Transferring Money to the UK
Sending money abroad used to be a huge undertaking. Thankfully, we’re long past the days of posting cheques abroad and sending ‘telegraphic transfers’, and long, long past the days of sending big chests of gold coins on creaking old ships.
Yes, transferring money today is a much simpler business, but there are still longer, more expensive options, and quicker, more affordable ones. On this page, we’ll tell you everything you need to know about sending money to the UK from the US, including typical costs, useful tips, and the best ways to do it.
The London cityscape at dusk, quite possibly where you need to send money to
UK money transfers: why and how?
Why do people need to ping their dollars over the pond? Here are the five most common reasons for international remittances (a fancy word for ‘money transfers’):
- Moving abroad
- Business transactions
- Gifting money to family/friends
- Buying property overseas
How to transfer money from a US bank to a UK bank
To send cash into someone’s UK bank account, you don’t actually need to use the services of a bank. It’s just one of your options.
Today, there are typically three options to choose from: banks, P2P (peer-to-peer) currency exchange platforms, and foreign exchange brokers. Allow us to take you through each one.
Transferring money with a bank
This is the traditional choice. You can send an international wire transfer from one bank to another along the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. The SWIFT network comprises over 10,000 banks in 200+ countries, so it’s pretty comprehensive.
However, it’s also quite an expensive choice. There are usually several fees associated with SWIFT transfers, such as those charged by the sender and recipient banks, along with any charged by the intermediary banks. Unless the sender and recipient banks have a strong relationship with one another, there can be up to three intermediary banks involved.
Plus, banks typically apply a mark-up to the exchange rate, which is usually around 4-6% above the mid-market rate (the one you see on Google).
There’s more info on fees further down the page.
Transferring money with a P2P currency exchange platform
In the past decade, the arrival of internet-based peer-to-peer foreign currency exchange platforms has really shaken up the market.
These platforms are generally much cheaper than the service offered by banks, mainly because they use the real, mid-market exchange rate, and charge very low fees. In 2019, the UK’s Daily Telegraph reported that the exchange rates used by P2P platforms were on average 4% cheaper than those used by banks.
Importantly, these companies also offer a strong level of security, with every responsible P2P platform operating in the UK being authorised and regulated by the Financial Conduct Authority (FCA).
These services are called ‘peer to peer’ because they literally match you with someone else around the world. For example, if you’re looking to send $100 to the UK, a company like Transferwise will find someone who’s looking to send £100 (or thereabouts) to the US, and use this pairing to fulfil the exchange.
If they can’t find anyone to match your transfer request, P2P platforms will simply buy the currency from the usual interbank markets – although this can then make the transfer more expensive. Check out which P2P currency exchange platforms performed best in our experiment.
That’s why exchanges in very common currency (e.g. dollars, pounds, euros, and yen) are very cheap on P2P platforms, because there’s always demand on both sides. Users literally trade between themselves without any dealers getting involved.
Transferring money with a foreign exchange broker
Foreign exchange (FX) brokers are useful if you’re sending very large sums of money abroad, i.e. over $4,000. They charge fees for their services, but will typically waive (or reduce) these fees for larger transfers. FX brokers also add a mark-up to the exchange rate, but this is usually much smaller than the mark-up typically applied by banks.
The key benefit of using an FX broker is the ability to set up a forward contract. This means you can set up future international money transfers with today’s exchange rate, so you won’t be affected by any negative changes.
A pile of shiny British pound coins
How much do international money transfers cost?
It depends on what service you’re using, how much money you’re sending, and how you’re paying for it.
If you use banks to send an international wire transfer, you’ll be dealing with a marked up exchange rate and a sending fee, while your recipient will have to pay a receiving fee.
According to a study by NerdWallet in October 2019, the median sending fee charged by US banks for an international money transfer was $45, and the median receiving fee was $15.
Meanwhile, on average, banks add a 4% mark-up to the mid-market exchange rate.
In contrast, a P2P currency exchange platform like Transferwise charges a flat fee of $1.02 for sending dollars to the UK. On top of this, there’s a 0.45% fee for transfers up to $135,000, and a 0.35% fee for transfers of over $135,000.
It also depends on how you pay for the transfer. For example, using a debit card with Transferwise incurs a 1.25% fee, while a credit card incurs a 3.8% fee.
Find out today how much it’ll cost you to use Transferwise.
How long does it take to transfer money to the UK?
Again, there’s a bunch of variables at play which can affect the length of time it takes to send dollars to the UK. These include:
- The service you’re using
- The number of banks involved (SWIFT transfers can involve up to three intermediary banks)
- Whether the transfer falls on a weekend / a public holiday
In general, the standard length of time for any international money transfer is between 0-5 business days, with banks generally taking longer than P2P platforms.
For example, if you send money internationally with Chase Bank, the funds typically won’t be available to the recipient before 3-5 business days. Likewise, international remittances with Capital One bank take “3-5 business days”.
