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Strange as it may sound, the great British weather is often not enough to keep many internationally mobile families on UK shores. Numerous wealthy UK citizens are lured by life on the other side of the pond, be it for work, retirement or lifestyle reasons.
While a US holiday may be quite straightforward, a longer-term move requires a bit more planning if you’re not to run into limitations long-term.
Permission to enter
If you’re going to spend any significant amount of time in the US – i.e. more than three months – or plan to do anything other than holiday, you need a visa, the type of which will depend on the purpose of your visit. The online standard electronic system for travel authorization (ESTA) should only be used for shorter holidays.
If you know that you’d want to pursue permanent residency – or the illustrious green card – it is best to start this process as soon as possible, as it is bound to take some time. Unlike in the UK, you don’t automatically qualify for residency after spending a number of years in the US.
A taxing decision
Another factor that can play heavily into a decision to make a permanent move or not is the US tax system – which carries a fairly fearsome reputation. For UK residents, there are three major areas of potential impact.
For starters, it’s quite tricky to determine in which country you’ll pay more tax – due to the US’ two-layered income tax system. Everyone is subject to the same federal tax, for which the top rate – of 37% – is lower than the UK’s equivalent rate – of 45% – and takes longer to reach than it does in the UK. However, in addition to the 30,000+ different types of tax that the US system boasts, residents are also subject to state taxes determined by where you live. These can vary significantly, from zero in places such as Florida, to reasonably hefty rates in areas such as New York and California.
It’s also worth bearing in mind that some tax allowances, such as the UK’s entrepreneurs’ relief upon selling a business, do not apply in the US. This can significantly impact the anticipated returns that a business owner expects to realise.
Timing is crucial
Secondly, timing is crucial for tax purposes – especially for individuals who spend time in the US every year – irrespective of their visa type. Unlike in the UK, your tax liability is determined by your presence in the country over three years, and the tax year runs as a calendar year. The effect of these differences could be significant for high-net-worth individuals.
The final element that can sting UK residents is their non-US investments. With a highly US-centric system, any distributions or disposals from an investment collective – such as a unit trust which will attract the top rate of federal tax. This effectively turns gains into income and eliminates any benefits accrued through tax-free investments in another jurisdiction.
The best course of action remains speaking to your wealth planner as soon as you’re considering the idea of either just spending more time in the US every year, or if you’re making a more permanent move – the sooner you start planning, the less chance you will run into obstacles further down the line.
Speakers:
Robert Paul, Partner and Head of US Family Office, London & Capital
Christi Jackson, Senior Attorney & Head of the US Practice, Laura Devine Immigration
Daniel Hyde, Partner, US/UK Private Client, Blick Rothenberg
