Taxation Overview for IT Professionals Relocating Abroad from the USA

Taxation Overview for IT Professionals Relocating Abroad from the USA

The fast-paced advancement in the technological sphere has raised the demand for IT professionals exponentially. Statistics indicate that IT professionals working in developing security programs in the data, networking, information systems, and cloud arenas are highly in demand worldwide. And that includes countries like the UK, France, Sweden, and various others.

Acquire Certification to Work in Any Location in the World

Getting an education, training, and the required certification can help you get a job in any overseas location. You can choose to work as a self-employed digital nomad or acquire a position with a prestigious company. Do keep in mind that any certification you earn in the US is valid in the UK and 146 other countries. Hone your skills using online tools like the Comptia+ Security certificate practice test for an overview of the common questions. Evaluating your grasp of the materials helps when you’re ready to sit for the exam.

You’ll Complete the Same Forms and Requirements as a US Citizen.

Regardless of where they’re living and working, US expat IT professionals must complete and submit the same forms as their compatriots back home. Further, you’ll declare income from all sources and add information about not just the wages and salaries you’re earning, but also all other income. That includes capital gains from the sale of any stocks and shares, rent, interest, dividends, royalties, and profits from property sales, among others.

Even if you’re working as a self-employed freelancer for clients across the world, you must list and provide detailed information in your tax return. Work with an expat tax consultant specialized in working with U.S. expats in the UK and international taxation in general to research the tax considerations to keep in mind when relocating to the United Kingdom or any other country.

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The IRS Has Exclusions to Avoid Double Taxation

The IRS has several exclusions for expat IT professionals, so they can avoid paying double taxation. If you’re a bona fide resident and maintain a UK domicile, you’ll also comply with the tax requirements of Her Majesty’s Revenue and Customs (HMRC). The US and UK have a Totalization Agreement and tax treaties to reduce the tax burden on US expats. Here are some of the exclusions you can claim.

  • Form 2555  to claim Foreign Earned Income Exclusion (FEIE) and Foreign Housing Exclusion (FHE)
  • Form 1116 to claim Foreign Tax Credit (FTC)
  • FinCEN Form – 114 FBAR or Financial Bank Account Report to declare all assets in foreign bank accounts
  • Form 8938 or Statement of Specified Foreign Financial Assets to submit information about other assets.

A critical factor to keep in mind is that you cannot claim both FEIE and FTC. Your tax consultant can advise you best on the best benefits you should take advantage of. For instance, if you have a high taxable income of between £50,001 to £150,000, and you’re paying 40% tax to the UK HMRC, using the FTC would be advisable in place of submitting Form 2555. Further, you can claim up to $1,400 as additional child tax credits if you have kids.

Paying Social Security and Medicare

Whether you’re working as a freelance contractor or holding a job, you must pay Social Security and Medicare. This amount is paid out of your gross income, but employees can expect that the company where they’re working will withhold the necessary taxes and remit them to the administration. 

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Working as an IT professional gives you the advantage of working from any country across the world. But, before relocating, make sure to inform the IRS of your intentions and keep up with your dues to both the US and UK governments. 

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