Expatriate Advice for Brits in America

Published on 09 August 2006
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America is often a country that expatriate resources skip over because obtaining residency in America, taxation in the US and even getting American health insurance as an expatriate are complicated and messy topics to cover…but we cannot ignore the fact that annually an increasing number of Brits move abroad to live, work or retire in the US.

This is our guide to essential expatriate advice for Brits in America and it covers taxation, the dollar versus sterling, retiring to the States and affording to fall ill without facing bankruptcy…

Getting into America depends a great deal on the status of the individual applicant and what their intentions are if they do receive the right to live in the States; there are many agencies who can assist with the visa application process but initially those seriously interested in learning about moving to live permanently in America should contact the American embassy in London to determine their eligibility and to get guidelines about how to apply for a visa.

Once a Brit moves to live in America permanently they become tax resident in the US.  After 183 days of living in the States their entire worldwide income and assets will become liable to American income and capital gains taxation therefore those moving need to ensure that they get their financial affairs in order to ensure they face the lowest taxes possible…

For example – whilst income tax in America is far lower than income tax in the UK, the addition of federal taxes, state and city taxes can push income tax rates higher than the UK’s rates.  (Some good news for those moving to live in Florida, Alaska, Nevada, South Dakota, Texas, Washington or Wyoming however, there are no state income taxes there!)

Those who are retiring to America from the UK can still take their tax free cash lump sum out of their pension fund and then they should ensure any income derived from pensions or savings in the UK is paid gross as they will have to pay tax in America and don’t want to have to pay it in the UK as well.  Because of the double taxation agreement between the UK and US expatriate Brits living in America only need pay US taxes – on all but their estate at death that is…but more about that in a minute.  More good news for Brits retiring to America – British state pensions are not frozen…

Those who have a house to sell in the UK might be best advised to sell it before their 183 days are up in America as they will be able to sell it capital gains tax free in Britain but after 183 days of residence in America they will have to pay a certain amount of CGT on the sale of even a primary residence. 

Now back to IHT – the Great British tax man likes to keep a strong hold of all of his citizens even if they do take up residence overseas – this is because IHT pays dividends to the British government – literally.  Therefore for the first seven years a British expat lives in America they will still be deemed domiciled in the UK and their estate will be subject to British inheritance tax laws.

Now then – healthcare – many people are aware that the cost of health care in America is exceptionally high.  This is why travel insurance and even expat medical insurance companies always charges a huge premium if the policy holder is planning on spending time in America.  There is quite simply no way around this fact – getting health insurance in America is criminally expensive…and what’s, more many US based insurers refuse to take those over a certain age or those who have not been fully resident in American for a few years.  This means that it is essential to get a good basic level of expatriate coverage until it’s possible to take out American health care cover.

Ways to keep premiums low include have a large excess – but of course this can back fire if you do fall ill and need to claim, you will have to be able to afford to pay the excess.  Those who can prove good health, who do not smoke, drink or participate in extreme sports and who have no history – either personal or family – of serious illness will get the lowest premiums.  And remember - while health insurance in America is expensive, not having it is even more expensive!

And finally – at the moment Her Majesty’s lovely British pound buys plenty of US dollars so those expats moving from the UK to live in America are having a field day and finding that the devalued dollar is allowing them to live like kings…but currency fluctuations are a very real phenomenon and financial advisers always advise would be expats to protect themselves against adverse fluctuations in advance.  Methods used include having a variety of investments across currencies, cashing in certain policies that are not recognised as tax free in the states, switching funds or policies and even securing the conversion rate for a large lump sum that could be derived from a house sale in the UK and be being used for a house purchase in America…there are financial advisers and currency specialists out there who can help.

Many thanks to Jennifer from Arizona for her help with this article...

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