Author Topic: 401k and Capital Gains tax for non-resident aliens  (Read 143 times)

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Offline ctynan

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401k and Capital Gains tax for non-resident aliens
« on: March 12, 2017, 01:34:17 AM »
Hello folks,

Trying to wrap my head around some of the nuances of relocating US to UK and hoping someone here can help, or at least point me in the right direction!

I'm a British national who lived for several years in the US (2011-2016). I no longer live in the US and will spend less than 30 days there this calendar year.

I'm considering liquidating my 401k and my brokerage account. I'm 30 years old and don't particularly care to hold onto the retirement account until I'm 60. Here's where I'm looking for help:

1. If I liquidate my 401k as a lump sum today, my understanding is that I will pay the 10% penalty and then the remainder will be classified as US source income for 2017. There won't be any UK tax burden.

2. If I liquidate my US-based (Vanguard) brokerage account, the gains (short and long term) will not be eligible for US Capital Gains Tax, but would be eligible for UK Capital Gains Tax.

Is this right or have I totally messed up?

Alternatively for the retirement account, is there any well established way to move a 401k into a UK pension provider without incurring any crazy fees or tax penalties?

Thanks!

Offline guya

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Re: 401k and Capital Gains tax for non-resident aliens
« Reply #1 on: March 12, 2017, 08:07:31 AM »
Hello folks,

Trying to wrap my head around some of the nuances of relocating US to UK and hoping someone here can help, or at least point me in the right direction!

I'm a British national who lived for several years in the US (2011-2016). I no longer live in the US and will spend less than 30 days there this calendar year.

I'm considering liquidating my 401k and my brokerage account. I'm 30 years old and don't particularly care to hold onto the retirement account until I'm 60. Here's where I'm looking for help:

1. If I liquidate my 401k as a lump sum today, my understanding is that I will pay the 10% penalty and then the remainder will be classified as US source income for 2017. There won't be any UK tax burden.

2. If I liquidate my US-based (Vanguard) brokerage account, the gains (short and long term) will not be eligible for US Capital Gains Tax, but would be eligible for UK Capital Gains Tax.

Is this right or have I totally messed up?

Alternatively for the retirement account, is there any well established way to move a 401k into a UK pension provider without incurring any crazy fees or tax penalties?

Thanks!
You are correct - possibly. An LSD from a US plan would be taxable in the US.

The Vanguard account would only be taxed as capital gains if the specific funds you own have UK reporting status.

After last week's Budget raid on ROPS, I do not expect that any other government will ever permit rolling a non-UK plan into a UK plan.

Offline durhamlad

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Re: 401k and Capital Gains tax for non-resident aliens
« Reply #2 on: March 12, 2017, 08:54:32 AM »
You are correct - possibly. An LSD from a US plan would be taxable in the US.

The Vanguard account would only be taxed as capital gains if the specific funds you own have UK reporting status.

After last week's Budget raid on ROPS, I do not expect that any other government will ever permit rolling a non-UK plan into a UK plan.

Are the Vanguard gains taxed in the US as well as in the UK? (With tax credits to offset the US taxes).
Adventure before dementia