Author Topic: UK Tax on US Social Security  (Read 703 times)

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Offline Josephus

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UK Tax on US Social Security
« on: December 17, 2017, 05:31:39 PM »
I've perused the site, but haven't found a prior post that addresses my question:
I've lived in UK on a Spouse Visa since mid-2016.  I receive around $22,000/year in US SS Benefit and around $8000/year in dividend income.  Spouse works and earns around 14K pounds/year gross.

My question is: How much of my SS income is taxable in the UK?  Also, since I paid for NHS health coverage up front when applying for my Visa, do I still have to pay a monthly premium?

Offline Nan D.

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Re: UK Tax on US Social Security
« Reply #1 on: December 17, 2017, 06:03:27 PM »
Heaven knows I am not a tax expert, but I think the personal allowance in the UK is about 11,500 (perhaps 11,850? in Scotland).  Anything after that is taxable, regardless of it being social security or any other type of income. Other than, I believe, a state pension (aka, for military service, other government service) per the USA/UK tax treaty which is not taxable in the UK, only the USA.

In the past the first 10% of pension/SS income was disregarded, but that has fallen by the wayside so I think for 2017/18 it's that they look at the full amount. Afraid I'm not up on NHS for spouses, sorry, but others here will be.

There are some sharp tax cookies on this site, hopefully they will chime in here. Sorry I can't be of more help.  :)
« Last Edit: December 17, 2017, 06:06:44 PM by Nan D. »

Offline F4mandolin

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Re: UK Tax on US Social Security
« Reply #2 on: December 17, 2017, 07:05:26 PM »
I believe that 0% of your social security is taxable in the US.....only taxed in the UK. US/UK treaty evidently says so.....why? Damned if I know.
Fred

Offline larrabee

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Re: UK Tax on US Social Security
« Reply #3 on: December 17, 2017, 07:12:26 PM »
Also, since I paid for NHS health coverage up front when applying for my Visa, do I still have to pay a monthly premium?

Are you talking about national insurance contributions? They are not a monthly premium for NHS access (it's a common misconception though) and you will still have to pay them if you work in the UK. If you are not going to be working, you don't have to pay.
« Last Edit: December 17, 2017, 07:27:17 PM by larrabee »
March 29th 2013-Moved to UK, husband on spouse visa.Oct 20th 2015-Applied by mail for FLR(M).Feb 1st 2016 FLR(M).

Offline durhamlad

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Re: UK Tax on US Social Security
« Reply #4 on: December 17, 2017, 07:16:19 PM »
I believe that 0% of your social security is taxable in the US.....only taxed in the UK. US/UK treaty evidently says so.....why? Damned if I know.

+1

For the UK tax year 2016/17 I believe 90% of your SS will be taxable in the UK. After that I think it is all taxed, and that is due to a change in UK tax law effective this year where foreign pensions are now fully taxable. (US government pensions remain taxable only in the USA)
« Last Edit: December 17, 2017, 07:18:14 PM by durhamlad »
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Offline guya

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Re: UK Tax on US Social Security
« Reply #5 on: December 17, 2017, 09:04:00 PM »
If you are subject to UK tax on the arising basis, all of the Social Security pension is UK taxable.

The NHS charge is simply a nickname for an immigration tax. It has no effect on Medicare or any NHS medical care.

Offline Nan D.

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Re: UK Tax on US Social Security
« Reply #6 on: December 18, 2017, 12:03:22 AM »
With it in mind that 10% of pension income was not counted as taxable income for '16/17, here are the tax bands for that year from  https://www.gov.uk/income-tax-rates/previous-tax-years

                        Tax rate    Taxable income above your Personal Allowance
Basic rate               20%    £0 to £32,000
People with the standard Personal Allowance started paying this rate on income over £11,000.

Higher rate              40%    £32,001 to £150,000
People with the standard Personal Allowance started paying this rate on income over £43,000

Additional rate         45%    Over £150,000


For the '17/18 tax year (100% of pension/SS income is counted)

Band                          Taxable income         Tax rate
Personal Allowance   Up to £11,500            0%
Basic rate                  £11,501 to £45,000   20%
Higher rate                  £45,001 to £150,000   40%
Additional rate           over £150,000           45%


For Scotland, as of the '18/19 tax year:
Personal allowance    Up to £11,850         Tax free
Starter rate           £11,850 - £13,850    19%
Basic rate                   £13,850 - £24,000    20%
Intermediate rate       £24,000 - £44,273    21%
Higher rate           £44,273 - £150,000    41%
Additional rate                    £150,000+    46%

The rest of the UK only has the personal allowance and three bands (basic rate, higher rate and additional rate).

Hope this helps....

Offline vadio

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Re: UK Tax on US Social Security
« Reply #7 on: December 18, 2017, 09:45:58 AM »
I've perused the site, but haven't found a prior post that addresses my question:
I've lived in UK on a Spouse Visa since mid-2016.  I receive around $22,000/year in US SS Benefit and around $8000/year in dividend income.  Spouse works and earns around 14K pounds/year gross.

