Can someone help me with this? Admittedly, might be dumb questions..
We have a US/UK citizen, relatively long term resident in UK (8 years), who is about to start taking out US pensions from times he lived and worked in USA. We know about Windfall provision.
We understand that he has to pay UK tax on it first (and then file US tax and claim foreign tax credit). Except for Roth which is not taxed in either country. Devil is in the details:
1) 401K RMD distributions, even taken once a year, are periodic payments, so they are 100% taxable in UK, right?
What if one goes beyond MRD and takes out a significant part of 401K - say 1/2 of one fond or even the whole from one of several 401K? Will it be lump sum and so taxable only in US?
2) SS benefits are a type of pension, right? Article 17 of US-UK treaty says that parts of pension non-taxable in issuing state should also be non-taxable in the state where the person is resident. Does it mean that he only pays UK tax on 85% of SS income (like it would be in US)?
For both questions - if it is possible to decrease UK tax, how one reports that on UK self-assessment? Just on the filed for additional information on the main form? Or is there an additional form to refer to treaties?
3) When filing US foreign tax credit from 1116, where SS and RMD go? Is it "income resourced by treaty" or "high taxed income" reclassified as general income? Or something else?
Thank you for any help