Author Topic: UK tax on terminal vacation pay?  (Read 599 times)

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Offline Nan D.

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Re: UK tax on terminal vacation pay?
« Reply #15 on: January 18, 2018, 09:18:00 AM »
Heard from HMRC on the pre-tax deductions taken from the USA paycheck for vacation pay disbursed to me while I was in my first month in the UK:  if it was pre-tax in the USA, they consider it pre-tax (or excluded from tax) in the UK. So, I go with my USA taxable income as "foreign income" for HMRC for that month, and yes, they will allow a tax credit for tax paid for that month only on my 2017/18 taxes.

Now, another question:  I do not yet draw US Social Security (I'm holding off so that I receive higher checks each month in a year or two).  When I do draw it, I know the UK will have first dibbs on taxing it, and it won't be taxable in the USA at all because of the treaty. However, if it ~was~ taxable in the USA (if I was living there), about 25% of the social security payment would not be taxed.  I remember reading something about if a benefit payment is non-taxed in the country of origin it should be treated the same in the country of residence (but it's been a while since I read that and can't find it again). Anyone know anything about that?

Offline vadio

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Re: UK tax on terminal vacation pay?
« Reply #16 on: January 18, 2018, 10:14:10 AM »
If you are taxed on the arising basis, 100% of your SS is reported and subject to tax in the UK per the treaty. We formerly got a 10% break, but that ended with the 2016/2017 tax year.

What your remember is in Article 17.1.b. However, SS is covered by a different part - Article 17.3..
Married December 1992 (my 'old flame' whom I first met in the mid-70s)
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Offline Nan D.

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Re: UK tax on terminal vacation pay?
« Reply #17 on: January 18, 2018, 12:05:51 PM »
Ah, ok, thanks!  That explains why I couldn't find that language when I went back into the treaty!