Investing for US/UK dual citizens living in the UK.

I apologise, it looks like you are correct, I just believed the Vanguard agent I talked to instead of being more persistent. You should be able to file a W9 with them if you are a USC living overseas and don't have a US address on file with them.

https://personal1.vanguard.com/pdf/s273.pdf?2210114361#:~:text=The%20IRS%20requires%20us%20to%20withhold%2030%25%20of%20your%20withdrawals,completed%20IRS%20Form%20W%2D8BEN.

I emailed Vanguard and their reply disagrees with what their phone rep told me and agrees with your actual experiences. I told them I would be a US citizen resident in the UK. However, I still don't think they should be selling ETFs to UK residents. Here is the critical bit of their email


When you relocate your residence outside of the United States, you are able to keep your accounts open. You would be considered a foreign investor when this happens, and some restrictions may apply.

Since you have existing accounts with us, you are still able to do all of the following regarding Vanguard funds:

-Make additional purchases of your existing funds
-Make additional purchases of new funds
-Exchange money from an existing fund you own into an existing fund
-Exchange money from an existing fund you own into a new fund

I emailed Vanguard and their reply disagrees with what their phone rep told me and agrees with your actual experiences. I told them I would be a US citizen resident in the UK. However, I still don't think they should be selling ETFs to UK residents. Here is the critical bit of their email


When you relocate your residence outside of the United States, you are able to keep your accounts open. You would be considered a foreign investor when this happens, and some restrictions may apply.

Since you have existing accounts with us, you are still able to do all of the following regarding Vanguard funds:

-Make additional purchases of your existing funds
-Make additional purchases of new funds
-Exchange money from an existing fund you own into an existing fund
-Exchange money from an existing fund you own into a new fund

Thanks for this confirmation.

I checked with my daughter, USC resident in the UK, who received a large settlement check last year and did a mobile check deposit into her Vanguard account. She used those funds to buy a new Vanguard ETF.

I apologise, it looks like you are correct, I just believed the Vanguard agent I talked to instead of being more persistent. You should be able to file a W9 with them if you are a USC living overseas and don't have a US address on file with them.

https://personal1.vanguard.com/pdf/s273.pdf?2210114361#:~:text=The%20IRS%20requires%20us%20to%20withhold%2030%25%20of%20your%20withdrawals,completed%20IRS%20Form%20W%2D8BEN.

I emailed Vanguard about withholding and they stated that it didn't matter if you filed a W9 and proved you were a US citizen, it's the address that is the deciding factor on withholding ie foreign address means 30% withholding ie they apply the NRA rule. To me this is simply a CYA strategy from Vanguard.

Two other options come to my mind for a US citizen living in the UK. They could just buy shares in individual companies with a UK broker or buy UK EFTs or mutual funds and deal with the PFIC implications. If they do this inside an ISA there will be no UK tax and then they can do a QEF declaration and just pay the tax each year to the IRS.

I do this for my kids, as their UK grandfather put some money into JISAs for them. To save the crushing weight of paperwork, I've moved them all onto only one tracker, so only one f8621 each year (mark to market delcaration). Also, if there is some new money (another gift from their Grandad for example), I just sell everything in late December and then use the new money combined with the proceeds from the previous year to buy more shares of the fund in the new year. Otherwise, I'd have to do a f8621 for each set of stock purchases.

A few things to note:

* For US citizens, the only full service UK brockerage I can find is H and L. Most, even Vanguard, don't want to know you if you're a US citizen, too much paperwork!
* From what I can tell, if your dependent child has more than $1400 in theoretical earnings from their m2m declaration in form 8621, then they'll need to file (or you need to file on their behalf) a form 1040. In 2021, given some crazy exchange rate swings, two of my kids had to pay tax on their JISA investments.
*  Please join ACA and write your Congressperson. The US needs to adopt residency based taxation. If you have lived and worked in both countries, then it might not solve everything as you'll have ongoing retirement account admin and the like in both countries, but I've only every really been a proper adult in the UK (came over here at 24 to study, and met my partner), so my US ties are almost nil, but I am always very conerned about every financial decision because I know it might cause me shedload of paperwork with the IRS, and if I get it wrong, shedloads of fines!

Just as a matter of interest, can someone explain for me in layman's terms, what the advantages are in investing in US ETF's versus purchasing ETF's in the UK? I would expect that in the US, there is a much wider selection, but is there something else I'm missing? (hopefully not tax or reporting implications!)

Most of my SIPP is invested in ETF's (mainly IShares and SSGA) and Vanguard Funds (mainly Lifestyle Funds of various equity mixes) - which are all heavily skewed towards US companies - the fees are generally low and I have been generally happy with the returns to date - although I am able to (I am 68), I have not entered drawdown yet, preferring to keep funds invested and free from any potential Inheritance Tax at this time.

