Social Security retirement benefits UK tax

Is 100% of SS benefit taxed for UK tax resident or is it adjusted as in the US based on income and a maximum 85% of the benefit amount?

Thanks in advance

Is 100% of SS benefit taxed for UK tax resident or is it adjusted as in the US based on income and a maximum 85% of the benefit amount?

For UK tax year 2016/17, there is a 10% tax free amount on US SS payments in the UK (arising basis - remittance basis will vary) regardless of level of income (if over the personal allowance). From UK tax year 2017/18 onwards, the US SS payment will be taxed at 100% in the UK (again, depending on basis and over the personal allowance).

EDIT- I've made the assumption you are speaking of a UK tax return. If your question relates to US tax, then the US/UK Treaty allows for the US SS to be 100% tax free in the US for a qualified UK resident (but still taxed in the UK via a self assessment form).

Thanks! Interesting that the tax treaty states, pensions will be subject to tax in the residency state as if received in original state. Roth IRA withdrawals are tax free in UK as a point of reference.

Although US SS is treated the same as U.K. OAP in that all of it is taxable, then for a US citizen living in the U.K. US SS is not taxed in the US but U.K. OAP is taxed in the US.

At least I think that it works that way. It's all very confusing.

Thanks! Interesting that the tax treaty states, pensions will be subject to tax in the residency state as if received in original state. Roth IRA withdrawals are tax free in UK as a point of reference.

.... and interest on ISAs is tax free in the UK but not in the US.

Interesting that the tax treaty states, pensions will be subject to tax in the residency state as if received in original state.

The Treaty also includes a saving clause (Article 1(4)) which means the US may tax the income of a US Person arising anywhere in the world (unless otherwise noted - Article 1(5)) as if the Treaty never existed. The US has citizenship based taxation, the UK has residence based taxation.

Yes, but this is regarding UK taxation and I would be a non resident alien, not a US Person.

Notwithstanding this, the fact the treaty allows tax free distributions of Roth IRA and other lump sum payments, suggests, to this layman anyway, that the US based tax treatment of SS benefits would be replicated by HMRC for a UK tax resident.

Yes, but this is regarding UK taxation and I would be a non resident alien, not a US Person.

Notwithstanding this, the fact the treaty allows tax free distributions of Roth IRA and other lump sum payments, suggests, to this layman anyway, that the US based tax treatment of SS benefits would be replicated by HMRC for a UK tax resident.

Your view concerning ROTH payments is reflected in paragraph 1(a) of Article 17. Social Security payments are covered exclusively in paragraph 3 of Article 17. Paragraph 3 starts with the words "Notwithstanding the provisions of paragraph 1 of this Article" [emphasis mine]. In other words, disregard anything stated in paragraph 1 when reading paragraph 3.

Your view concerning ROTH payments is reflected in paragraph 1(a) of Article 17. Social Security payments are covered exclusively in paragraph 3 of Article 17. Paragraph 3 starts with the words "Notwithstanding the provisions of paragraph 1 of this Article" [emphasis mine]. In other words, disregard anything stated in paragraph 1 when reading paragraph 3.

Thanks for the clarification. Do you happen to know how Required Minimum Distributions from 401k accounts are handled for UK tax purposes?

Do you happen to know how Required Minimum Distributions from 401k accounts are handled for UK tax purposes?

I've a good guess, but it would be better if someone more knowledgeable concerning required distributions answered this question. Hopefully, they will respond to your question fairly soon.

Thanks for the clarification. Do you happen to know how Required Minimum Distributions from 401k accounts are handled for UK tax purposes?

RMDs will be taxed in the UK just like any regular 401k distribution.....they are taxed as income using the current foreign pension rules.

Although US SS is treated the same as U.K. OAP in that all of it is taxable, then for a US citizen living in the U.K. US SS is not taxed in the US but U.K. OAP is taxed in the US.

At least I think that it works that way. It's all very confusing.

Yes, for a US citizen living in the UK, US SS payments are taxable only by the UK, but UK state pension is taxable by both the US and the UK. The key is that in these circumstance the UK state pension is not a cross border payment and so is not covered by the treaty Social Security article.

RMDs will be taxed in the UK just like any regular 401k distribution.....they are taxed as income using the current foreign pension rules.

Thank you for that but what of the penalty for failing to take the RMD? Is that assessed on UK or US taxes? Clearly the if the distribution is taken it is UK taxable income but I'm unclear on how the penalty would be assessed if for some reason the RMD was missed.

The UK does not regulate 401ks, it just taxes withdrawals as income. If you miss RMDs then you pay any tax penalties to the IRS.....not HMRC.