Similarly, transferring money abroad with Wells Fargo takes “a few days”, with their expedited ExpressSend service available only to recipients in South American and Asian countries.
In contrast, sending money abroad via P2P exchange platforms like TransferWise is typically much quicker. For example, in some instances, sending $100 from the US to the UK via Transferwise takes just “a few seconds”.
If you change your Transferwise payment method from a debit card to a wire transfer, “a few seconds” becomes “24 hours”. If you increase $100 to $5,000, “24 hours” becomes “two days”. However, it rarely takes as long as an international wire transfer, because there are no intermediary banks involved.
What are the minimum and maximum limits on UK money transfers?
When it comes to minimum and maximum limits, there’s usually a bit of a tradeoff between banks and P2P platforms.
Generally speaking, you pay higher fees to send cash via banks, but you can send larger amounts of cash; meanwhile P2P platforms keep fees low, but also impose smaller limits on how much you can send.
For example, Transferwise allows transfers of no more than $2,000 per day (if paying via debit/credit card), whereas Bank of America doesn’t impose a limit on international money transfers.
However, if you’re not looking to send vast sums of money abroad, P2P foreign exchange firms also come with very favorable rules for minimum payments. Transferwise has no lower limit, and services such as WesternUnion and WorldRemit require a minimum payment of just $1.
While some banks also do not impose a minimum limit on payments, their sizeable flat fees can make small transfers rather uneconomical.
The highland cows of the Yorkshire Dales have little use for money
What are the tax implications of transferring money to the UK?
Please be advised that while every effort is made to keep this information up to date, Movehub does not provide tax advice, and you should always consult a tax professional about your unique circumstances.
Tax implications for the sender in the US
The below information is sourced from finance experts Michelle Miley and Ryan Cockerham (writing for The Nest).
Every US citizen can gift up to $11.18 million in their lifetime without paying any gift tax. So, when you’re filing your return, you can choose between paying tax on the gift, or using up some of your lifetime exemption limit. Crucially, you can gift an unlimited amount of money to your spouse tax-free if your spouse is a US citizen.
However, before sending any money internationally, it’s important that you consult with a professional accountant and/or the IRS to ensure that you’re acting in full compliance with regulations.
Tax implications for the recipient in the UK
In a simple case, sending money from a US bank to a UK bank should not automatically give rise to a tax charge. If that money has already been through taxation in the US, and it is being sent as a gift, transferring it internationally from bank to bank is in most cases tax free.
Tax issues generally only start to arise if the recipient is a UK resident for tax purposes, but is not domiciled in the UK, and is receiving the money from the US as a form of overseas income (e.g. earnings from a rented property in the US, or from having shares in American companies). That is when the remittance needs declaring on your tax return.
Alternatively, if the recipient in the UK is not a UK resident for tax purposes, they only need to pay tax on income earned within the UK.
Before sending any money from the US to the UK, we strongly advise that you consult the services of a qualified tax professional, to ensure that you are acting in full compliance with US and UK law.
How do I get the best exchange rate when sending money to the UK?
In most cases, you’ll find the best exchange rate with P2P foreign currency exchange firms, as they don’t tend to apply any mark-up to the mid-market rate.
For example, depending on the variables, Transferwise’s service can be up to 8x cheaper than the service offered by high street banks.
However, if you plan to send large amounts of money to the UK at regular intervals, a forward contract with an FX broker will probably give you the best exchange rate.
What is the mid-market rate?
A reasonable question, given we’ve mentioned it a few times.
The ‘mid-market rate’ refers to the ‘actual’ exchange rate, i.e. the one you see on Google. The rate is known as ‘mid-market’ because it’s set at the midpoint between the supply and demand for a currency.
The difference between the mid-market rate and the marked-up rate that banks use is known as the bank’s exchange rate spread.
What keeps my money safe when I send it to the UK?
There are governing bodies in the US and the UK who have a job to ensure that every bank and P2P currency exchange platform is operating responsibly, so that every customer’s money is protected.
Money transfer safety measures in the US
The Consumer Financial Protection Bureau (CFPB) is a US agency that oversees all international money transfers exceeding $15. It ensures that the financial markets remain fair for consumers, stipulating that an individual must be able to see all costs before sending money with a bank or a P2P platform.
There’s also the Financial Crimes Enforcement Network (FinCEN), which requires all P2P platforms based in the US to be registered as licensed money transmitters with their relevant state banking department.
Money transfer safety measures in the UK
Meanwhile, any P2P currency exchange firms with registered offices in the UK are administered by HMRC, so they’re obliged to follow all UK Money Laundering Regulations.
Plus, as ‘payment institutions’, all money transfer firms are monitored by the Financial Conduct Authority. Before sending your money with any currency exchange company, you should check to see if they’re on the FCA register.
Hopefully you’re feeling a little more clued up on how to transfer money from the US to the UK. As you can see, there are multiple options available to you, and they each come with their own benefits.
If you’re tempted by a P2P foreign currency exchange platform, look no further than Transferwise.