US Pension while working in the UK

Hello,
I was thinking about applying for early retirement from the job I worked while living in the US in order to start receiving my pension to help make ends meet. To be clear, it's been years since I left that job to move and live in the UK. Since I worked as a city employee, I am enrolled in retirement system that is run by the State I lived in and worked in. 
I still plan to continue working in the UK as well and my current Visa status is Indefinite Leave to Remain.
So, what are the tax implications for me in both the US and the UK. Will I get taxed in both the US and the UK. I still feel out my 1040 every year. Is my pension treated as income in the US for tax purposes. In order to apply for retirement with the State pension plan I have to fill out a IRS Form W-4P for federal tax withholding​ and
A State Tax Withholding Request for the State I worked in.
I tried to read up on this, but am still not certain and a bit confused about how all this works. Along with the questions I asked, is there anything else I need to know. Thank you.

I am not a tax pro but have been in a similar position for a few years. As a USC living in the UK I file both an HMRC and IRS return each year.  I have a private pension from a former US employer and that is taxed by both the IRS and HMRC but on my IRS return I claim a foreign tax credit for the HMRC tax I paid on that income so I don't get double taxed. At first glance the IRS foreign tax credit form, 1116, looks like it is for tax on foreign income, but you check the box "Income Resourced by Treaty" to tell the IRS that there is a treaty in place which allows a foreign tax credit against this US income.

You say that your pension is paid from the State in which you were a City employee, and there is section in the treaty that says that government pensions are only taxed by the IRS, but I think that only applies to Federal government jobs. Hopefully someone will come along and clarify this for you.

Thanks for your replies. Neither me or my wife have ever had to fill out UK tax forms, is it just one form I need to fill out. Sounds like I can get an exemption from paying the US tax but will to pay the UK tax, is that correct. And either way, how much is the tax you have to pay. Let's say my monthly pension worked out to $10,000 a year, which is a nice round number. What would be the total tax amount I would have to pay. Thanks.
I have already checked with the department that runs my pension, but thanks for pointing that out. I have been told I can work somewhere else and still collect my pension.

Thanks for your replies. Neither me or my wife have ever had to fill out UK tax forms, is it just one form I need to fill out. Sounds like I can get an exemption from paying the US tax but will to pay the UK tax, is that correct. And either way, how much is the tax you have to pay. Let's say my monthly pension worked out to $10,000 a year, which is a nice round number. What would be the tax I would have to pay. Thanks.
I have already checked with the department that runs my pension, but thanks for pointing that out. I have been told I can work somewhere else and still collect my pension.

I also never had to complete a UK tax until I had foreign income. You can complete your tax return online through the HMRC portal which is pretty user friendly. Bunch of questions up front to determine which forms are needed then it takes you through them. You WILL need a Unique Taxpayer Reference number to file, so the first thing to do, and do it now, is create yourself an HMRC gateway account and request a UTR for self assessment. (Google is your friend)

https://www.gov.uk/log-in-register-hmrc-online-services

How much tax you’ll pay will depend on your total income as your US pension is treated like any other pension income. If you are already paying taxes then you will be in the 20% bracket so will pay 20% of your pension in taxes.

https://www.gov.uk/income-tax-rates

Thanks. If I am understanding what you wrote and what I have read, the total amount of tax on my pension would be based on what my total income would be up to 1050 pounds at most based on the 7,000 pound figure.
So, if I made 13,000 pounds and my pension was 7,000 pounds I would be paying 86 pounds of taxes on my income and 1050 pounds on my pension.
However, if I made say 10,000 pounds my pension tax would be 536 pounds and continue to be less if I make less a year. On the other hand, the maximum I would be is the 20 percent number which works out to 1050 pounds. Is that correct? I used the following tax pension calculator to determine the numbers.

https://www.wearejust.co.uk/retirement-calculators/pension-taxation-calculator/

I have also seen a 25% tax-free lump sum. Does this also  apply to my US pension.
 
"You are able to take up to 25% of your total pension savings as a tax-free lump sum. This is also known as pension commencement lump sum."

Thanks. If I am understanding what you wrote and what I have read, the total amount of tax on my pension would be based on what my total income would be up to 1050 pounds at most based on the 7,000 pound figure.
So, if I made 13,000 pounds and my pension was 7,000 pounds I would be paying 86 pounds of taxes on my income and 1050 pounds on my pension.
However, if I made say 10,000 pounds my pension tax would be 536 pounds and continue to be less if I make less a year. On the other hand, the maximum I would be is the 20 percent number which works out to 1050 pounds. Is that correct? I used the following tax pension calculator to determine the numbers.

https://www.wearejust.co.uk/retirement-calculators/pension-taxation-calculator/

I have also seen a 25% tax-free lump sum. Does this also  apply to my US pension.
 
