The W-8BEN form for freelancers: how to avoid tax when earning money from the US

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You don’t want to get taxed twice if you do work for clients based in the US, so here’s everything you need to know about the infamous W-8.

 The web is a wonderful thing, making it super-easy for us freelancers to work across national borders. Sometimes, in fact, we forget they exist at all. But exist they do, and if you’re earning any kind of income from the United States, you need to complete a W-8 form. Because otherwise you’ll be breaking the law, and you’ll either lose money in extra tax, or not get paid at all.

The good news is that for most freelancers, filling in this form is pretty straightforward. In this article, we’ll explain what the form is, why you need to complete it, and how to do so.

Note: this article offers general information, but tax is a complex minefield and advice will vary in specific situations. To ensure you are conducting your own tax affairs correctly, always check with a certified accountant.

Crosshead: What are W-8 forms?

W-8 forms are used by non-US citizens or businesses to claim exempt status from certain obligations they’d have if they were US-based. There are five different W8 forms, depending on what kind of business dealings you have.

In this article, we’ll focus on the W-8BEN form, which individual freelancers must submit if you wish to receive payment from US companies. Note that if you are either a US resident or a US citizen, you do not have to submit this form.

Make sure you only fill in the W-8BEN form, because the other four forms have very similar names. For example, the W-8BEN-E form is for companies, partnerships, or charities rather than individuals, and it’s super-long. Thankfully, the W-8BEN form that freelancers have to complete is much shorter.

Crosshead: Why do you need to submit a W-8BEN form?

The first reason you need to submit a W-8BEN form is that it’s a legal requirement, under the Foreign Account Tax Compliance Act of 2010. The second is that submitting the form will mean you avoid paying tax to the IRS (Inland Revenue Service, the US equivalent of the UK’s HMRC), as long as certain conditions are met.

These conditions are that your business doesn’t have an office or branch in the US, and that your country of origin has a tax treaty with the United States. Both the UK and Ireland have such treaties. You’ll find a full list of countries that have a tax treaty with the US here: https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z

If you don’t submit a W-8BEN form, the IRS can withhold 30 per cent of your earnings. To avoid this happening in practice, many US companies will just avoid processing your payment until they receive your W-8BEN form. However some, including YouTube, will remove the withholding tax from your payments. Either way, the problem is best avoided by completing the W-8BEN form.

Note that you’re not getting a free ride: you’ll still have to pay tax on your income in your home country. But this way, you’ll avoid having to pay tax twice.

Crosshead: How to complete a W-8BEN form: Part 1

You can download the W-8BEN form from the IRS website: https://www.irs.gov/forms-pubs-search. Just type in ‘W-8BEN’ into the search bar to access the form (at time of writing, the latest version of the form is dated October 2021). Be warned: when you fill it in, there are a few potential trip hazards, so we’ll go through each of these in turn.

Part one of the form asks for your name, address, your business address if it’s different, and date of birth. Make sure you use the American notation for date of birth, putting the month first, rather than the British convention of putting the day first.

You’re also asked for your country of citizenship. It’s important to enter this exactly as it appears on your passport. So for example, ‘United Kingdom’ rather than England, Scotland, Wales or Northern Ireland, or just ‘UK’.

Section 5 asks for “U.S. taxpayer identification number (SSN or ITIN), if required”. If you’re a UK citizen who’s registered as a sole trader, the best number to put here is your National Insurance number. Otherwise, leave this blank.

Section 6 asks for “Foreign tax identifying number”. If you’re a UK citizen who’s registered as self-employed, you should enter your Unique Taxpayer Reference (UTR) here. This is a 10 digit number given to you by HMRC when you register as self-employed. If you’re a sole trader, leave this blank.

Finally, Section 7 relates to income derived from things like shares; so if you’re only earning freelance income from the US, this can be left blank.

Crosshead: How to complete a W-8BEN form: Parts 2 and 3

In section 9, enter your country of residence, eg ‘United Kingdom’. Then in section 10 you have to provide details of the type of income you’re claiming exemption from.

The form’s very legalistic language reads: “Special rates and conditions (if applicable—see instructions): The beneficial owner is claiming the provisions of Article and paragraph ___ of the treaty identified on line 9 above to claim a __ % rate of withholding on (specify type of income).

If you’re a freelancer earning money from customers in the US, you’d normally enter ‘7’ in the first blank space (as Article 7 in the UK-US tax treaty refers to business profits). In some circumstances you might instead enter ‘12’ (as Article 12 refers to royalties). If you have other types of income, such as capital gains, rental income, share dividends, etc, these all have different article numbers too.

For the second blank space, a freelancer who’s a UK citizen should normally enter ‘0’, to say that you do not want to pay any tax in the US.

Once you have completed, signed and dated your form, send it to the US company you are receiving income from. Each W-8BEN form will cover you until the end of the calendar year, and then for three years after that. At that point, if you continue freelancing for US companies, you’ll need to complete and submit a new form.

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