Working for a UK Employer While Living in the United States

US tax starts with where the worker lives and works

A British national who is a US tax resident is generally taxed by the United States on worldwide income, regardless of where the employer is based or where salary is paid. That means a salary paid from London into a UK bank account is still part of the employee US taxable income if the employee is living and performing services in America. The location of the employer matters for withholding, payroll, and treaty analysis, but it does not remove the basic US income tax obligation. Many employees assume that staying on a UK contract preserves a UK only tax position. In reality, the physical location of the work and the employee residence status usually drive the starting answer.

PAYE and US payroll are not interchangeable

The UK employer may continue operating PAYE, may stop it, or may need to restructure payroll depending on the assignment and local advice. Whatever happens on the UK side, PAYE does not settle the employee US obligations. If UK tax continues to be withheld, the employee may later need to claim foreign tax credits or otherwise reconcile the mismatch on a US return. At the same time, the employer may face US payroll obligations because the services are performed in the United States. A UK payroll that works perfectly for an employee in Manchester can be incomplete or even wrong for the same employee once the work is performed from New York or California. Payroll mechanics and income tax liability therefore need to be analysed together.

Social Security, Medicare, and the totalization agreement

The UK and US totalization agreement is intended to prevent double social security coverage, but applying it in remote work situations can be technical. In some temporary assignment cases, a certificate of coverage allows the worker to remain within the home country system for a defined period. In other situations, especially longer term remote arrangements, US Social Security and Medicare taxes may apply instead. The agreement prevents the same earnings from being covered twice, but it does not always produce the result either the employee or the employer expects. Because the social insurance position can differ from the income tax position, British nationals and their employers should review totalization issues separately rather than assuming the payroll country decides everything.

The employer may create US tax and compliance exposure

Having an employee working from the United States can create more than payroll obligations. Depending on the facts, it may create state or federal nexus for the UK employer, particularly if the employee is generating revenue, negotiating contracts, or performing a role that the tax authorities regard as core business activity. This can affect income tax filings, sales tax analysis, registrations, and employment law compliance. Smaller UK companies are often caught out because they see the arrangement as a private matter for the employee. From a US perspective, the company now has a worker on the ground. That can create obligations for the employer even if it has no office, no US bank account, and no prior plan to establish a US presence.

How double tax relief works in practice

Relief usually comes through a foreign tax credit rather than a simple exemption. If the same salary is taxed by both countries, credits may be available subject to sourcing rules and timing. In some cases treaty provisions help allocate primary taxing rights, but the practical filing burden remains. For long term arrangements, many British nationals and UK employers eventually conclude that a formal US payroll set up, a local employing entity, or a different contract structure is cleaner than trying to preserve a purely UK arrangement. Working for a UK employer from the United States can be entirely legitimate, but it should be treated as a cross border employment structure, not as ordinary remote work with no legal consequences.