the UK?
American citizens move to the UK for many reasons ranging from business, employment, family or even because they are tired of the American bureaucracy. There are many of those in the UK too.
Americans applying for a UK VISA
Americans wishing to live in the United Kingdom (UK) need to consider the type of VISAs available to them. It is advised that US citizens that want to reside in the United Kingdom apply for their VISAs via a specialist. There are many UK embassies available to take your VISA application in the United States.
US citizens can apply for a UK VISA for employment, business, student or as a tourist (albeit the number of days allowed to stay in the United Kingdom as an American is limited).
We suggest that Americans looking to move to the United Kingdom identify a UK VISA specialist to prevent errors and delays in their VISA application.
Moving to England and buying a home
Americans are used to using one realtor in the United States when buying real estate property. It is not the same process in the United Kingdom. When looking for a UK home or property investment, you rarely have one point of contact. You will need to utilise online property portals such as RightMove and Zoopla
Americans looking to move to the United Kingdom need to be aware that there is a purchase tax on buying a residential property as a home or a buy-to-let investment.
HMRC require foreigners (Americans not yet UK resident) to pay an additional 2% Stamp Duty foreign surcharge. This means that an American looking to buy an apartment in London or Manchester (as an example) at the cost of £600,000 will pay an additional £12,000 Stamp Duty Tax.
The 2% foreign surcharge Stamp Duty is in addition to the banded Stamp Duty Land Tax (SDLT) rates and the 3% Stamp Duty higher rate. The 3% rate applies if you already have a residential property in your name or wish to buy one inside a UK limited company.
Americans moving to the UK should use our Stamp Duty Land Tax calculator.
We advise clients to wait until they are in the UK and become residents before they purchase a UK home to avoid the unnecessary 2% Stamp Duty foreign surcharge.
Capital Gains Tax on US homes when moving to England
Many homeowners will have an emotional attachment to their homes in America for many reasons. However, did you know that you may pay Capital Gains Tax to the Internal Revenue Service (IRS) after 5 years of living in the US home?
You must meet the ownership and use tests to claim the capital gains tax exclusion. This means that during the 5-year period ending on the date of the sale, you must have the following:
- Owned the home for at least two years (the ownership test)
- Lived in the house as your main home for at least two years (the use test)
It might be more tax efficient to sell the US home before moving to the United Kingdom to avoid paying the IRS Capital Gains Tax.
Another pitfall is buying a UK home whilst retaining a US home. HMRC will require you to pay a higher 3% Stamp Duty rate if you own a residential home. This is irrespective of where the property is in the world.
Americans that move to the United Kingdom and sell their US home will avoid paying Capital Gains Tax to the IRS and the 3% Stamp Duty higher rate surcharge to HMRC.
UK mortgages for US citizens buying a home in the UK
Americans may need to apply for a residential mortgage if they wish to buy a UK home and need finance.
I will stipulate from the outset that the following few paragraphs does not constitute financial advice, and you need to seek out a mortgage broker who is suitably qualified and regulated by the Finance Conduct Authority (FCA).
In our experience of working with many Americans that move to the UK will be required to submit proof of income with their mortgage application:
- 6+ months’ worth of bank statements (but may be less in certain circumstances)
- 2 years of accounts (UK self-assessment tax returns or limited company accounts)
Many Americans will choose to rent a property for 6+ months in the United Kingdom while gathering the required information to get a good mortgage interest rate when buying a UK home.
Many Americans have opted for one option: to release money from their US home where the mortgage interest rates in America are less than in the United Kingdom.
Americans leaving the US need to think about mortgage terms and conditions if they leave the United States.
UK Wills & Power of attorney for Americans
Americans need to be aware that their US wills and power of attorney have no effect in the UK. They will need to maintain their US wills and power of attorney in the United States for their US assets.
Americans need to consider a will and a Power of Attorney in the United Kingdom for their UK assets. A will is a document that informs the courts, loved ones and lawyers where they wish their assets to be gifted upon death.
A power of attorney is a legal document that allows other people to act on their behalf for legal and financial matters in the event of incapacitation.
A mirror will is a legal will in one country replicated in another. In this case, you can give a UK solicitor the United States will document. The UK solicitor translates the US will document into UK law.
It is worthwhile using a UK solicitor such as Geldards to draw up a will and a power of attorney.
Currency exchange rates for US citizens moving to the UK
US citizens moving to the United Kingdom make the fatal error of exchanging their hard-earned money with a US bank or high street money conversion store.
The issue is that these vendors do not give you the best rate and have hidden charges. This means that Americans get less UK Sterling for their US Dollars.
We suggest that our US clients moving to the United Kingdom set up an account with Transfer Wise, where they will get the best exchange rates with the lowest charges.
Additionally, timing is essential. US citizens moving to the UK must keep an eye on the exchange rate. Americans should set up triggers using Transfer Wise to alert them when they get the best conversion rates.
