Understanding Salary and Comp for the UK

Hello nathanielclements,

Welcome to Expat.com

Thank you for starting this new thread on the England forum to ask your questions.

I really hope that someone who has already been there can clarify some points by sharing their own experience.

Cheers,

Cheryl

Expat.com team

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Hi all. Just trying to understand UK salary vs US salary, specifically how it relates to take home pay. Here in the US, there's federal, state and local taxes, plus social security, health insurance, etc. All affecting the overall take home pay. For example, looking at an average paycheck here with a gross income of $100K, the average bring home after all the fees might be close to $60K - $70K.
In planning for our move to England, I'm trying to understand how UK salaries handle all those types of fees and taxes. So compared to the situation I described, what would a similar situation look like in the UK, i.e. what percentage of a gross salary should I expect to have as take home pay?

Any help in understanding that would be greatly appreciated.
-@nathanielclement

Hi and welcome to the Forum.

First off, I am not a tax expert, nobody in the Expat.com team is and what we post here is based on what we have learnt/experienced over the years. In general, where you are assessed for taxes is dependent on where you are deemed resident, so if you move to the UK, you will be deemed as being resident there from the day you land. It gets complicated because as a US citizen you still have to make your tax declaration to the IRS and maybe to your home State, no matter where you are deemed as a resident. If you have a non-regular lifestyle, you will be assessed by the country where you have lived for more than 183 days in the tax year being assessed; be careful as not all countries use the Calendar year, the UK in particular has a tax year that runs from 1 Apr to 31 Mar; assessments in general cover the whole tax year, not just the little bit you may have spent there; needless to say, if you have complicated tax affairs, then speak to a tax expert who deals in the countries where you have an interest. There is a tax treaty in place between the UK and US, It generally covers things like double taxation, corporate taxes and pensions, plus any other unique aspect of a country's relationship with another; you can download them as PDF documents from the UK Gov website; this link will take you straight to them.

Like the US, there are many different sorts of taxes in the UK (link); that list covers both personal and corporate/business taxes; assuming you are an employee (as opposed to self-employed) you should concentrate on the things I've listed below; if you're interested in Corporate taxes, then go and speak to an accountant with experience in these matters:

• Payroll taxes - almost certainly deducted by your employer from your pay (they call it PAYE) and cover income tax and national insurance charges, you will have no say in how much and when they take it; when you start work you will be allocated a tax code which translates into how much tax you pay. There is a UK Government supplied online tax calculator; this link will take you straight to it.

• Council taxes - pays for local services, these are charged based on the value of the property where you live; again the UK Gov website provides further information about them; this link will take you straight to it.

• Sales/other taxes - are charged at the point of sale/delivery, currently for VAT (sales tax), 20% of the value of the goods, again the UK Gov website explains these and what they are charged in detail; this link will take you straight to it. There are other specific taxes in this category, things like insurance tax and other generic charges.

• Benefits in kind - these are mainly job-related and apply to things that are supplied to you by your employer (things like a company car, private healthcare) - your employer, things that anybody else would have to pay for. Yet again, details of these can be found on the UK Gov website; this link will take you straight to it.

• Capital Gains taxes - charged when you sell property, shares, personal possession and business assets. Again, this UK Gov link will take you straight to the website on this matter.

We don't pay Health Insurance as such in the UK. We have our National Health Service (NHS) which is funded by general taxation (so, from all of the taxes taken, there is no specific Health Care tax); if you are a resident of the UK, you will be entitled to use it. As an ex-pat to the UK who is staying for more than 6 months, part of your visa process will include an individual charge for 12 months of access to the NHS, you don't get to opt out of this or choose not to use it; again, full details are on the UK Gov website and this link will take you to it. This UK Gov website (link) has all the details about using the NHS in general.  Routine dental treatment is not part of the NHS scheme, we all have to pay for it.

If you have any other specific taxes questions, then go and speak to a tax expert, it may cost you, but he/she will also inform you of any tax breaks available to you.

I hope this helps.

Cynic

Expat Team