Just as a matter of interest, can someone explain for me in layman's terms, what the advantages are in investing in US ETF's versus purchasing ETF's in the UK? I would expect that in the US, there is a much wider selection, but is there something else I'm missing? (hopefully not tax or reporting implications!)

Most of my SIPP is invested in ETF's (mainly IShares and SSGA) and Vanguard Funds (mainly Lifestyle Funds of various equity mixes) - which are all heavily skewed towards US companies - the fees are generally low and I have been generally happy with the returns to date - although I am able to (I am 68), I have not entered drawdown yet, preferring to keep funds invested and free from any potential Inheritance Tax at this time.

I think the advantage buying US ETFs/funds outside of a SIPP is that, assuming they are HMRC reporting, then you get to treat gains as capital gains in both the US and the UK and you don't have to do any PFIC related paperwork. I think (and there will no doubt be those that disagree) that within a SIPP, there isn't much advantage to buying US ETFs, because you can hold UK ETFs/funds in your SIPP without PFIC implications as it is a pension (I think some accountants don't view SIPPs as pensions in the eyes of the IRS). Although, I have no idea how the IRS views the sales of funds/ETFs in a UK pension/SIPP. I would have assumed there were no implications as the sale is inside a pension wrapper, so as long as you've established your cost basis previously, then it doesn't matter until you start collecting your pension, at which point it will be taxed as income, although that seems far too easy and makes too much sense!

Just as a matter of interest, can someone explain for me in layman's terms, what the advantages are in investing in US ETF's versus purchasing ETF's in the UK? I would expect that in the US, there is a much wider selection, but is there something else I'm missing? (hopefully not tax or reporting implications!)

Simplicity is one reason, no reason to file any PFIC reports or pay PFIC taxes.

Our US ETF funds are in my wife’s name so up to now we have paid more US taxes on their dividends and cap gains than in the UK although that may be changing as the UK government continues to increase taxes on them. First year we were back dividends we completely tax free as they are paid out of after-tax company profits, but then  it changed and only the first £5k was tax free and the excess taxed at 7%, but they have been reducing the tax free amount each year and this year it is only £500 tax free then taxed at 8.75%.

The cap gains when we (she) sell shares used to be the first £12,500 tax free but this year it is now only £3k and tax on the excess is 10%. (For basic rate taxpayers like my wife)

I have not looked in a while but the fund fees for Vanguard US ETFs are much lower than the UK equivalents.

I just checked and Vanguard US total stock market index VTI is 0.03% expense ratio and their UK equivalent is 0.1% .

I wanted to check in again on the latest. Most of this thread covers US based people who have moved to UK. I am UK based and never lived in the US so don't have any IRA. I would now like to open a UK based investment, as I understand I could do a SIPP and hold any Vanguard funds in that. If I open a stocks and shares ISA I can only hold individual stocks (which would be taxed each year in the US), but what I wanted to ask is there any UK S&S ISA provider that would let me hold a fund that is US based (so no PFIC)?  Are there any US based Vanguard funds that I could hold in an ISA product?

You need a dual-listed fund - one that meets both IRS and HMRC reporting requirements. The good news is that such funds exist - see:

 https://www.bogleheads.org/wiki/US_domiciled_ETFs_that_are_UK_HMRC_reporting_funds

The bad news is that retail investors like us are effectively forbidden from buying them.

So there is no one of holding these dual reportable funds as a UK resident? Whether in an ISA or not? If it was inside an ISA would it need to be HMRC reporting, as it would be tax free anyway? (so I thought if there is an ISA provider that allows US ETFs inside the wrapper that should be OK?).

So there is no one of holding these dual reportable funds as a UK resident? Whether in an ISA or not? If it was inside an ISA would it need to be HMRC reporting, as it would be tax free anyway? (so I thought if there is an ISA provider that allows US ETFs inside the wrapper that should be OK?).

Schwab are talking to the UK authorities about selling US based ETFs in the UK. That would be a perfect solution. It might happen later this year.

https://www.ft.com/content/d70e7fca-a935-43eb-9405-4f317161d265

Schwab are talking to the UK authorities about selling US based ETFs in the UK. That would be a perfect solution. It might happen later this year.

https://www.ft.com/content/d70e7fca-a935-43eb-9405-4f317161d265

Do you know if Schwab UK will accept US citizens as clients with all the FATCA implications that comes with it?

I tried becoming a Vanguard UK client but they don’t accept US citizens as clients even when residents of the UK.

What a minefield it is. I was looking at opening a SIPP with Vanguard Uk but if that is not possible what are my options? Does anyone know any UK SIPP provider that will accept US person? Interactive investor?