Working remotely for a US company from the UK makes your salary UK-taxable and, for US purposes, foreign earned income — even though a US employer pays it into a US bank. The UK taxes it first; the US return then relieves it through the foreign tax credit or the exclusion. US–UK tax specialists untangle the payroll side.
The arrangement looks simple from the employee's side: same job, same pay, different kitchen table. From the tax side, it moves the source of the income, changes which country's payroll rules apply, and can change which social security system you belong to.
Working remotely from the UK: who taxes the salary
If you are UK resident, the UK taxes your employment income, and pay for work physically done in the UK is taxable there wherever the employer is based. The US continues to tax you as a citizen, but the income is now foreign-source.
The IRS is explicit on its page defining foreign earned income: the source of earned income is the place where you perform the services, and where or how you are paid has no effect. A New York employer paying a Chase account does not make work done in Manchester US-source.
The payroll problem
| Employer set-up | UK payroll | What usually happens |
|---|---|---|
| US company with a UK branch or office | PAYE expected | UK payroll through the UK presence |
| US company with no UK presence | May operate PAYE voluntarily | Voluntary scheme, or you settle UK tax yourself |
| You work for a UK entity in the group | That entity can be required to operate PAYE | UK payroll through the UK entity |
| Employer of record in the UK | The provider runs PAYE | UK payslips; US W-2 stops |
HMRC's guidance on a new employee coming to work from abroad explains the employer's side. An overseas employer is not treated as having a UK tax presence merely because it has staff working from their homes here, which is why many US companies with one remote employee have no UK payroll at all.
That does not make the UK tax disappear. Where no one operates PAYE, the liability is generally settled through your own Self Assessment return, with payments on account that can come as a shock in the second year.
US withholding while the UK is taxing you
A US employer that keeps you on US payroll will usually keep withholding federal income tax, and often state tax too. You then pay UK tax on the same salary and recover the US withholding only when you file your US return.
Two tools help. Form W-4 can be adjusted to reflect the foreign tax credit you expect, and Form 673 lets you claim exemption from US withholding on wages to the extent you expect to exclude them under the foreign earned income exclusion. State withholding is a separate question for your former state, covered in state taxes for US expats.
Social security: US or UK?
The US–UK totalization agreement decides which system you pay into. An employee sent by a US employer to work in the UK temporarily — for up to five years — can stay in the US system, with FICA continuing and a certificate of coverage from the Social Security Administration exempting them from UK National Insurance.
The rule is built for assignments. Someone who moved to Britain on their own and now works remotely indefinitely does not fit it neatly, and may belong in the UK system instead. Get the position confirmed and the certificate in hand before either payroll is set up. Coverage rules are covered in the US–UK totalization agreement.
Without a certificate of coverage, both countries can charge social security contributions on the same salary. The certificate is issued before the assignment, not reconstructed afterwards.
Relief on your US return
Because the salary is foreign earned income, you can choose the foreign earned income exclusion, capped at $132,900 for 2026, or the foreign tax credit. With UK rates usually above US rates on the same salary, the credit generally leaves nothing to pay and keeps your IRA contributions and refundable child credit available — the comparison is in FEIE versus the foreign tax credit.
Your W-2 will show wages as if they were US-source, and some preparers accept that at face value. They should not: the foreign source has to be established on Form 1116 or Form 2555, and the treatment of workdays spent back in the US needs apportioning.
The employer's risks
A remote employee can create obligations the company did not plan for: UK payroll, employment law rights, and in some cases a risk that the employee's activities create a taxable presence for the company. That is why many employers insist on an employer of record or refuse UK-based remote work outright.
Raising it early tends to go better than being discovered by HMRC. If you are a contractor rather than an employee, the analysis is different again — see US companies paying UK contractors.
Tranzesta sets up the UK and US side together so the payroll, the certificate and both returns agree. Book a consultation before you agree remote terms with your employer. The US return itself sits under US expat tax returns.
Frequently Asked Questions
Do I pay UK tax if I work remotely for a US company?
Yes, if you are UK resident. Employment income for work performed in the UK is taxable in the UK regardless of where the employer is based or where you are paid. If the employer does not operate UK payroll, the tax is generally settled through your own Self Assessment return.
Is salary from a US employer foreign earned income?
Yes, for the days you work outside the United States. The IRS sources earned income by where the services are performed and states that where or how you are paid has no effect, so salary for work done in the UK is foreign earned income even when paid by a US company into a US account.
Does my US employer have to run UK payroll?
Not necessarily. HMRC does not treat an overseas employer as having a UK presence simply because an employee works from home in the UK, so PAYE may not be mandatory. The employer can operate it voluntarily or use an employer of record, and if neither happens you account for the UK tax yourself.
Can I stop US tax being withheld from my paycheque?
Often, partly. Form 673 claims exemption from US withholding on wages you expect to exclude under the foreign earned income exclusion, and Form W-4 can be adjusted for an expected foreign tax credit. State withholding depends on your former state's rules and whether you have properly ended residence there.
Do I keep paying US Social Security while working from the UK?
Only in the right circumstances. A US employer's employee sent to the UK temporarily, for up to five years, can remain in the US system with a certificate of coverage. Someone who relocated on their own and works remotely indefinitely may fall into the UK system instead, so the position should be confirmed before payroll is set up.
Is working remotely from Dubai for a US company different?
The US sourcing rule is the same, so the salary is foreign earned income and the exclusion is usually the only relief because the UAE has no personal income tax. There is no US–UAE totalization agreement, so US Social Security generally continues to apply to an American employee of a US employer.
Talk to a real, signing professional
AI precision, human accountability — across the US, UK & UAE.
Book a free consultation