Confused about royalty income taxation after moving from US to UK as a permanent resident

The key to your situation is understanding where your income is "sourced" according to tax treaties. For royalty income, it's typically sourced where the payer (distributor) is located - so yes, your income would still be considered US-sourced even after you move. The good news is that the US-UK tax treaty specifically addresses royalties. When you move back to the UK and surrender your permanent residency, you should submit Form W-8BEN to your US distributors. This tells them you're now a UK tax resident eligible for treaty benefits. The treaty reduces withholding on royalties to either 0% or a lower rate than the standard 30%. You'll report this income on your UK tax return as a sole trader. The UK will tax you on your worldwide income, but you'll get credit for any US tax withheld to avoid double taxation. You'll only need to file a US tax return (Form 1040NR) if the treaty withholding rate isn't zero or if you have other US-source income.

I went through something really similar when I moved from the US to Canada last year! I was getting royalties from my photography and ran into the same confusion. Found this service called https://taxr.ai that completely saved me from the international tax nightmare. They analyzed my royalty contracts and tax situation, then gave me a detailed report showing exactly how the US-Canada treaty applied to my specific situation. In my case, they confirmed my royalties were considered US-sourced income but showed me exactly how to fill out the W-8BEN correctly (I was doing it wrong before!) and laid out which specific treaty provisions applied. They even created a personalized plan showing which forms I needed to file in both countries. Might be worth checking out since international royalty situations are super specific!

Just wanted to update after trying taxr.ai from the recommendation above. It was honestly super helpful for my situation! I uploaded my royalty contract and filled out their questionnaire about my move to Australia, and they sent me a detailed analysis showing exactly which parts of the US-Australia tax treaty applied to my music royalties. The most valuable part was getting clarity on what's considered "US-sourced" versus "foreign-sourced" income. Turns out some of my income streams were classified differently than I thought! They also explained exactly how to fill out the W-8BEN form for each of my distributors and gave me a timeline of what tax forms I'll need to file in both countries after the move. Now I actually feel confident about this international move instead of stressing about potential tax issues!

If you're having trouble getting clear answers about international tax stuff, you might want to try Claimyr to get through to an actual IRS agent. I used https://claimyr.com when I was in a similar situation moving abroad and couldn't get straight answers from my accountant. Instead of waiting on hold forever, they got me connected to an IRS representative in about 15 minutes. I was able to ask specific questions about my W-8BEN submission and get official guidance on my royalty situation. They also have a video showing how it works: https://youtu.be/_kiP6q8DX5c - it's basically a service that navigates the IRS phone system and calls you back when they've got an agent on the line. Saved me hours of frustration and gave me peace of mind knowing I was getting information directly from the source.

Ok I need to admit I was wrong about Claimyr. After being super skeptical I decided to try it anyway because I was desperate to talk to someone at the IRS about my international royalty situation before tax season. It actually worked! Took about 40 minutes (still faster than my previous attempts), but they called me when they had an IRS agent on the line. I was able to ask specifically about how the tax treaty with the UK applies to digital royalties and got confirmation about which forms I needed. The agent even emailed me some guidance documents specific to my situation. Definitely worth it for the peace of mind alone. I've been stressing about this for months and finally have clear direction. Sometimes you just need to hear it directly from the IRS rather than trying to interpret the complicated rules yourself.

Make sure you check with a UK accountant too! I moved from US to UK a few years ago and discovered the UK tax system has some quirks that US accountants don't understand. For example, the UK tax year runs April to April (not January to December), and the rules for self-employed "sole traders" are different from US self-employment. Also, when you register as a sole trader in the UK, look into "Making Tax Digital" requirements and whether you need to do quarterly reporting. I got hit with a penalty my first year because I didn't realize I needed to make these quarterly submissions on top of my annual return.

One thing nobody's mentioned yet - don't forget about FBAR requirements! Even after you surrender your green card, if you had $10,000+ across all foreign (non-US) accounts at any point during the year you lived in the US, you still need to file the FBAR form. I got hit with a massive penalty for missing this when I moved back to Europe.

This is a really complex situation that involves both US and UK tax law! A few additional points to consider beyond what others have mentioned: First, make sure you understand the timing of your move in relation to tax years. The UK tax year runs April 6 to April 5, while the US follows the calendar year. This can create some interesting split-year situations that affect how you report income in both countries. Second, regarding your W-8BEN form - you'll need to be careful about when you submit it. You can only claim treaty benefits as a UK resident once you've actually established UK tax residency. The distributors will need updated forms, and there might be a transition period where you're still subject to the higher withholding rates. Also worth noting: some music royalties might be classified differently depending on whether they're mechanical royalties, performance royalties, or sync licensing fees. The treaty treatment can vary based on the specific type of royalty income. Finally, consider keeping detailed records of your income sources and any taxes withheld during your transition year. You'll likely need to file partial-year returns in both countries for the year you move, and having clear documentation will make this much easier. The international tax rules for creative professionals are genuinely complicated, so getting professional help from someone experienced with US-UK tax issues is probably your best bet for navigating this correctly.