Non-US Investing • Summary of 401K/IRA taxation for US 'tax resident' living in the UK?

Hi all,

I've been searching through the Boglehead forums and wiki (thank you to the experts here from whom I've been slowly learning), and googling for information elsewhere. I'm hoping someone who has more knowledge than I do can confirm or correct the following summary for how IRAs/401Ks/investments are taxed in the UK and US for:

• A greencard-holder

• Retires in the UK, but doesn't expatriate

• Living off investments (not working in the UK, not making any new contributions to 401Ks/IRAs).

Thanks in advance. And hopefully this information, when corrected, will be of use to others.


ROTH IRA
This seems the most straightforward one:

• Lump sum withdrawals - are not taxed in the US or UK

• Regular withdrawals - are not taxed in the US or UK

• Capital gains/dividends within the ROTH IRA - are exempt from taxation in the US and UK

ROTH 401K
There is not much information on this - I assume because it is preferable to rollover to a ROTH IRA. I believe the taxation is the same as for the ROTH IRA:

• Lump sum withdrawals - are not taxed in the US or UK

• Regular withdrawals - are not taxed in the US or UK

• Capital gains/dividends within the ROTH 401K - are exempt from taxation in the US and UK

Traditional 401K

• Lump sum withdrawals - are taxed as income in the US, they are not taxed in the UK (do I have to pay UK tax and then claim back as foreign tax credit?)

• Regular withdrawals - are taxed as income both in the US or UK. Foreign tax credits can be claimed in the US to avoid double taxation.

• Capital gains/dividends within the Traditional 401K - are exempt from taxation in the US and UK

Traditional IRA
Seems to be similar to 401K, but I've found contradictory information about whether the UK recognizes Traditional IRAs as pension schemes:

• Lump sum withdrawals - are taxed as income in the US, they are not taxed in the UK (do I have to pay UK tax and then claim back as foreign tax credit?)

• Regular withdrawals - are taxed as income both in the US or UK. Foreign tax credits can be claimed in the US to avoid double taxation.

• Capital gains/dividends within the Traditional IRA - This is where I read contradictory information. Some sources claim that the UK doesn't recognize Traditional IRAs as a pension and treats them as a normal investment account - taxing gains/dividends within the IRA. Other sources state that gains/dividends within a Traditional IRA are not taxed in the UK. What is the correct answer?

Standard (non-retirement) investments

• Capital gains and dividends in the investment account - are taxed in the US as long- or short- term capital gains, and in the UK as capital gains or dividends. Foreign tax credits can be claimed in the US to avoid double taxation. The UK taxes all gains as interest (higher tax rate) unless the investments are HMRC Reporting funds.

Notes:

• There is no legal definition of 'lump sum' in the UK, but HMRC typically classify any non-regular withdrawal as a lump sum.

• Finding an institution who will deal with a US 'tax resident' living in the UK is difficult, and there's an ongoing risk that any that currently do may suddenly change their policy.

Statistics: Posted by sgp — Tue Dec 03, 2024 12:12 am — Replies 0 — Views 33

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