Better to keep money in LLC or transfer to UK account (higher/additional rate taxpayer)

[Flux8867]

I have started a side hustle service business in the US (I am based in the UK). I set it up on a whim to test the concept, so only initially set up a Wise business account so I could receive USD, otherwise have not set up an LLC or anything else in the US yet, nor have I set anything up in the UK (i.e. I am a sole trader for the side hustle). I just invoiced two clients and received $45k in my Wise business account. Through my day job I am already a higher/additional rate taxpayer on PAYE (varies year to year but will be £100-140k), so would essentially lose half of this income to tax when Wise report it to HMRC at the end of the year. Can I retrospectively open an LLC in the US and have this income count under that, and if so are there any benefits to doing that and keeping the money in there for now until I quit my day job in the future and do this full time (at which point I could draw profit more efficiently)?

 

[CashPhantom]

Banks and fintechs share data under CRS rules. If you are UK tax resident you must declare it anyway. Trying to hide it is how people get flagged fast.

 

[Ascot_international]

First of all: congratulations on making money so fast.

Second: We are sorry but you made a couple of big mistake. (A) not doing it through a corp from day one and (B) you used a bank (wise) that also operates in the UK.

But this can be easily fix with the right setup. Also, if you are considering quitting your job, with some planning, you could end up paying almost 0 taxes in any country you want to live.

 

[Flux8867]

First of all: congratulations on making money so fast.

Second: We are sorry but you made a couple of big mistake. (A) not doing it through a corp from day one and (B) you used a bank (wise) that also operates in the UK.

But this can be easily fix with the right setup. Also, if you are considering quitting your job, with some planning, you could end up paying almost 0 taxes in any country you want to live.

Ok thanks so what would your advice be? Are you saying if I open a bank account with a US bank then they will not report to HMRC? I have a young family so relocation abroad is unrealistic at this time.

 

[Ascot_international]

Ok thanks so what would your advice be? Are you saying if I open a bank account with a US bank then they will not report to HMRC? I have a young family so relocation abroad is unrealistic at this time.

A bank that has a license in both countries (US and UK) has way more possibilities to share your data with HMRC.

You definitely need a company (ideally with a nominee but it may not be necessary) and a bank account with a bank without a license in the UK. Then, you can even fix those 45k with some minor cost as long as you get some decent agreements & documents prepared. If relocation is unrealistic, it all depends on your risk appetite, but fixing this situation is not that complicated (or expensive).

 

[Flux8867]

A bank that has a license in both countries (US and UK) has way more possibilities to share your data with HMRC.

You definitely need a company (ideally with a nominee but it may not be necessary) and a bank account with a bank without a license in the UK. Then, you can even fix those 45k with some minor cost as long as you get some decent agreements & documents prepared. If relocation is unrealistic, it all depends on your risk appetite, but fixing this situation is not that complicated (or expensive).

Thanks - are you able to give any specific guidance here

 

[Numaro Accountants]

I have started a side hustle service business in the US (I am based in the UK). I set it up on a whim to test the concept, so only initially set up a Wise business account so I could receive USD, otherwise have not set up an LLC or anything else in the US yet, nor have I set anything up in the UK (i.e. I am a sole trader for the side hustle). I just invoiced two clients and received $45k in my Wise business account. Through my day job I am already a higher/additional rate taxpayer on PAYE (varies year to year but will be £100-140k), so would essentially lose half of this income to tax when Wise report it to HMRC at the end of the year. Can I retrospectively open an LLC in the US and have this income count under that, and if so are there any benefits to doing that and keeping the money in there for now until I quit my day job in the future and do this full time (at which point I could draw profit more efficiently)?

If you are a uk resident or domiciled there are two concepts of not taxing your money, arising basis and remittance basis. You could be charged much higher than you think. The best option is to open a ltd company.