UK Tax on US savings

I am a UK citizen and resident but still have some US savings accounts from when I lived there. I need to declare the income from these to the HMRC and need a bit of help in how to handle each account type.

The accounts I have are:

• Regular bank savings accounts and fixed term Certificates of Deposit,
      I believe these are treated as regular savings interest
  
• Mutual funds and Shares,
      Am I correct in thinking the income is dividends taxed at the tax rate for gross dividends.
  
• Traditional iRA retirement savings
      These are tax free in the US until withdrawals are made when distributions are is taxed as income.
      Do they need to be declared to the HMRC whilst no withdrawals are being made?
      How are withdrawals declared to HMRC and is there any difference between lump sums and regular distributions?
  
• 401k pension plan,
      Are these treated the same as IRAs?
Thanks for any assistance

MymsMan is a UK resident but not a US citizen who has US sources of income. The terms of the UK US double tax treaty therefore apply to his US sources of income.

The UK has recently changed the taxation of dividends from UK companies, with the abolition of the notional 10% tax credit and the introduction of a dividend allowance. Most dividends from non UK companies and most distributions from non UK mutual funds are taxed in the same way as UK dividends. As an exception, distributions from mutual funds that invest in bonds is taxed in a similar manner to interest.

The US generally imposes a withholding tax of 30% on dividends and mutual fund distributions. As a UK resident MymsMan may apply under the double tax treaty to reduce this to 15%. The 15% withholding tax may then be claimed in his self-assessment against UK tax on these dividends and distributions. (If the claim is not made under the double tax treaty the UK would only allow a credit for the 15%.)

MymsMan should also note that on a sale of his US mutual funds, any gain (which is computed in sterling terms, using the exchange rates at the time of the purchase and sale) could be charged to income tax (rather than capital gains tax) under the Offshore Income Gains rules. The OIG rules would apply unless the mutual fund was a reporting fund (to HMRC not the IRS) and few US mutual funds choose to be reporting funds. There is a list of reporting funds on the HMRC website.

I shall leave it to others to comment on pension income.

In addition to Dunedin's wise thoughts; it is worth saying that the treaty is elective. It is not compulsory to elect into the treaty, but choosing to do so requires filing of a UK personal self-assessment return claiming any benefits.

If you choose to use the treaty the UK will recognize the tax free wrapper around the 401k and the IRA and will tax withdrawals as income. As you have US source income and gains you should also be aware of any US tax filing requirements.

Thanks for all the replies

MymsMan should also note that on a sale of his US mutual funds, any gain (which is computed in sterling terms, using the exchange rates at the time of the purchase and sale) could be charged to income tax (rather than capital gains tax) under the Offshore Income Gains rules. The OIG rules would apply unless the mutual fund was a reporting fund (to HMRC not the IRS) and few US mutual funds choose to be reporting funds. There is a list of reporting funds on the HMRC website.

Does the UK capital gains allowance apply if gains are treated as income or is the entire gain treated as income?  How would they be reported on a tax return

There is no UK CGT allowance. Losses are not offset against gains.

There is no UK CGT allowance. Losses are not offset against gains.

What do these rules apply to? I would have thought that if I sold shares in Apple for a capital gain of £5,000 it would go against an allowance of £11,300.

https://www.gov.uk/government/publications/rates-and-allowances-capital-gains-tax/capital-gains-tax-rates-and-annual-tax-free-allowances

Or are you only referring to non-reporting funds?

What do these rules apply to? I would have thought that if I sold shares in Apple for a capital gain of £5,000 it would go against an allowance of £11,300.

https://www.gov.uk/government/publications/rates-and-allowances-capital-gains-tax/capital-gains-tax-rates-and-annual-tax-free-allowances

Or are you only referring to non-reporting funds?

My apologies for the lack of clarity. I thought I was replying to a question about offshore income gains; rather than the UKs rules relating to other kinds of gains.

My apologies for the lack of clarity. I thought I was replying to a question about offshore income gains; rather than the UKs rules relating to other kinds of gains.

 No worries.

There is no UK CGT allowance. Losses are not offset against gains.

For mutual funds that are taxed under the Offshore Income Gains rules, if the calculation results in a loss, then as Guya has said, the loss cannot be set against any OIG gains (nor against general income) However, the loss is then a capital loss which may be set against any capital gains, in the usual way.