Okay, I have the more of the story now. The answer is that you plan to return to the UK at some point and will re-aquire UK domicile upon return. The bad news is that tax law is likely to change dozens of times between now and then. Any answers I post are related to the current law, and may change. You should probably get an annual advice check to confirm these things haven't changed. If you register as a client with a dual-country tax prep firm, they should update you automatically when laws change (which should give you time to jump if you've only got a small time-frame within which to jump).
>>I am currently domiciled in the US, but I intend to retire
>>to the UK and make that my permanent home, build a house
>>etc. so I believe that I will be giving up US domicile and
>>becoming UK domiciled.
Sounds right to me, but in some cases there could be mitigating circumstances. Let's go with this for the nonce.
>>As a dual UK/UK citizen resident and domiciled in the
>>UK when I sell some US mutual funds I will have to pay
>>capital gains tax on them in the US. When I come to do
>>my UK taxes the UK/US tax treaty will be applied and I'll
>>be able to subtract the tax I've paid in the US from my UK
>>liability.
Basically right, but it's domestic law, not treaty, that enables you to take a tax credit in the UK for any US taxes paid.
>>Another question I have a US ROTH IRA. When I'm 60 and
>>take money from it, it will be free of tax in the US, will it be
>>free of tax in the UK too?
Under the treaty, a pension that is tax-free in the country-of-pension-origin enables it to be tax-free in the resident country. Factors that could affect the taxability include whether it's taken out all at once, in period payments over time, or in discrete random occasional chunks. I can not go into detail regarding this, as the mechanics and research I've done on the topic would start to fall under the definition of a covered opinion (i.e., fees and lots of legalese). If it's a small sum, it's not worth worrying too much about until you're closer to take it out, but if it's a large sum, it's worth taking the precaution of expert advice and planning at this early stage. This area of taxation is one of those kinds of things that gets bollixed up when a new law is passed, so it falls under "watch this space".
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