US pensions for UK resident - remittance basis

I am still trying to figure out how to pay UK/US taxes on US pensions - SS income, RMD, and Roth conversions, for a double UK/US citizen, resident in UK.

1) SS pension is reported to UK and taxed in UK, but it is not taxable income for US (but where to report to US on 1040 that it is not taxable by treaty??)
For UK: Article 17b of U/US treaty says:
"the amount of any such pension or remuneration paid from a pension scheme established in the other Contracting State that would be exempt from taxation in that other State if the beneficial owner were a resident thereof shall be exempt from taxation in the firstmentioned State."
I read it so that, since only 85% of SS is taxed in US, UK should also only tax 85% of US SS income. But it seems from my online search that people report 100% of US SS income as taxable in UK. Why? Anyone has an experience with that?
2) RMD from 401K is taxed in UK, and credit is taken for US. What about partial rollovers to Roth? Say, he rollovers not all, but half of a specific fund (He owns several 401K)? Is it lump sum or not? (I.e., is it taxable in UK or not?)
3) He might file UK tax on remittance basis this year - he will have to pay surcharge, since it is 8-th year in UK, but it is still less then UK tax to be paid on combined RMD and SS from 22-23 UK tax year (he works in UK, and is high earner).
< All his US SS/401K money are received on his US accounts. The payments received could be used to pay tax for Roth conversion, and hence will never be remitted to UK>
In this case, would would happen with US tax?
Will his SS income from USA still be considered non-taxable in US?
Will his RMD from 401K still be considered by IRS as "foreign income" (as "income resourced by treaty") - so that he can cover US tax on it by credit from his other UK taxes?
Or will they both magically become "US income" in this case?

I know nothing about using the remittance basis for UK tax as we pay on an arising basis. But I can tell what we do with SS.

On our 1040 line 6a shows the full amount and line 6b shows the taxable amount which for us is 85% of 6a. For Other Income listed on Schedule 1 we put a negative number to that in 6b with the explanation of the tax treaty article 17.  This is because TurboTax will not allow a zero number in 6b and I do like to efile.

On our HMRC returns we only report 85% of SS with a comment referring to the tax treaty that since 15% of this retirement income is tax free in the US that it is also tax free in the UK.

When i had an accountant do my UK returns they reported 100% of my SS as taxable.

When i had an accountant do my UK returns they reported 100% of my SS as taxable.

Our dual qualified tax preparer used the following wording to exempt 15% of my wife’s SS. (I haven’t started mine yet)

I started receiving US State Pension in 2021 and the amount received during the year was $xxx. Due to my income level, only 85% of this is potentially taxable in the USA so I have claimed the same 15% exemption for UK tax purposes, which is permitted under the UK/US double tax treaty.

It would be nice if that was correct, and it is an interpretation i did consider myself. My accountant's reason for it being fully taxable was that Article 17 of the UK/US tax treaty provides the UK with the primary and sole right to tax US Social Security for a UK resident. The SS is not subject to any US tax therefore there is no consideration to be made to any partially exempt portion of it.

Article 17(3)
"Notwithstanding the provisions of paragraph 1 of this Article, payments made by a Contracting State under the provisions of the social security or similar
legislation of that State to a resident of the other Contracting State shall be taxable only in that other State."

I would certainly welcome that being the wrong position...

Article 17 1 (b) states

Notwithstanding sub-paragraph a) of this paragraph, the amount of any such pension or remuneration paid from a pension scheme established in the other Contracting State that would be exempt from taxation in that other State if the beneficial owner were a resident thereof shall be exempt from taxation in the first- mentioned State.

I believe this is the interpretation our tax accountant is taking. It seems that the paragraph is clear that you are taxed on the same amount in the UK  that would have been taxed if you were resident in the USA.

I am still trying to figure out how to pay UK/US taxes on US pensions - SS income, RMD, and Roth conversions, for a double UK/US citizen, resident in UK.

