Opening a Roth IRA as a US/UK dual citizen....

Is it possible for a US citizen (also with UK citizenship) to open a Roth IRA while living in the UK? If so, is it even worth it? And/or is it a tax reporting nightmare?

I have been living in the UK 20+ years and I don't have much of a pension here and I'm not quite sure yet if I will settle in the UK or US but I need to do something as the clock is ticking. I have a US address I can use (I know that firms like Vanguard have been closing down accounts of non-US residents).

Any advice here would be greatly appreciated!

Vanguard have not been shutting down accounts of non-US residents that I am aware of. They have had our UK address only for a while now plus they use my UK mobile phone to send verification codes so no need even for a US phone number.

Having said that I don't know that it is possible to open a new account at any brokerage firm including Vanguard if you are not resident in the US.  Same goes for opening a UK bank account if you are not resident in the UK. Restrictions are high these days to stop money laundering.

Assuming you find somewhere to open an IRA account (Roth or traditional) do you know if you would be eligible to fund it?  You need earned income so for example you would have to be declaring it on your US return and instead of excluding it as Foreign Earned Income (form 2555) use foreign tax credits (form 1116) to reduce the US taxes on that income. Even if your tax credits  reduce your US taxes to zero I believe you can still make a Roth IRA contribution up to the limit of $6k. ($7k if over age 50)

I’ve heard that A.J Bell maybe the avenue to follow with regards your circumstances. As durhamlad had mentioned, you’d need non excludable income though to fund.

I have a Vanguard account from when I lived in the US, but as a mitigation in case Vanguard decides to close accounts of non-US-resident customers, I recently opened a Roth IRA at Interactive Brokers. This was while living in the UK, using only UK information (address, phone, etc.), plus US Social Security number.

No issues at all opening the account, and it feels good to have a backup.

Being able to actually invest in the account is a bit more of a challenge. Because IBKR knows I'm UK resident, they won't let me buy US funds (due to the EU/UK MiFiD rules and lack of a KID). However, I can buy UCITS funds in the IRA. Normally this would be very bad (PFIC!), but since it's in the IRA wrapper, my understanding is that the IRS a) can't impose the punitive tax and b) doesn't need the onerous filings (see https://www.bogleheads.org/wiki/Passive_foreign_investment_company#US_pensions).

The UCITS ETF does mean that expenses are slightly higher. You should also be aware that you'll be indirectly paying tax on US-source dividends that you don't have to (the ETF pays the taxes, you have no way to reclaim them). If it's an Irish ETF, that's "only" 15%, but if you have the option, you'd keep your US investments somewhere where you don't get stuck with that tax, like a 401k - you get the same problem with UK pensions, etc. Obviously want your overall asset allocation to make sense, but each individual account doesn't have to match the overall allocation.

As durhamlad said, you do need earned income to report on your US tax return. If you have UK earned income and use the Foreign Tax Credit, that does it. Or if you're fortunate enough to exceed the FEIE, the excess would work (but you would pay US tax on it first - at that point, the FTC very likely makes more sense anyway).

And it's not a tax reporting nightmare at all, because the UK recognizes Roth IRA as a pension. Nothing to report at all, although some people make a comment in the free text field on their Self Assessment just to ensure HMRC is aware but there's no tax due. On the US side, it's just like anybody resident in the US, no headache there.

That's really good info.  I don't suppose that having opened a Roth at Interactive Brokers that you can rollover from, say a US Vanguard Roth, to your Roth at IB?  Maybe a step too far. But for the working dudes in the UK it's great to have a Roth alternative.

That's really good info.  I don't suppose that having opened a Roth at Interactive Brokers that you can rollover from, say a US Vanguard Roth, to your Roth at IB?  Maybe a step too far. But for the working dudes in the UK it's great to have a Roth alternative.

It's certainly possible on paper (not technically a rollover, but a direct transfer). I'm not sure what would happen with my Vanguard investments, since they're all in US ETFs (HMRC reporting, but no KID/not MiFiD friendly). My optimistic guess is that they could transfer, but IBKR would prevent me from buying more.

It's certainly possible on paper (not technically a rollover, but a direct transfer). I'm not sure what would happen with my Vanguard investments, since they're all in US ETFs (HMRC reporting, but no KID/not MiFiD friendly). My optimistic guess is that they could transfer, but IBKR would prevent me from buying more.

Thanks.

A direct transfer is probably the same thing as a rollover in that there would be no tax implications and the money would still grow tax free in the new Roth. I wouldn't expect the same funds to be available in the new brokerage but that is the same if you transfer IRAs between US brokerages, the advantage being no tax implications in the transfer.  My wife and I have been through this 3 times in the US - the monies from the old IRA/401k brokerage get converted to cash which then is transferred to the new brokerage and you then buy the funds you want in the new location.

I would not expect the regular after-tax investments to be transferable, you would for sure have to sell the US ETFs and buy equivalents in the new brokerage.

We had been with Raymond James for 25 years until in 2019 they suddenly decided to kick out all non-US based customers with 60 days notice and threatened to sell all our assets and send us a cheque. This would have made an astronomical tax bill as we had decades of unrealized gains in non-reporting funds. We struggled to find a broker but in the end got all out accounts IRA, Roth IRA, Ben IRA and trading transferred as-is without any sales. This was finalized 2 days before RJ were to liquidate everything.
We used schwab.co.uk and Interactive Brokers UK and have been happy with them. IBKR has a more international focus, Schwab is more US.