US Expat in UK: Tax on UK earned pension?

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Have you read the saving clause in the treaty?

Do you have basis in the UK pension plans? Have you reported employer contributions and growth on previous US tax returns? Have you included the pension plans each year on Form 8938?

Where in US law is there is $95K allowance for pension income? Is this is a change in US law?

It was $92k last year for non-US income that you don't have to pay tax on. But you still have to file if you earn more than the minimum for filing (married filing separately) which is under $7k. I'm assuming you've also heard of the FBAR paperwork?

The savings clause (article 1.4) says the US can ignore the entire treaty when it comes to US citizens. So it does. There are some exceptions, found in article 1.5.

Pensions are not 'earned income'. The $100,000+ tax exclusion as found on form 2555 (FEIE) is for earned income only. You would use FTCs (Foreign Tax Credits). They comprise of the tax you pay in UK, but not all the tax you pay in the UK. If the US does not have an equal type tax, tax paid in the UK won't count.

What is tax free in the UK is rarely tax free in the US. Think of ISAs for example.

Some types of UK investments can be very toxic for a US tax payer. Think of Stocks and Shares ISAs, or any type of mutual fund.

The filing threshold for a filer of a 'married separate' return is $4,050 for 2016. Above that figure, you must file a return.

If you are delinquent in filing for past years, there are special programmes you may qualify for to get back into compliance.

FBARS are for reporting accounts only. You don't pay any tax on an FBAR.

Yes, the only returns are for those past three years. The IRS sort of writes off previous years, provided there are no visible worries, or your yearly income is not in the millions. They never completely set you free as by filing Streamlined you waive some of your rights. But, many have used the programme successfully.

If you have (or had) Stocks and Shares ISAs, talk to a competent US/UK tax advisor. I must warn you now, prepare yourself for a (monetary) shock regards fees. You must then determine if you wish to proceed or consider an alternative route to filing.

If you are correct and you are a US citizen you always had an obligation to file US tax returns. On what basis do you claim US citizenship? Have you ever relinquished US citizenship?  Are you planning on remaining a US citizen or renouncing?

All of these issues will affect the way you decide to deal with the IRS.

If you are correct and you are a US citizen you always had an obligation to file US tax returns. On what basis do you claim US citizenship? Have you ever relinquished US citizenship?  Are you planning on remaining a US citizen or renouncing?

All of these issues will affect the way you decide to deal with the IRS.

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A good set of questions. The OP will want to investigate possible intentions they may have had thereby relinquishing US citizenship in the past.

Also, if we may ask, how was the OP alerted that they had a US tax obligation?

I hold a US passport. I do not hold citizenship of any other country.

Just a quick reply to say all forms of voluntary relinquishment are out with the exception of renunciation. To renounce, you need to have a 2nd citizenship such as UK. There are a very small number who would debate that statement.

I have not fully contemplated whether I might renounce my citizenship. Obviously it would be contingent on my ability to get UK citizenship. I think there is a good chance I would be able to get a UK citizenship, though I have not looked into the specific details.

If you have ILR the chances of obtaining UK citizenship are good. I'm not sure of the timings these days, but 6 months from start to finish might be a good estimate. Renunciation obviously effects your immediate ability to return to the States to live permanently. Eventually, renunciation ends your requirement to file a US tax return since you have no US assets/pensions.

Since you only left at age 30, have you ever contributed to the US Social Security system through employment in the US (10 years or less)? If so, you may qualify for a small amount from the US monthly provided you have contributed to the UK State pension (if US contributions are less than 10 years). If you have more than 10 years of substantial earnings in the US, you already qualify for US SS.