US Spouse living in UK on US pension - Tax Issues

Hi,
My partner moved here 2 years ago and we became civil partners. Her whole source in income is a pension from the US, paid into a US bank. She does not have a UK bank account. She has no UK earnings or a NI number.
The only money that comes to the UK is from cash withdrawals and credit card purchases.
We are unsure of her tax liability in the UK; she is resident and domicile here so I believe should complete a UK tax return. She does her US tax as normal.
Her total money brought into the UK might not be up to the UK personal allowance.
We are just wondering what to do about UK tax and how to go about it - its all very confusing.
Thanks in advance for any advice,

You don’t need a NI number to file an income tax return in the UK, it is an optional field. One must register to file and will be issued with a Unique Taxpayer Reference (UTR) and filing online is pretty straightforward, even with foreign income such as US pensions.

If worldwide income is below the personal allowance then I don’t think a tax filing is needed.

https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past

The Personal Allowance is the amount of income a person can get before they pay tax.

Allowances   2022 to 2023   2021 to 2022      2020 to 2021   2019 to 2020
Personal Allowance   £12,570   £12,570   £12,500   £12,500

The UK has the primary right to charge tax. She'd register for self-assessment and file annual UK tax returns reporting worldwide income. If she pays tax to the UK, the US would give a credit for UK tax paid.

Thank you both for your replies - it seems quite a difficult area. She is considering going to a firm for advice, but its seems an expensive option.

Thank you both for your replies - it seems quite a difficult area. She is considering going to a firm for advice, but its seems an expensive option.

How does she file her US taxes now?  Adding a foreign tax credit for UK taxes paid is really quite simple.

Filing a UK self assessment is also quite straightforward even with foreign income so she should not need a tax account for a simple tax return.

Hi,

I am a UK citizen who also has a US pension so offer advice from my experience.

--- As is said, under the tax treaty (Article 17(1)(a)), as you are resident and domiciled in the UK the UK has the primary right to tax your pension. HMRC has recently stated  the following that I hope you find useful.

G

Periodic Payments
 
 Periodic, frequent, payments or withdrawals, that is weekly, monthly, annually and so on, then those payments would have been taxable within the UK and ‘maybe’ exempt from US tax. This is in accordance with Article 17(1)(a) of the DTA which, again from the perspective of a UK resident, states:
 
 ‘Pensions and other similar remuneration beneficially owned by a resident of a Contracting State [UK]shall be taxable only in that State [UK].’
 
 As a result, these periodic payments are fully taxable in the UK and should be declared to HMRC on the foreign income pages (SA106) of a Self Aassessment return. If US tax has also been paid on those payments, then it is important to note that no UK tax relief can be claimed to offset that US tax charge against any UK tax due. Instead, you must approach the US Internal Revenue Service (IRS) to claim US tax relief and the type of US tax relief available will differ depending on whether or not you are a US citizen.
 
 If you are not a US citizen, then periodic pension payments will be fully exempt from US tax and you should claim a full repayment from the US IRS. However, if you are a US Citizen, you will only be permitted to claim the US version of FTCR, which will offset the UK tax paid against a US tax charge. This is because the US taxes its citizens worldwide income, regardless of where they are resident. So, if you are a US citizen, then Article 1(4), as outlineD above, would kick in again and, this time, allow the US to tax any periodic payment received, despite Article 17(1) providing the UK with the sole right to tax. Again, Article 1(4) effectively ‘overrides’ Article 17(1), and the consequence is that both the UK and USA can tax any periodic payments received.
 
 In these situations, double taxation will occur since both the UK and the USA can tax the same income. However, this time, it is for the US to eliminate that double taxation, since they are the ones invoking Article 1(4). This is in accordance with Article 24(1)(a) of the DTA, which states:
 
 ‘In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof), the United States shall allow to a resident or citizen of the United States as a credit against the United States tax on income:
 
 a.    the income tax paid or accrued to the United Kingdom by or on behalf of such citizen or resident.’

Hi,

I am a UK citizen who also has a US pension so offer advice from my experience.

--- As is said, under the tax treaty (Article 17(1)(a)), as you are resident and domiciled in the UK the UK has the primary right to tax your pension. HMRC has recently stated  the following that I hope you find useful.

G

Periodic Payments
 
 Periodic, frequent, payments or withdrawals, that is weekly, monthly, annually and so on, then those payments would have been taxable within the UK and ‘maybe’ exempt from US tax. This is in accordance with Article 17(1)(a) of the DTA which, again from the perspective of a UK resident, states:
 
 ‘Pensions and other similar remuneration beneficially owned by a resident of a Contracting State [UK]shall be taxable only in that State [UK].’
 
 As a result, these periodic payments are fully taxable in the UK and should be declared to HMRC on the foreign income pages (SA106) of a Self Aassessment return. If US tax has also been paid on those payments, then it is important to note that no UK tax relief can be claimed to offset that US tax charge against any UK tax due. Instead, you must approach the US Internal Revenue Service (IRS) to claim US tax relief and the type of US tax relief available will differ depending on whether or not you are a US citizen.
 
 If you are not a US citizen, then periodic pension payments will be fully exempt from US tax and you should claim a full repayment from the US IRS. However, if you are a US Citizen, you will only be permitted to claim the US version of FTCR, which will offset the UK tax paid against a US tax charge. This is because the US taxes its citizens worldwide income, regardless of where they are resident. So, if you are a US citizen, then Article 1(4), as outlineD above, would kick in again and, this time, allow the US to tax any periodic payment received, despite Article 17(1) providing the UK with the sole right to tax. Again, Article 1(4) effectively ‘overrides’ Article 17(1), and the consequence is that both the UK and USA can tax any periodic payments received.
 
 In these situations, double taxation will occur since both the UK and the USA can tax the same income. However, this time, it is for the US to eliminate that double taxation, since they are the ones invoking Article 1(4). This is in accordance with Article 24(1)(a) of the DTA, which states:
 
 ‘In accordance with the provisions and subject to the limitations of the law of the United States (as it may be amended from time to time without changing the general principle hereof), the United States shall allow to a resident or citizen of the United States as a credit against the United States tax on income:
 
 a.    the income tax paid or accrued to the United Kingdom by or on behalf of such citizen or resident.’

Unless it is a US Govt pension....then the treaty means the UK doesn't touch it. Only the US taxes my pension.