My question is: How much of my SS income is taxable in the UK?  Also, since I paid for NHS health coverage up front when applying for my Visa, do I still have to pay a monthly premium?

All SS income is reported on your 1040, but the taxable amount is $0 if you lived in the UK for the full US tax year, assuming you use the arising basis, which most of us do. In your case, assuming you received SS income in 2016, the amount you received BEFORE becoming UK resident would have been taxable in the US (using the IRS rules for calculating the taxable amount), not the UK. For US tax year 2017, again assuming the arising basis, the entire amount is only subject to UK tax.

You have to do a bit of allocation math on your income for UK purposes since the UK tax year is different. With income from only 2 sources, that's not an onerous task.

Do you have your SS deposited into a UK bank account? That's the easiest method for 1) having access to your funds and 2) calculating the Sterling amount to report on your UK Self Assessment. You know exactly what you received in GB£ and the Fx rate is the best you will get.

And yes, for the 2017/18 tax year, we do lose our 10% break, and report 100% of pension income on the SA form.

Given your part year residence in 2016, and again assuming the arising basis, your income may be less than the UK taxable amount for the 2016/17 tax year. When you received dividend income will obviously have an affect. The filing deadline is coming up soon, so you may want to register for Self Assessment PDQ if you have not already done so.

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Offline durhamlad

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Re: UK Tax on US Social Security
« Reply #8 on: December 18, 2017, 01:44:32 PM »
 Vadio makes an excellent point on registering now for self assessment as it takes time to do so and get issued the UTR number you need to file. In past years I have listened to callers to BBC Moneybox complain that they missed the Jan 31st deadline because they had not received their UTR number in time, (because they had left it too late to register for self assessment)
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Offline Cmoh

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Re: UK Tax on US Social Security
« Reply #9 on: December 18, 2017, 09:05:50 PM »
Unfortunately I did not keep all my notes and phone numbers when I went through all my queries to HMRC but on one call I was given my UTR over the phone,   

Offline Nan D.

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Re: UK Tax on US Social Security
« Reply #10 on: December 19, 2017, 08:52:25 AM »
Vadio makes an excellent point on registering now for self assessment as it takes time to do so and get issued the UTR number you need to file. In past years I have listened to callers to BBC Moneybox complain that they missed the Jan 31st deadline because they had not received their UTR number in time, (because they had left it too late to register for self assessment)

Any idea how early is too early? I'm only here for the 2017/18 tax year, and will probably have to send in a paper return, so I'm thinking I'll register just after the holidays?

Offline durhamlad

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Re: UK Tax on US Social Security
« Reply #11 on: December 19, 2017, 09:21:48 AM »
Any idea how early is too early? I'm only here for the 2017/18 tax year, and will probably have to send in a paper return, so I'm thinking I'll register just after the holidays?

We arrived in May 2016 and I and my wife registered in June 2016 for self assessment and got our UTR numbers even though we wouldn’t need them until well into 2017. When we came to do the self assessment we did it online so I don’t know the process for filing paper copies. To file electronically we had to log onto our HMRC account and apply to file, using our UTR, and it took a few days as well to get that registration completed before we could then complete the online forms to file our HMRC return.
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Offline larrabee

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Re: UK Tax on US Social Security
« Reply #12 on: December 19, 2017, 09:29:52 AM »
Any idea how early is too early? I'm only here for the 2017/18 tax year, and will probably have to send in a paper return, so I'm thinking I'll register just after the holidays?

You can do it as soon as you like. Once it's done, it's done.
March 29th 2013-Moved to UK, husband on spouse visa.Oct 20th 2015-Applied by mail for FLR(M).Feb 1st 2016 FLR(M).

Offline Nan D.

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Re: UK Tax on US Social Security
« Reply #13 on: December 19, 2017, 10:06:54 AM »
Thanks. Today sounds like a good day.

Offline Nan D.

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Re: UK Tax on US Social Security
« Reply #14 on: December 23, 2017, 02:39:34 AM »
We arrived in May 2016 and I and my wife registered in June 2016 for self assessment and got our UTR numbers even though we wouldn’t need them until well into 2017. When we came to do the self assessment we did it online so I don’t know the process for filing paper copies. To file electronically we had to log onto our HMRC account and apply to file, using our UTR, and it took a few days as well to get that registration completed before we could then complete the online forms to file our HMRC return.

So, how did you handle the taxes for the first year you were here? I'm looking at 8 months of UK residence in 2017.  I'm going to be taxed by the USA on my private pension for those 8 months.  And I'll also get dinged by HMRC for those same 8 months, only later.   

I hate to make the leap, but do you happen to know if  HMRC will allow me credit for the 8 months of 2017 USA taxes I paid when I file with HMRC?  I'm running across language that says that as of recently they will NOT give credit for USA taxes that are the result of the "savings" clause.