US expat acquiring UK citizenship and ISA

Hi,

My wife and I are living in the UK. She's American and I'm Italian.
I'm trying to figure out the best way to structure our investments, specifically to her position as a US expat.

She currently hold a UK cash ISA which is basically doing nothing (interest is super low).
I know that ISA are taxed by the US so I was wondering if getting her a ROTH IRA would be the best option for an investment (beside getting a Vanguard ETF via UK brokerage).

Also, she's planning on applying for UK citizenship. What would happen then? I am not sure if she should move the money from the ISA to the ROTH. As a UK+US citizen, would she be able to benefit from ISA without being tax by US? Because in that case I wouldn't want to lose the money already in there (given that you can only deposit about £20,000 max per year into such account)

Thanks for your help!

Hi,

My wife and I are living in the UK. She's American and I'm Italian.
I'm trying to figure out the best way to structure our investments, specifically to her position as a US expat.

She currently hold a UK cash ISA which is basically doing nothing (interest is super low).
I know that ISA are taxed by the US so I was wondering if getting her a ROTH IRA would be the best option for an investment (beside getting a Vanguard ETF via UK brokerage).

Also, she's planning on applying for UK citizenship. What would happen then? I am not sure if she should move the money from the ISA to the ROTH. As a UK+US citizen, would she be able to benefit from ISA without being tax by US? Because in that case I wouldn't want to lose the money already in there (given that you can only deposit about £20,000 max per year into such account)

Thanks for your help!

She won't be able to open a Roth and make contributions because you have to be working in the USA for this. Getting UK citizenship will make no difference to her tax situation, we are both UK/US citizens with cash ISA's and the US still taxes the interest. She needs to continue to avoid stocks and shares ISA even after gaining UK citizenship.

She definitely cannot move money from an ISA to any type of US retirement account (401k, IRA, Roth IRA etc).

Got it. So what would be the best product for this money sitting in a cash ISA? Cash ISA offers a very low interest rate, below inflation.

Worth considering ETF Vanguard on via Stock and Share ISA?

Thank you

Got it. So what would be the best product for this money sitting in a cash ISA? Cash ISA offers a very low interest rate, below inflation.

Worth considering ETF Vanguard on via Stock and Share ISA?

Thank you

I really don’t know what funds outside of the USA would not be considered Passive Foreign Investment Companies (PFIC).

I have Vanguard ETFs but held in a US Brokerage account that I retained after moving back to England.

Hi,

As a US citizen I have money in an ISA that holds shares and collect dividends. I report the total amount to my account in the USA. Curious why this would cause a concern? Thanks

Tim

Hi,

As a US citizen I have money in an ISA that holds shares and collect dividends. I report the total amount to my account in the USA. Curious why this would cause a concern? Thanks

Tim

Hi Tim.    Until the experts get here, look up PFIC's.

Hi,

Thanks, Can you recommend  a good PFIC? Possibly an ethical one?

Thanks

Tim

Hi,

Thanks, Can you recommend  a good PFIC? Possibly an ethical one?

Thanks

Tim

You DON'T want to hold PFIC's as a USC!

Hi

What is a USC, sorry I am new to this site? How do dual citizens save longterm in the UK, outside of buying a home, I am thinking of generating an income from dividends held in an ISA.

Thanks
Tim

Hi,

I have figured out what a USC is, sorry!

This is an excellent website:

https://thunfinancial.com/american-expat-financial-advice-research-articles/ [nofollow]

Hi,

As a US citizen I have money in an ISA that holds shares and collect dividends. I report the total amount to my account in the USA. Curious why this would cause a concern? Thanks

Tim

Hi Tim,

Welcome to the site.

If the shares being held are individual shares as opposed to share funds then I think you should be okay. How does your accountant report those share dividends on your IRS tax return?

Hi,

I have figured out what a USC is, sorry!

This is an excellent website:

https://thunfinancial.com/american-expat-financial-advice-research-articles/

From the website above look at section 3 which covers the problem of PFIC’s

https://thunfinancial.com/PDF/Guide-to-Investment-Management-and-Financial-Planning-for-Americans-Abroad.pdf

Yeah, I see, to me it looks like the Vanguard funds for oversea reporting funds are a good choice. I have been here for quite awhile and work with lots of Americans and they do not report any dividends from the USA to the HMRC for money created in the USA before they came here. Is that most peoples experience?

Thanks

Tim

Yeah, I see, to me it looks like the Vanguard funds for oversea reporting funds are a good choice. I have been here for quite awhile and work with lots of Americans and they do not report any dividends from the USA to the HMRC for money created in the USA before they came here. Is that most peoples experience?

Thanks

Tim

I did not report dividends from my US funds to HMRC BEFORE I came to the UK but certainly do now that I am here. My Vanguard ETF’s pay dividends quarterly and I report them as stock dividends on my self assessment. This coming tax year only the first £2,000 are tax free instead of the £5,000 from the previous year.

To be clear, my wife and I do self assessment and report our US income on “an arising” basis, and we are both dual UK/US citizens.

Yeah, I see, to me it looks like the Vanguard funds for oversea reporting funds are a good choice. I have been here for quite awhile and work with lots of Americans and they do not report any dividends from the USA to the HMRC for money created in the USA before they came here. Is that most peoples experience?

Thanks

Tim

Tim - given that Parliament decided that anyone who has not declared worldwide income (but should have done so) only has until 30 September 2018 to correct any mistakes (the Requirement to Correct legislation); should you know anyone in these circumstances there is only little time left to address these issues.