1) SS pension is reported to UK and taxed in UK, but it is not taxable income for US (but where to report to US on 1040 that it is not taxable by treaty??)
For UK: Article 17b of U/US treaty says:
"the amount of any such pension or remuneration paid from a pension scheme established in the other Contracting State that would be exempt from taxation in that other State if the beneficial owner were a resident thereof shall be exempt from taxation in the firstmentioned State."
I read it so that, since only 85% of SS is taxed in US, UK should also only tax 85% of US SS income. But it seems from my online search that people report 100% of US SS income as taxable in UK. Why? Anyone has an experience with that?
2) RMD from 401K is taxed in UK, and credit is taken for US. What about partial rollovers to Roth? Say, he rollovers not all, but half of a specific fund (He owns several 401K)? Is it lump sum or not? (I.e., is it taxable in UK or not?)
3) He might file UK tax on remittance basis this year - he will have to pay surcharge, since it is 8-th year in UK, but it is still less then UK tax to be paid on combined RMD and SS from 22-23 UK tax year (he works in UK, and is high earner).
< All his US SS/401K money are received on his US accounts. The payments received could be used to pay tax for Roth conversion, and hence will never be remitted to UK>
In this case, would would happen with US tax?
Will his SS income from USA still be considered non-taxable in US?
Will his RMD from 401K still be considered by IRS as "foreign income" (as "income resourced by treaty") - so that he can cover US tax on it by credit from his other UK taxes?
Or will they both magically become "US income" in this case?

It is rare, very rare, for a US citizen ever to elect to claim the remittance basis. In the circumstances described, most people would pay UK tax and claim a credit in the US for UK tax paid on any doubly taxed income.

Our dual qualified tax preparer used the following wording to exempt 15% of my wife’s SS. (I haven’t started mine yet)

This issue was extensively discussed when the US/UK treaty was negotiated in 2001 and 2002. No UK based tax professional believed during those discussions that the treaty exempted 15% of US social security from UK tax (although a few people wished it did). This seems an overly aggressive position, I have seen thousands of UK returns prepared by other firms & - honestly - I have not seen a single tax return taking this position.

This issue was extensively discussed when the US/UK treaty was negotiated in 2001 and 2002. No UK based tax professional believed during those discussions that the treaty exempted 15% of US social security from UK tax (although a few people wished it did). This seems an overly aggressive position, I have seen thousands of UK returns prepared by other firms & - honestly - I have not seen a single tax return taking this position.

Interesting.  I wonder why after all those discussions they did not change the wording to make it clear because it is certainly not obvious.  Does a “pension scheme” include an employer Roth 401k because if so then distributions from those schemes would also be taxable in the UK even though they are tax free in the USA?

Notwithstanding sub-paragraph a) of this paragraph, the amount of any such pension or remuneration paid from a pension scheme established in the other Contracting State that would be exempt from taxation in that other State if the beneficial owner were a resident thereof shall be exempt from taxation in the first- mentioned State.

This is a very interesting and crucial topic - especially as I am a US/UK citizen resident in the UK and now in receipt of Social Security Retirement payments - which started in the current UK tax year.

I agree with @guya in terms of a remittance basis   - which it is my understanding can only be claimed if you are a Non-Dom (another hot topic, especially with Rishi!) - so for most, it's a non-starter. See UK GOV website https://www.gov.uk/government/publications/remittance-basis-hs264-self-assessment-helpsheet/remittance-basis-2021-hs264#:~:text=The%20remittance%20basis%20is%20an,deemed%20domicile%20in%20the%20UK. and this:

"The remittance basis is an alternative tax treatment that’s available to individuals who are resident but not domiciled in the UK and have foreign income and gains. Remittance basis is not available if you are deemed domicile in the UK. You will be deemed domicile if you were born in the UK with UK domicile of origin and UK resident in 2020 to 2021 tax year, or you have been UK resident for at least 15 of the previous 20 tax years and UK resident in 2020 to 2021 tax year."


In terms of the taxability of US Social Security Pensions, the following is an extract from HMRC's own internal manual:

"Note 2: Remuneration received from a pension scheme that would have been exempt from taxation in the United States is exempt from taxation in the UK."

The full link tot he manual is here: https://www.gov.uk/hmrc-internal-manuals/double-taxation-relief/dt19852 - relevant quoted sentence is the final one on this page.

The next page of the manual contains further notes although I can nothing to override the quoted sentence.

I fully respect @Guya and the opinion expressed, however the position taken by @durhamlad 's accountant maybe is not to be dismissed. I'm a Chartered Accountant myself, and by training we nearly always take the risk-free option (indemnity insurance is expensive!).

Where is the legal document that states the full 100% is taxable?

I'm tempted myself to test the waters and declare 85% and see what HMRC do - I suspect that they have bigger fish to fry (start looking at UK citizens living in Monaco!) than chasing after what will be a minimal payday if they take it all the way to Appeal.