Self-Employed & Freelancers Tax When Working in the UK After Leaving the US
We have created a new website for Americans moving to the United Kingdom who need to know about US & UK taxes.
According to HMRC, more than 12,000 people change their residency status each year when moving to the United Kingdom.
Understanding residency rules in the United Kingdom is critical for self-employed professionals and freelancers leaving the US to work in the UK. This guide helps you navigate the Statutory Residence Test (SRT), identify your responsibilities, and avoid costly mistakes when crossing jurisdictions.
Planning is required by anyone moving to the United Kingdom from a foreign country, especially the United States. Being resident in the UK has many downsides that could affect your finances if you have not planned ahead.
This is your Tax Guide for US Self-Employed & Freelancers working in UK after leaving US
Understanding Tax Resident Rules
HMRC uses the Statutory Residence Test to determine if an individual is a UK tax resident. The test considers how much time you spend in the United Kingdom and your connections to the country. Your residency status affects whether you must pay tax on your worldwide income or only British-sourced income.
The Statutory Residence Test (SRT)
The SRT comprises three parts:
Automatic Overseas Test – You’re not a resident if you were in one or more of the previous three years and spend fewer than 16 days in the country during the year.
Automatic UK Test – You are a resident if you spend 183 days or more in the country in the year.
Sufficient Ties Test – If neither automatic test applies, residency is based on ties such as accommodation, family, and work. The more ties you have, the fewer days you need to become resident.
It is important that you log your time in the UK.
HMRC’s official guidance on the Statutory Residence Test:
Real-World Scenarios
British Freelancer Returning from the US A British national working in the US decides to return and operate as a freelance consultant. If they spend more than 183 days in the United Kingdom, they become a resident and must declare all income, including US earnings.
US Freelancer Moving to the United Kingdom Temporarily A US-based graphic designer takes a six-month project in the UK. They may remain non-resident under the Automatic Overseas Test with no previous ties and fewer than 183 days.
Digital Nomad with Dual Residency Risk A self-employed IT contractor spends 100 days in the United Kingdom and maintains ties (accommodation and family). They might trigger residency and face double taxation unless protected by a treaty.
The UK-US Tax Treaty and Permanent Establishment Rules
The UK-US treaty prevents double taxation and outlines rules about when business income becomes taxable in the other country. Under the treaty, business profits from a US-based sole trader or LLC are not taxable in the UK unless they have a permanent establishment (PE) . A PE typically includes a fixed place of business, such as an office or an agent habitually concluding contracts in the United Kingdom. Freelancers working remotely without a physical base may avoid creating a PE, meaning their income may not be taxed in the UK—unless they are resident.
Using a US LLC
Many freelancers or business owners consider using a US LLC—especially in states like Wyoming—to reduce administrative burdens and US tax exposure. A single-member LLC treated as disregarded for US tax purposes means the entity does not pay US tax. Instead, the income flows through to the UK self-assessment return of the individual. If the person is resident in the United Kingdom, they are taxed on this income as if they were self-employed.
Benefits of a Limited Company
Setting up a limited company offers several advantages:
Compared to higher personal tax rates, corporate rate is charged at 19% (for profits under £50,000).
Directors can pay themselves a mix of salary and dividends, reducing overall liability.
Business expenses can be more easily deducted, reducing profits.
A limited company separates personal and business liability.However, company administration and reporting are more involved than operating as a sole trader.
VAT Implications for Freelancers
If your business turnover exceeds £90,000 in a rolling 12-month period, you must register for VAT. This applies whether you operate as a sole trader, limited company, or through a foreign entity with a UK presence. Even without a physical office, VAT registration may be required if you sell digital services or consultancy to British customers. Once registered, you must:
– Charge VAT on services (usually 20%)
– File VAT returns quarterly
– Pay VAT to HMRC and keep digital records under Making Tax Digital (MTD) rules
Some businesses voluntarily register for VAT below the threshold to reclaim input VAT on business expenses.
US Tax Considerations When Leaving the United States
US citizens and green card holders are taxed on worldwide income regardless of residence. However, moving to the introduces another tax layer. The IRS requires filing of Form 1040 and possibly FBAR or FATCA disclosures, even when abroad. For full compliance guidance, visit the IRS international page: https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad
Treaty Agreements Between the United States & the United Kingdom
The UK and US have a double taxation agreement that allows credits to be claimed on income taxed in both countries. Residents in the United Kingdomcan claim Foreign Tax Credit Relief (FTCR) or use the remittance basis if they qualify. The treaty also includes tie-breaker rules for dual residents and detailed provisions on pensions, dividends, royalties, and business profits.
Self-Assessment Requirements
You might need to register for self-assessment with HMRC if you have:
Deadlines:
– Register by 5 October following the end of the year
– File online by 31 January
More information: https://www.gov.uk/self-assessment returns
2024 & 2025 OECD Compliance Updates
From the 2024/25 year, HMRC increased scrutiny of ties for short-term workers and is digitising cross-border income reporting. This aligns with OECD transparency standards. Freelancers with multi-jurisdictional clients should maintain detailed records of travel, contracts, and income sources.
Actionable Steps for Expats and Freelancers
Track Days Accurately – Keep detailed records of time spent in the country.
Assess Ties – Identify if you meet work, accommodation, or family tie criteria.
Check Treaty Relief – Review double taxation agreements to avoid dual tax.
Evaluate PE Risk – Avoid creating a permanent establishment through local offices or agents.
Monitor VAT Thresholds – Register for VAT if turnover exceeds £90,000.
Consider Entity Structure – Evaluate the benefits of a UK limited company or US LLC.
Seek Professional Advice – implications vary based on individual circumstances.
Author Bio – Simon Misiewicz of Optimise Accountants
Simon Misieiwcz FCCA, ATT, MBA, EA the UK-US tax experts at Optimise Accountants wrote this article. With over a decade of experience advising expats, freelancers, and international business owners, we help clients navigate complex rules and ensure full compliance.
Optimise Accountants is a specialist firm providing and advice to individuals and businesses.
FAQ about Self-Employed & Freelancers
How does the Statutory Residence Test (SRT) determine residency? The Statutory Residence Test (SRT) assesses UK residents rules based on automatic tests, automatic overseas tests, and sufficient ties tests. Factors include time spent in the United Kingdom, work, family, and accommodation.
What are the implications of being a resident? You might need to report worldwide income and may be subject to UK tax on foreign earnings, although double taxation relief may apply under treaties.
How can expats avoid resident status in the United Kingdom? Expats can avoid resident status by spending fewer than 16 to 183 days in the country (depending on ties) and ensuring they do not meet the automatic residence criteria.
Do I need to file a self-assessment tax return if I am a resident? Yes, you must submit a self-assessment return if you are a resident with foreign income, self-employment, rental income, or meet HMRC filing thresholds.
What reliefs are available for residents with foreign income? Residents with foreign income may claim tax relief via the remittance basis, Foreign Tax Credit Relief (FTCR), and treaty agreements (DTAs) with other countries.
