Freelancing for a US 1-person company while in the U.K

[snaptikappmefr]

I’ve been working remotely for a client in the US. The funds are sent via PayPal from the US in pounds. I have only transferred £2K in my U.K. bank account. The rest is sitting in PayPal.

Are there any tax implications in the U.K.? I’m a U.K. citizen (been to the US for work before and have a social security number there, but no US bank account)

I’m about to file for taxes for the first time and I’m not sure what to do about the income.

My job is above the tax free bracket.

Edit: I haven’t touched the money yet since I’ve been living off my wages. The £2k are separated in a savings account, the rest is sitting in PayPal.

 

[snaptikappmefr]

Recently, my new employer did a background verification check (the employer is a multinational financial company) and everything went smoothly, so not sure if it’s all ok.

 

[resjudicata]

@snaptikappmefr Passing a background check has absolutely no bearing on your tax position.

 

[jmswprkr]

@snaptikappmefr In a nutshell, yes you have to declare any income you get from working. HMRC will then decide if you owe tax or not.

It’s best to think of if that way to avoid any confusion of “should I?” Just declare it no matter what and let HMRC decide.

 

[ribs26]

@snaptikappmefr You need to register as a sole trader and fill out a tax return declaring the income you've earned (in the self employment section).

 

[snaptikappmefr]

@ribs26 Even if I am a full-time employee outside of freelancing?

 

[ribs26]

@snaptikappmefr Yes

 

[jmswprkr]

@snaptikappmefr Yes.

 

[resjudicata]

@snaptikappmefr Yes.

EDIT: it's sometimes mentioned in this sub that it's possible to declare this type of income over the phone to HMRC instead of doing a full self-assessment tax return, but I've never tried that myself.

 

[tobyheath94101]

@snaptikappmefr To add to the other answers, you need to declare all of the income, not just what you have converted to £

 

[resjudicata]

@snaptikappmefr The real question is: where are you tax resident? "I’m a U.K. citizen" doesn't really tell us that, there's something called the Staturory Residence Test which determines if you are. But essentially, if your only home is in the UK (which you have owned, rented or lived in it for at least 91 days in total) and you have spent at least 30 days there in the tax year you're deemed to be a UK tax resident. Or if you have another home abroad, if you spent 183 or more days in the UK in the tax year you are tax resident in the UK.

Assuming you are UK tax resident, this means you do have to file a self-assessment tax return in the UK, and declare all your income. The fact that it's been paid by a US company, or that it's been paid via Paypal, or where the money is sitting now, are all irrelevant, all that matters is that it is income you've had during the tax year.

Having a US social security number complicates matters a little bit, as far as I know this means you have to also file a tax return in the US. There should be no US tax payable if this income arose while you were tax resident in the UK, but from what I hear the US still want their tax return filed as well.