Best advice or most worthwhile financial decision you’ve made when relocating?

Hi all,

We’re planning our move to the UK this summer and will be meeting with our accountant soon to start discussing the financial implications. I’m at the beginning of my journey in understanding how taxes work between the two countries, how to think about accounts, moving money, and treating savings in each as well.

I’m hoping folks can share resources that helped them to understand the basics, as well as things that they learned that were unique to their situation that I may want to ask our accountant about.

Thanks in advance!
-N

Hi all,

We’re planning our move to the UK this summer and will be meeting with our accountant soon to start discussing the financial implications. I’m at the beginning of my journey in understanding how taxes work between the two countries, how to think about accounts, moving money, and treating savings in each as well.

I’m hoping folks can share resources that helped them to understand the basics, as well as things that they learned that were unique to their situation that I may want to ask our accountant about.

Thanks in advance!
-N

Do ask away, plenty of good advice available here.

I take it from skimming through your other posts that you are a USC only and your wife is a UKC only?

You mention savings in both countries. If that includes stock and bond mutual funds then there are things you can do ahead of time to manage the taxes better, and be aware that there are no equivalent funds in the UK that you as a USC can own without punitive taxes as the IRS considers them to be PFICs.

If you are working in the UK and your employer has a 401k style pension plan then that is great but if you do more than match your employer's contributions then it becomes a Foreign Grantor Trust, so try and avoid that as well.

If you have a 401k and/or IRA in the USA then you can check that the brokerage(s) will allow an overseas address. Similarly with your US bank. Ourselves and our son rolled our 401ks into an IRA immediately after finishing work. If you do have a 401k and wish to roll it over to an IRA after you have moved then that may prove difficult unless you have already have an IRA as even with brokerages that allow overseas customers it may be that opening a new IRA from overseas may not be possible.

Thanks durhamlad,

I am a USC and my wife is in the process of applying for USC and we hope to get that sorted before we move, so she'll be dual. I'll be applying for a spousal visa.

We have 401k (ETF and index funds) and brokerage accounts here in the US. What was the driver for rolling the 401ks into IRAs after finishing work? Thanks for the tip on checking if brokerage will allow oversees addresses. They are with Fidelity as custodian currently.

-N

Also make sure your accountant is well versed in the US/UK tax treaties.  There are excellent accountants in the USA who don't know boo about overseas investments and such.  It may be that you need to find a specialist as opposed to your current accountant.

If you have the time, going back through some old threads in this tax section will provide a lot of useful info. There have been a number of threads that have helped me a lot and I have simplified my tax situation accordingly.

Thanks durhamlad,

I am a USC and my wife is in the process of applying for USC and we hope to get that sorted before we move, so she'll be dual. I'll be applying for a spousal visa.

We have 401k (ETF and index funds) and brokerage accounts here in the US. What was the driver for rolling the 401ks into IRAs after finishing work? Thanks for the tip on checking if brokerage will allow oversees addresses. They are with Fidelity as custodian currently.

-N

We rolled our 401ks into IRAs to get a much greater choice of funds plus lower fees. Also the rules on the 401ks are governed not by the custodian brokerage but by the employer. For example Schwab was the custodian of my 401k and they would only do physical checks, and when I rolled it over to Vanguard they would only send the check to my address on record so I had to receive an extremely large check then Fedex it to Vanguard.

HMRC will respect both an IRA and 401k as pension funds and only tax distributions when they are taken. If you have funds in a taxable account then you can look up the funds to see if they are “HMRC Reporting “ (just Google HMRC Reporting to get the list). If they are HMRC reporting then HMRC will treat them as individual stocks or bonds in that stock dividends get lower tax rates, bond dividends get taxed as regular income, and the sale of shares or bonds get very favorable capital tax gain tax treatment.

You will need to know that you and your wife will be taxed as individuals in the UK. In our case because of my much higher pensions I am in a higher tax band than my wife so we took my name off our joint brokerage and savings accounts so that we get an overall smaller tax bill.

We rolled our 401ks into IRAs to get a much greater choice of funds plus lower fees. Also the rules on the 401ks are governed not by the custodian brokerage but by the employer. For example Schwab was the custodian of my 401k and they would only do physical checks, and when I rolled it over to Vanguard they would only send the check to my address on record so I had to receive an extremely large check then Fedex it to Vanguard.

HMRC will respect both an IRA and 401k as pension funds and only tax distributions when they are taken. If you have funds in a taxable account then you can look up the funds to see if they are “HMRC Reporting “ (just Google HMRC Reporting to get the list). If they are HMRC reporting then HMRC will treat them as individual stocks or bonds in that stock dividends get lower tax rates, bond dividends get taxed as regular income, and the sale of shares or bonds get very favorable capital tax gain tax treatment.

You will need to know that you and your wife will be taxed as individuals in the UK. In our case because of my much higher pensions I am in a higher tax band than my wife so we took my name off our joint brokerage and savings accounts so that we get an overall smaller tax bill.

Super helpful. The delineation between which policies govern your 401k, being either custodian-led or employer-led, makes sense. Crazy that they could only mail you a check to do a rollover!

Super helpful. The delineation between which policies govern your 401k, being either custodian-led or employer-led, makes sense. Crazy that they could only mail you a check to do a rollover!

Hopefully I have given enough info for you to start doing a bit of research.  Forewarned is forearmed, and you may find that you end up with very few issues to sort out ahead of time once you look into things.

I'm a UK citizen so can't give insight into the US citizen/dual citizen issue (others such as Durhamlad can give good advice on this side of things). I've written below a few things I did, didn't do (and wished I had), or learned after moving to the UK. Some of it may not apply to you, but thought I'd put anything I can think of and you can use/reject as needed.

My situation is that I lived in the US from 1990 to 2006, with a 1-year break in 2000. For some of those year I paid FICA and also paid into two 403(b) plans with TIAA-CREF.  On returning to the UK, I quickly started thinking about retirement, i.e., how I would juggle US and UK "plans" when I finally retired (in the UK).

I would definitely endorse the advice to rollover to an IRA, because of the flexibility that gives you. In the past, I've seen reasons given to roll over to Roth, but I think that advice was for reasons that don't apply to everyone.

One hiccup I know many people hit is with the 30% withholding on retirement withdrawals when you live overseas. I've had many tussles with TIAA over this, and although I managed to arrive at a solution, others have failed. Just something to anticipate if you consider withdrawing funds from the UK, as you can end up losing 30% withholding and then UK taxes, meaning you might only net 50% from your withdrawal, until you eventually get a refund from the IRS (which in my case was 18 months after the withdrawal occurred). There's a couple of threads on this.

For reasons purely to do with achieving simplicity, I wasn't keen on the idea of (a) dealing with funds sitting in the US and (b) dealing with issues when withdrawing or receiving benefits from my US 403(b). However, it is nigh on impossible to transfer US retirement funds to UK retirement accounts. I found a belt and braces way around this, and if it's something you want to know, let me know and I'll paste a basic description.

Just a tidbit, and someone correct me if this is incorrect, but I think that the withholding depends on your citizenship. I only had 20% withholding from my 403B (similar to 401K) disbursement, but I am a US citizen and it was withheld to cover potential income taxes.  And where the money is going. (AKA, is it going to a USA bank account? If so, if it's not immediately then being shunted to the UK, I think the lower 20% withholding applies. Not sure if that applies for non-US citizens, though.)  My 403B is with Fidelity, and they were happy to do direct deposit to a USA bank. (I didn't ask them about foreign banks.)