Transferring funds from the US to the UK: Taxes?

I just read that transferring money to a UK bank account might trigger tax implications. But what if this is money that you have saved for years? Surely that wouldn't be taxed! I assume that income received abroad while you live in the UK will be taxed, that only makes sense. But not past income right?!? We've been sitting on a bit of cash that we're hoping to put towards a downpayment some day in the UK but if we get taxed on it (after paying cap gains in the US) then we'll really be in trouble.

How have you been paying tax in the UK; on the remittance basis or on the arising basis?

If you've been paying on the arising basis and have been properly declaring the US interest/gains on a UK self assessment return there should be a paper trail to prove it has been declared. In which case, even if questions are asked, there should be no problem.

I haven't even gotten to the UK yet. I move over at the end of this month. I'm just trying to understand these issues in advance. Like, if I bring over some money will the UK ask me to pay taxes on it even though I made it in years past?

Similarly, when we eventually sell our US house after we've moved to the UK I assume the UK will want us to list it as income. But we will take a huge loss on it. Will the basis being higher than the sale price negate our need to pay taxes on it?

I haven't even gotten to the UK yet. I move over at the end of this month. I'm just trying to understand these issues in advance. Like, if I bring over some money will the UK ask me to pay taxes on it even though I made it in years past?

You will have no UK tax liability on the funds you bring with you. But once you are in the UK, any income those funds generate (interest, for example) is taxable in the UK.

Similarly, when we eventually sell our US house after we've moved to the UK I assume the UK will want us to list it as income. But we will take a huge loss on it. Will the basis being higher than the sale price negate our need to pay taxes on it?

Have a look on the HMRC site. Generally, all gains on a personal/primary residence in the UK are tax free (there are a few exceptions, but probably nothing that should concern you). It's not like the US. But I am not familiar with the rules on the sale of 'foreign' property. I would guess you are allowed a certain period in which to make the sale. Again, check the HMRC site for the correct answer.

Great, thank you!

I just read that transferring money to a UK bank account might trigger tax implications. But what if this is money that you have saved for years? Surely that wouldn't be taxed! I assume that income received abroad while you live in the UK will be taxed, that only makes sense. But not past income right?!? We've been sitting on a bit of cash that we're hoping to put towards a downpayment some day in the UK but if we get taxed on it (after paying cap gains in the US) then we'll really be in trouble.

The transfer of cash from the US to the UK will only generate a tax bill if you end up with a foreign exchange gain. There might be US reporting requirements if your foreign accounts go above some threshold, eg. $10k for FBAR.

If you sell property in the US while in the UK you will have to work out your liability. The UK will have primary taxation authority on capital gains from investments and you'll have to get a US tax credit for any tax you pay in the UK. If you sell US real property, ie. a house, the US has primary taxation authority. Remember if your US house is not your primary residence and you haven't lived in it for at least 2 out of the last 5 years you'll lose your US capital gains exemption for the house.

Great, thanks. Hopefully it'll sell quickly and we won't face that issue. And there's no gain. Like I said, we'll lose a bundle on the house but it is what it is. Thanks!

Great, thanks. Hopefully it'll sell quickly and we won't face that issue. And there's no gain. Like I said, we'll lose a bundle on the house but it is what it is. Thanks!

You should take some time, or go to a professional, to make sure your finances are all set for the move to the UK. You should pay particular attention to any US mutual funds you own and also understand the situation with any US retirement funds you have. Then you should understand the implications of investing and saving in the UK and contributing to UK pensions funds.

The transfer of cash from the US to the UK will only generate a tax bill if you end up with a foreign exchange gain. There might be US reporting requirements if your foreign accounts go above some threshold, eg. $10k for FBAR.

If you sell property in the US while in the UK you will have to work out your liability. The UK will have primary taxation authority on capital gains from investments and you'll have to get a US tax credit for any tax you pay in the UK. If you sell US real property, ie. a house, the US has primary taxation authority. Remember if your US house is not your primary residence and you haven't lived in it for at least 2 out of the last 5 years you'll lose your US capital gains exemption for the house.

I'm confused. The UK does not tax foreign currency gains or losses made by individuals; only the US chooses to do this.

If you have US investments you may want to create segregated capital and income accounts; as this is still good UK planning. You will want to get shot of any US living trusts in the UK tax year before moving to the UK. HMRC will not care about a loss made on your US PPR, and you will get no CGT relief for any such loss.

My finances are fairly simple. I have some cash from an old real estate transaction. We own our current home outright (the one that we're "losing" money on) so when we sell it we will walk away with more cash (albeit much less than we spent) and I have a 401k and IRA, both with my current company with whom I'm moving. I will no longer be able to contribute to those, of course, but the benefits dep't have checked and I can just leave them where they are for now. I will begin a pension plan once I move. Don't know what will happen when it's time to draw from the US retirement accounts but that's decades away and I can't worry about that now!

I have a 401k and IRA, both with my current company with whom I'm moving. I will no longer be able to contribute to those, of course, but the benefits dep't have checked and I can just leave them where they are for now.

You can certainly contribute to the IRA (though not the 401k) if you have earned income in the UK and take the foreign tax credit rather than the foreign earned income exclusion. This can also be very favorable because the US-UK tax treaty allows UK tax deductions for IRA contributions and does not tax Roth conversions (discussed here). The primary requirement is that you must have been contributing to the IRA before becoming UK resident - so you'd be wise to ensure you have both traditional and Roth IRAs and you've made a contribution to each one before you arrive here.

I'm confused. The UK does not tax foreign currency gains or losses made by individuals; only the US chooses to do this.

Yes so it's pretty difficult to get a tax bill on the transfer of cash. I suppose you'd have to change dollars to pounds and then pounds to dollars at an advantageous exchange rate and then you'd end up with a US taxable gain.

You can certainly contribute to the IRA (though not the 401k) if you have earned income in the UK and take the foreign tax credit rather than the foreign earned income exclusion. This can also be very favorable because the US-UK tax treaty allows UK tax deductions for IRA contributions and does not tax Roth conversions (discussed here). The primary requirement is that you must have been contributing to the IRA before becoming UK resident - so you'd be wise to ensure you have both traditional and Roth IRAs and you've made a contribution to each one before you arrive here.

I'd also recommend that you set up a US Vanguard mutual fund and brokerage account before you leave the US, or at least ensure that your current brokerage and investment accounts will allow you to trade as a UK resident. As a US citizen for anything other than savings accounts and cash ISAs, it's better to invest in the US than the UK. Just make sure you understand the the implications of UK reporting funds and US PFIC regulations.

Yes so it's pretty difficult to get a tax bill on the transfer of cash. I suppose you'd have to change dollars to pounds and then pounds to dollars at an advantageous exchange rate and then you'd end up with a US taxable gain.

From a US perspective, Internal Revenue Code § 988(e)(2) requires foreign currency gains attributable to personal transactions to be recognized if in excess of $200.