Invoicing America from Britain: the tax rules for UK contractors with US clients

Figures relate to tax year 2025-26 (UK) / 2025 (US)

British freelancers with US clients usually owe no American tax at all. The work happens in Britain, so Britain taxes it. Yet without one short form, your customer may still hold back 30% of every payment.

That form takes ten minutes and costs nothing. So this guide explains why your fees stay British, which W-8 your client needs, and what changes if you ever work on American soil.

Key takeaways

• Services performed in Britain are UK-sourced, so US tax rarely applies.
• Sole traders send a W-8BEN; limited companies send a W-8BEN-E.
• Without the form, a US payer may withhold 30% of your fee.
• Never sign a W-9, because that form is only for US taxpayers.
• Work done during trips to America can create genuine US obligations.

What is the US tax position on work done in Britain?

Service income is sourced where the work happens, not where the customer sits. Design a website from Leeds for a company in Denver, and that income is British. The IRS has no claim on it, however American the client may be.

The treaty reinforces the same answer. Business profits are taxable only in Britain unless you have a permanent establishment in America. An office, a workshop or a dependent agent could create one, but a laptop in your spare room cannot.

Your customer's address does not decide where tax is due. Your desk does.

Why do US clients ask for a W-8BEN?

Because American payers must document who they pay. The W-8 series certifies that you are a foreign person, which lets your client pay the full invoice without withholding. It also keeps you out of US information reporting that applies to American suppliers.

Per the IRS guidance on Form W-8BEN (opens in a new tab), the form goes to the client rather than to the IRS. Your client keeps it on file. It stays valid until the end of the third calendar year after signing, so diary the renewal.

Many US clients send a W-9 by mistake, because that is the form they use with everyone else. Never complete it. A W-9 declares that you are a US taxpayer, which is both wrong and awkward to unwind later.

What happens if you skip the form?

Your client protects itself by withholding, usually at 30%. The money goes to the IRS under your name, and your invoice arrives short. Nothing about that withholding reflects any actual US tax liability of yours.

Getting it back is the painful part. You would file a US non-resident return to claim a refund, which normally means applying for a taxpayer identification number first. Months pass before the money returns, all to avoid a form that takes minutes.

Does travelling to America change things?

Yes, because days worked on American soil produce US-source income. A week on site in Chicago makes that week's fees American in origin. Small amounts may fall below filing thresholds, but the principle changes as soon as you step off the plane.

Regular visits raise a second question about permanent establishment. A desk kept permanently at a client's office, or long stretches on site, can cross the line. According to the IRS guidance on effectively connected income (opens in a new tab), a genuine US trade or business brings filing duties with it.

Visa status matters just as much. Business visitor rules limit what you may do while in America, and they sit entirely outside the tax question. Check both before agreeing to on-site work.

How do you set yourself up properly?

Most of the work happens once, at the very start. Getting these steps right before the first invoice keeps the rest of the relationship quiet, and it stops your US clients from having to correct anything at their end. The order below matters:

1. Register with HMRC as a sole trader, or form a company if that suits better.
2. Complete the correct W-8 and send it to each US client.
3. Check whether your contract mentions withholding, and correct it if so.
4. Agree the currency and who carries the conversion cost.
5. Record each payment in sterling using the rate on the day it arrives.
6. Keep the W-8 dates in a diary so renewals never lapse.
7. Review your VAT position once turnover approaches the threshold.

Our guide to registering for Self Assessment covers the HMRC side in detail, including the October deadline that catches new freelancers.

A worked example

Take an illustrative example. A developer in Manchester bills $8,000 a month to a software company in Austin. She works entirely from home and visits America once a year for a conference.

She sends a W-8BEN before her first invoice, so her client pays the full amount. Her income is British, taxed through Self Assessment, and no US return arises at all. The conference trip involves no work for the client, so nothing changes.

Had she skipped the form, her client would have withheld $2,400 each month. Reclaiming that would have meant a US tax number and a non-resident return, for money she never owed.

Do you charge VAT to US clients?

Generally no, because the place of supply for most business services follows the customer. A supply to a US business therefore sits outside the scope of UK VAT. You raise the invoice without VAT and keep evidence that the customer is in business.

Those sales also sit outside your registration threshold, which surprises many freelancers. A contractor billing only American customers can pass £90,000 of turnover without needing to register. Voluntary registration may still appeal, since it allows you to reclaim VAT on UK costs.

Supplies to American consumers follow different rules from supplies to businesses. So check the status of each customer rather than assuming that every US invoice behaves the same way.

How should you get paid?

Payment mechanics decide how much of the invoice reaches you. International bank transfers often lose 2% or more to the exchange spread, which dwarfs most tax questions at this size. A multi-currency account usually pays for itself within a few invoices.

Agree the currency in the contract as well. Billing in dollars leaves you carrying the exchange risk between invoice and payment, while billing in sterling moves it to your client. Neither is wrong, but the contract should say which applies.

Late payment terms deserve the same attention. Many US clients work to 45 or 60 day terms as standard, so a UK freelancer used to 30 days should plan cash flow accordingly.

What if you hire subcontractors?

Your own suppliers follow the same logic in reverse. If you subcontract to someone in Britain, you pay them gross and they handle their own tax. Nothing American enters that relationship, even when the underlying work reaches US clients.

Subcontracting to someone in America is different. You may then have a US supplier, and your client may ask questions about who performs the work. Check your contract first, because many agreements restrict subcontracting without written consent.

Does IR35 apply with an overseas client?

The off-payroll rules do not apply where the end client is wholly overseas with no UK connection. Responsibility for assessing status then returns to your own company under the original rules. So the question does not disappear; it simply lands back on your desk.

That matters if you work through a limited company for a single American client. Keep your contracts, working practices and evidence in order, exactly as you would with a British engager.

What does HMRC expect from you?

The same things it expects from any self-employed person, with currency added. You report worldwide income on your Self Assessment return, converted into sterling. HMRC accepts either the rate on the day or a published average, provided you apply one method consistently.

National Insurance follows your profits in the usual way. Keep the original dollar invoices alongside the sterling figures, because an enquiry will ask how you arrived at the converted numbers. Class 4 contributions apply to profits above the lower limit, and many freelancers set aside a fixed percentage of each payment from US clients to cover both taxes.

The mistakes that cost contractors money

None of these involve complicated law. They are the habits we see most often when freelancers first take on American work:

• Signing a W-9 because the client sent one.
• Letting a W-8 expire and losing part of a later payment.
• Charging UK VAT on services to a US business.
• Assuming a trip to a client's office carries no tax consequences.
• Converting income at one rate on invoices and another in the accounts.
• Treating an overseas client as a reason to ignore employment status entirely.

Selling goods rather than services follows an entirely different set of rules. Our guide to US sales tax for UK sellers covers that side, which turns on where your customers are rather than where you work.

How US UK Tax Accountants helps

Our US tax specialists check your contracts, complete the right W-8 and confirm whether any American filing arises. Our business tax service covers the treaty position alongside your UK returns, and our W-8BEN service handles the paperwork itself.

In our practice the expensive cases are always the late ones. Once a payer has withheld, recovery takes months, so we would rather spend twenty minutes with you before the first invoice goes out.

Get set up before you invoice

If you have just landed work with US clients, a short review protects your full fee from day one. Tell us how you trade and who you are billing. You can book a consultation and hear back within one working day.

Last reviewed 12 September 2026 by the US UK Tax Accountants Tax Team. This article is general information, not personal tax advice — speak to a qualified US/UK tax adviser about your own position.

For the neighbouring question, Hiring in Britain: what an American employer needs to know about payroll and tax walks through it in detail.