financial questions for American expats

[JJ]

We're moving to London from Switzerland soon and I'm trying to get a handle on the money rules and regulations. From what I understand, I can bring in money tax free (it's already been taxed by the US and Switzerland, so I mean UK tax free) as long as I'm not resident. Is this true? We have a bank account there and, I'm assuming we'll need money to get started, unless people are giving away food, clothing and housing for free. (Yay if they are!!)

Also, we'll be paid in GBP and we have a mortgage that needs to be paid in USD. What kind of things do I need to worry about when transferring money to the US?

If you think I'm not asking the right questions or haven't thought of something, please let me know. Or if there's a good website that gives all the rules in a straightforward manner, that would be much appreciated.

Thanks!

JJ, I'm working on some of the same issues myself right now so I'll also be interested in any answers you get.

I have heard that as a non-resident I could put money in a bank account in the UK and not get taxed on the interest (up to a certain amount), and I could then use that money when I'm visiting. I have a call into my financial guy at the moment, so if I find out more I'll post again.

(By the way I'm a British citizen but a US resident.)

KateandtheGirls, we can switch! I'll put some pounds aside for you and you put some dollars aside for me...Let's see, how would that work?

Just joking, of course.

Keep bumping -- SofiaAmes has done all this, I think she has an accountant she recommends in London. Or just CAT her.

That would be perfect. Thanks, zebra, I'll cat her.

Wait! Was it you who wanted/needed rainpants?

JJ - if you're bringing in funds, then make sure that the source of the funds is easily traceable. I think that the one thing you need to be very careful about is bringing in funds made from capital trasactions eg sale of property, stocks/shares etc, especially where these haven't been "fully" taxed already. One of the perks of expats is that you are sometimes not subject to UK tax on capital gains provided that you do not remit the money to the UK.

Ladymuck, thanks! That's the problem, unfortunately. The money is sitting in an interest bearing acct and is subject to a whopping UK tax if we bring it in. Somehow I thought that it was ok for non-residents to do, though.

There should be a simple reference guide available somewhere with links to the detailed information. Bah!

Hi jj. got your email and here I am. I can't remember if you are a british citizen or not, and I'm not sure if it matters. In my case (as a non british citizen) it was significant when I became resident. The inland revenue uses several things to determine when you become resident. They include buying a house and spending more than 180 days in a year in the country. There are 2 stages, one is being resident and the other is domiciled. I'm not sure what happens when your are domiciled, but I think that doesn't kick in until you are living in the country for many years, or declare your intention to live there forever.
Once you are resident you cannot bring money into the uk from an interest bearing account. without being taxed on it. This also includes using credit cards that are paid for out of such account. You can however bring money in from an account that isn't interest bearing where you can show (with a solid paper trail) that the original source of the money in the account was not earned (ie it was inheirited or capital gains). Before you are resident I think that you can do more or less what you want. But, it is important that you don't do it within the tax year that you become resident, because I think they mix the whole lot up.
In my case, I transferred a large sum of money into the uk in order to buy a house before I became resident here. I didn't get financial advice until after I had done the transfer and the accountant had a bit of a time juggling things to show that I wasn't resident when I bought the house (as owning the house was one of the markers for residency).
By the way, I now have my parents send me money as a gift when I need to get money out of the usa. Also, I pay for all my holidays and everythat that happens outside of the uk with my us bank account as this doesn't count as bringing the money into the uk.
Really you should consult an international tax expert. The money will be well spent in order to prevent costly mistakes.

Thank you! Can you recommend someone? Does your person do email well? It's not the fee, but email is much easier than me than phone conversations. Argh about the tax year thing. We have to have money there to start with, so I guess we'll bite the bullet and transfer it in. I'll do asap, though.

Also, what are the regulations on transferring money to the US? I'm going to have to do that to pay the mortgage.

Do you have to pay tax on the unrealized gain of the worth of your house in USD (ie due to the dollar weakening)? My husband thought you did. I looked on the IRS site, but it wasn't exactly clear.

I'm a US citizen, but resident of Switzerland atm. I could transfer the money through my Swiss account (it'd be a million times easier for me), but don't want to do anything illegal. Although why that would be illegal, I don't know! I guess I just want to be sure I'm doing things properly.

Thanks so much!

The domicile issue is in relation to inheritance tax - your estate is only caught for UK inheritance tax if you are UK domiciled. You become automatically domiciled once you live here for 17 years. You can also opt to become domiciled earlier if you wanted to (can't offhand think why you would want to - presumably to escape a more punitative system elsewhere.

Will I be domiciled if I become a citizen? We're aiming for citizenship as we'd like to move back once the boys are through high school and/or university. Also, I'd like to be able to live there if they decide to attend a school in the UK.

I guess that's a question for a few years from now. Thanks for all of the help.

Didn't quite understand the question about unrealized gain. Do you mean in the usa? As a us citizen you are liable for tax (and MUST fill out tax returns annually) regardless of where you live. You can work the system though. I have rental income in the usa which I do not bring into the uk. However, I can deduct the interest portion of my uk mortgage against my us taxes, meaning that I pay no taxes in the usa (my uk income is below the foreign earnings exemption amount). When I sell my house (primary residence) in the uk, the profit on it will be subject to us taxes if it is above the exemption amount. Because of this, it is important to keep track of any capital improvements that you do to your uk property (ie extensions, loft conversions etc.), because although they are not relevant to the uk taxes, they are to the us taxes.
I wouldn't recommend the woman that I used as in the end I didn't really feel that she knew the international stuff very well, and she was not computerized at all. I may know someone else. I will check tomorrrow and email you the info.

Oh, and there is no problem with sending money to the usa, since as a us citizen you are liable for tax on income regardless of where it's earned or where you keep the money. Once you've paid us tax on it, you can transfer it to timbuktoo for all they care. However, you should consult with an american tax expert if you are a citizen and your dh isn't and you have an estate over $600,000 (this amount has probably increased by now). There is a special way that you have to do wills and things to avoid your dh having to pay large amounts of inheiritance tax if you die before him. I don't know if this applies if you don't live in the usa.

Thanks again.

The unrealized gain was for the US taxes. Because we're on an expat package and have been since we moved abroad (sounds like I'm moving a woman of dubious character), we haven't had to deal with this (taxes) ourselves. I'm hoping to continue that trend, but my husband can't ask the people he usually would because they don't know he's moving yet.

I'd love to get in contact with an international tax person. We'll have Swiss, UK and US this year and I'd like to make sure I don't mess it up.

Don't reply tonight again! Thanks for all of your help, I really appreciate it.

We're both US citizens. Forgot to mention that!

Is your husband British? (Now I'm just being nosey and I feel like I should know this, but...)