What US Expats Should Know Before Getting a Job in the UK

When your job brings you across another sea and into the British job market, things can get knotted for an American expat. Navigating unfamiliar tax forms, payroll systems, and legal documents can be daunting.

If you're an American expat beginning a new job in the UK, here's how things work when your first paycheck comes and the UK forms you'll probably see.

Steer Clear of UK Payroll Confusion

The UK payroll system is far different from the W-2s and 1099s that you've grown familiar with in the US. UK workers are commonly paid on the PAYE (Pay As You Earn) system.

That is, your employer takes income tax and National Insurance contributions (such as Social Security) out of your pay automatically, each time you receive pay. No quarterly estimated payments or additional filings just to account for your work income, it's all taken care of ahead of time.

It's a cinch by and large. But just like there are many forms in the US, the UK has a couple of main pieces of paper you'll want to know about.

The 5 Must-Know UK Forms for American Expats

1. Payslips

Unlike in the US, where pay stubs aren't always required, UK law mandates that employers issue a payslip every time you’re paid. This will show:

• Gross and net pay
• Tax deductions
• National Insurance contributions
• Pension contributions
• Any bonuses or reimbursements

Payslips might be digital or printed, but they’re crucial for keeping track of what you’re being paid and what’s being taken out.

1. National Insurance Number

You'll require a National Insurance (NI) number before you begin working, which is like a Social Security Number. It's employed to record your contributions towards the UK's pension and healthcare systems.

If you're coming from Australia and entering the UK, you might need to apply for one. Your employer can assist, or you can make an application on the website of the UK government.

You technically can work and wait for one, but you should have it resolved soon so that there won't be any problems.

1. P11D

If your company provides you with benefits such as a company car, housing allowance, or private health insurance, your employer can issue a P11D towards the end of the tax year. The form details "benefits in kind," which can be taxed. It's sort of like a 1099-MISC for non-monetary benefits.

Not everybody receives a P11D—only if your employment has benefits. 

1. P60

The P60 is equivalent to the W-2 in the US. It's an annual statement that indicates how much you made and how much of your salary was taken out as tax during the tax year (which in the UK, from April 6 to April 5).

You'll receive a P60 from your current employer if they still have you working on April 5. This document is significant for:

• Filing UK taxes (if necessary)
• Verifying your income when renewing your visa or applying for credit
• Informing the IRS about foreign income

If you're switching between jobs halfway through the year, your new employer won't give you a P60 until the next April, and only if you remain with them until then.

1. P45

You'll receive a P45 when you leave employment, whether you're made redundant, retire or quit. It sets out how much you've been paid and how much tax you've paid so far in the tax year.

The P45 is sent in several sections: one to your new employer, one for you to keep on file, and one might go to HMRC (equivalent to the IRS in the UK). This allows your new employer to add you to the correct tax code so you don't overpay (or underpay) tax.

If you change jobs during the middle of a year, your P45 keeps your record intact.

It’s essential to know the difference between p60 and p45 in order to file the correct form and avoid any penalties that come with mistaking one for the other.

The IRS Still Wants to Hear from You

As an American citizen, you're still bound to file a US tax return, even if every dollar you make comes from overseas. The IRS really doesn't care that you're employed in London or Manchester, they want to know what you made and where.

But here’s the good news: thanks to the Foreign Earned Income Exclusion (FEIE) and the US-UK tax treaty, most Americans abroad don’t end up paying double in taxes. You’ll still file, but your UK taxes usually offset what you’d owe the IRS.

Your UK paperwork (particularly the P60) will assist you in preparing your US return correctly. This is one of those situations where a tax professional who has experience working with expats is worth their cost.