"You are able to take up to 25% of your total pension savings as a tax-free lump sum. This is also known as pension commencement lump sum."

That sounds about right. Yes, the tax free lump sum also applies to US pension savings, and my wife and I have both had UK tax free lump sum withdrawals from our US pension IRAs, but we had to pay US tax on those pension withdrawals. As US citizens nearly all of our worldwide income is taxed by the US, our exception being our US SS which is paid directly to us in the UK and not taxed by the IRS, only by HMRC.

There are free calculators for estimating your UK taxes. Simply convert your US pension int £s when entering it.

https://www.gov.uk/estimate-income-tax

https://www.moneysavingexpert.com/tax-calculator/

Thanks. If I am understanding what you wrote and what I have read, the total amount of tax on my pension would be based on what my total income would be up to 1050 pounds at most based on the 7,000 pound figure.
So, if I made 13,000 pounds and my pension was 7,000 pounds I would be paying 86 pounds of taxes on my income and 1050 pounds on my pension.
However, if I made say 10,000 pounds my pension tax would be 536 pounds and continue to be less if I make less a year. On the other hand, the maximum I would be is the 20 percent number which works out to 1050 pounds. Is that correct? I used the following tax pension calculator to determine the numbers.

https://www.wearejust.co.uk/retirement-calculators/pension-taxation-calculator/

I have also seen a 25% tax-free lump sum. Does this also  apply to my US pension.
 
"You are able to take up to 25% of your total pension savings as a tax-free lump sum. This is also known as pension commencement lump sum."

The UK has the primary right to charge tax on pension distributions. Double taxation is ameliorated by the US giving credit for UK tax paid. The 25% tax-free element of a commencement payment only applies to payments from UK plans.

That sounds about right. Yes, the tax free lump sum also applies to US pension savings, and my wife and I have both had UK tax free lump sum withdrawals from our US pension IRAs, but we had to pay US tax on those pension withdrawals. As US citizens nearly all of our worldwide income is taxed by the US, our exception being our US SS which is paid directly to us in the UK and not taxed by the IRS, only by HMRC.

There are free calculators for estimating your UK taxes. Simply convert your US pension int £s when entering it.

https://www.gov.uk/estimate-income-tax

https://www.moneysavingexpert.com/tax-calculator/

My understanding, which aligns with @guya, is that the 25% tax free lump sum only applies to UK pensions.

If it also applies to US pensions then I've been missing out.

My understanding, which aligns with @guya, is that the 25% tax free lump sum only applies to UK pensions.

If it also applies to US pensions then I've been missing out.

Same here. I withdrew all of my US-based 401(k) type retirement holdings while a non-US resident, non-US citizen, UK resident, UK citizen. While I dearly wanted my withdrawals to include a 25% tax-free portion, all the research I did back then (ca. 10-12 years ago) indicated that US pension withdrawals were NOT eligible for a 25% tax-free element because US pensions were not recognised in the same way as UK pensions because of different tax regimes in the US vs UK.

My understanding was based on my own extensive research and also information generously provided in several posts by members such as Nun and Guya, who understand this stuff better than I do. It was also confirmed (in my mind) by the fact that when entering the amounts in the foreign pensions section of HRMC's online tax forms, there was no indication that 25% was tax-free (and I didn't want to just enter 75% of the total amount as a get-around).

My understanding, which aligns with @guya, is that the 25% tax free lump sum only applies to UK pensions.

If it also applies to US pensions then I've been missing out.

I am mistaken, I did not mean to say that 25% of US pension withdrawals are tax free in the UK but that a lump sum withdrawal from a US pension scheme is taxable only in the USA as per paragraph 2 in section 17.

https://home.treasury.gov/system/files/131/Treaty-UK-7-24-2001.pdf

The Technical Explanation also supports this position that a lump sum from a US pension scheme is only taxable in the US. I understand that the IRS uses the saving clause so that lump sum distributions from UK pension schemes are taxable in the US, although that is not a position I have ever been in myself.

https://home.treasury.gov/system/files/131/Treaty-UK-Protocol-TE-7-22-2002.pdf

durhamlad - many thanks for the clarification. These days one would say that an LSD (lump sum distribution) from a US plan to a UK resident is taxed by the UK because HMRC now invokes the saving clause.

durhamlad - many thanks for the clarification. These days one would say that an LSD (lump sum distribution) from a US plan to a UK resident is taxed by the UK because HMRC now invokes the saving clause.

If they are doing this retrospectively can I can expect them to come after me for a past LSD, which was declared on my HMRC return?

This year my wife has cashed in her Roth IRA in a single lump sum, can she expect this to be taxed by HMRC?  The technical explanation above specifically calls out Roth distributions as being exempt from tax by HMRC.