I've been posting here for a couple of years as I plan to return to the UK at some point. I'm a UK/US dual citizen working in the the US so when I come back to the UK I'll have to deal with cross border tax issues. My focus has mostly been on the taxation of US retirement funds and after tax investments for a US/UK citizen resident in the UK and I thought it might be useful to outline some of my conclusions for people who might find themselves in the situation of being a US citizen taxed on worldwide income by both the UK and the US.
1) Owning pooled investments (mutual funds, unit trusts etc) in taxable accounts is a bad thing. The US has complex PFIC rules with lots of penalties and the UK will tax US funds dividends and capital gains at your marginal tax rate, not so bad if you are in the 20% bracket, but still a pain in the neck. Owning individual stocks is better as far as tax goes, but that has it's own headaches and as I'm a "lazy investor" in index or tracker funds I haven't really considered that avenue.
2) Pooled investments are ok in US retirement accounts. The tax treatment of such accounts is quite sensible and well covered in the UK/US tax treaty. So US retirement accounts can grow tax free. Withdrawals are then taxed as income and you can use tax paid in one country as a credit against tax in the other. Also ROTHs are tax free in the US and the UK under the treaty.
3) Before you move to the UK sell all your US taxable mutual funds and your house etc to realize the capital gain. Then a simple thing to do is to put the money in CDs or a saving account. For the US saver the dogma is to keep CDs and other income producing investments in tax advantaged accounts, to limit taxation, but as I've decided to avoid pooled investments in taxable accounts I'm just going to increase the percentage of equity mutual funds in my retirement accounts and put the fixed income on the taxable side. That way my mutual funds can grow tax free, I keep my returns relatively simple and I keep my asset allocation where I want it. It may not be the best as regards tax, but it does keep things simple as I'll only have foreign interest to declare until I tap the retirement accounts when I'll also have foreign income.
4) Your SS payments are only taxed in the UK.
5) Make sure you file TDF9.22-1 if you have more than $10k in foreign accounts.
I may start a blog as I get closer to my move so I can write about the practicalities of leaving the US and retiring in the UK. It will give me something to do!