I'll be making a decent amount of money (for me) from some teaching in the USA this year, and have the prospect of earning more in the future.
Off-hand, can anyone on here recount how taxes work in such a case? I am self-employed, so have to file myself - which I do with an accountant.
Is income tax paid on the equivalent GBP based on the exchange rate at the time? Is there a tax penalty of any sort for bring money into the country? Is there anything else I should be aware of?
My first teaching gig with them starts in March, and because I tend to say 'yes' before looking into details, just realised this morning that I should have probably thought of some of these things before!
You have to complete a W-8BEN with your US employer to take advantage of the US-UK tax reciprocity agreement (so you don't pay double taxes). Just fill in non-US citizen, non-US resident, non-US resident alien, UK citizenship and don't work more than 90days in the US and you'll be fine. No IRS / US tax. Other wise your US employer may apply "witholding", i.e. they keep enough of your pay back to cover tax payment.
If you get paid in USD, then use the exchange rate at time of payment for your tax return.
No penalty for bringing money into the UK. Just be aware US employers still often pay with cheques (remember them!) which sometimes take months to clear. I have a UK (HSBC) USD account which makes electronic $ payments possible and gives a excellent exchange rate. It's a hassle to open one but worth it if you can.
I'd be checking with the US employer to confirm the intended method of payment. Cheques would be bad enough but make sure they aren't requiring you to have a US bank account for direct payment purposes (if so, figure out how you're gonna open a US account first, at this could take some time and hoop jumping).
If they are happy to pay into your (UK?) account, figure out whether their bank and your UK bank use IBAN it SWIFT for international transfers and be aware that both the sending and receiving banks will probably charge you a fee for each transaction. I'd imagine you can probably offset such transaction charges against tax but check with your accountant.
Can you crease a Wise account for them to pay into in USD? Can be cheaper than your own bank's international costs
I work in the Middle East, get paid in US dollars via a company in Singapore. The country I work in has a dual-taxation agreement with the UK. I'm very much not keen on messing up my UK tax liability so for me it goes like this:
Every month I'm paid in US dollars to a Wise account which I then convert to GBP and send to my UK current account. After looking at all the available options, Wise was the cheapest for me.
At the end of the year I get a tax letter saying how much tax/social security has been paid in the work country.
I give that to an accountant who works out how much is due in the UK. As far as I understand it she calculates how much I've been paid in GBP by using the exchange rate on each pay date. Then works out how much my gross pay would be in the UK for that to be my take home. The foreign-paid tax comes off the total amount of UK tax due and I then pay the remaining amount in 50% chunks every 6 months.
The big thing for me is the social security paid in the work country does not count towards NI in the UK, which is fair enough, but it means I need to pay class 3 contributions separately. It is next to impossible to speak to someone at HMRC who understands my situation so I'm currently 3 years behind.
I know it's a slightly different situation, but the main points are Wise is cheapest and get an accountant who knows these things. I have very a highly-paid family member who thought they were smart enough to do their tax returns themselves. An HMRC investigation resulting in a high 5-figure tax liabiliy soon made them realise they were in fact not smart enough to do their tax returns themselves.
