Moving 401K proceeds to the UK

As a former UK employee of a US based company, I have accumulated a 401K account worth $40K. I am a UK citizen and I never lived and worked in the US, so I don't have a SSN. I understand I may avoid a 10% withdrawal penalty by leaving the money where it is until I reach age 59 & 1/2 in September 2014.

Beyond that point, what is the most tax efficient way to withdraw the funds?

Will I need to get a ITIN?

I have seen conflicting reports on whether I will need to complete a W8BEN for any withdrawals.

Any advice gratefully received.

Neil Matthews,
Cambridge, UK

As a former UK employee of a US based company, I have accumulated a 401K account worth $40K. I am a UK citizen and I never lived and worked in the US, so I don't have a SSN. I understand I may avoid a 10% withdrawal penalty by leaving the money where it is until I reach age 59 & 1/2 in September 2014.

Beyond that point, what is the most tax efficient way to withdraw the funds?

Will I need to get a ITIN?

I have seen conflicting reports on whether I will need to complete a W8BEN for any withdrawals.

Any advice gratefully received.

Neil Matthews,
Cambridge, UK

You should get a ITIN by filing a W7 and then file the W-8BEN with your 401k administrator and claim exemption from withholding tax under the US/UK tax treaty.

Once you reach 59.5 you will be able to make withdrawals from the 401k penalty free and free of US withholding. You will have to pay UK income tax on those withdrawals, file a Self Assessment, and plan how they will affect your UK marginal tax rate.

If you have no other assets or income in the US, the administrator gets the 0% withholding correct and are an NRA you won't have to file a US tax return.