US Treasury interest during first 4 years in UK with new FIG

I'm dual UK/US national currently resident in US but considering retiring back to UK in a couple of years.

Under the new Foreign Income and Gains (FIG) regime introduced by the UK, foreign income and gains appears to be tax-exempt for the first 4 years of UK residency. Due to Treaty, interest from US Treasuries is already exempt from US taxation for UK residents who file a W-8BEN form.

Does this mean no US or UK taxes on UST interest income for first 4 years back in UK? Must be a catch somewhere

 

I’m pretty sure the W8BEN form is NOT for use by US citizens, only non-resident aliens.

I don’t know about the rest.

One can only escape liability to US taxation under current law by renouncing US citizenship. There is no exemption from US tax under the treaty.

> I’m pretty sure the W8BEN form is NOT for use by US citizens, only non-resident aliens.

Thanks for the quick reply. Yes, looks like I was confusing myself 

Now I'm thinking the UST interest will only be taxable in US during the first 4 years back in UK due to new FIG regime.

i.e. say UK investment income is £50k, and US investment income is $50k

UK Tax
    Taxable UK Income: £50,000 - £12,570(Personal allowance) = £37,430.
        Tax at 20%: £37,430 × 20%(Basic Rate) = £7,486.
    Taxable US Investment Income ($50,000 = ~£40,000)
        No tax due to FIG
    Total: £7,486

US Tax (coming from state with no state tax so Federal only)
    UK Investment Income (£50,000 = ~$62500 - $15k(Personal Allowance) => $47,500
         $11,925 @ 10% + $35,575 @ 12% = $5,462 => £4370
         but £4370 is eliminated due to FTC for £7,486 => £0
    US Investment Income ($50,000): mostly @ 22% due to UK income
        $50,000 × ~22% = $11,000 => ~£8,800
    Total: £0 + £8,800 = £8,800

Total taxes would be £7,486(UK) + £8,800(US) = £16,286

Would  it really work like that with FIG cancelling out the US interest income in UK and and FTC cancelling out the UK income in the US? Would appear to lower tax by about 7% during those 4 years (£16.3k vs £23.5k for £90k income)



 
 

FIG replaces non-dom status where UK residents might be able to claim that they are not domiciled in the UK

https://www.gov.uk/government/publications/tax-changes-for-non-uk-domiciled-individuals/reforming-the-taxation-of-non-uk-domiciled-individuals

Will you qualify as a non-dom and be subject to taxation using the remittance method instead of on an arising basis?

https://www.bdo.co.uk/en-gb/insights/tax/private-client/changing-rules-for-non-dom-status-what-to-do-now#:~:text=The%20rules%20were%20adjusted%20and,in%20the%202024%20Autumn%20Budget.

https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3

Again, thanks for the quick reply and the useful links...

> https://www.gov.uk/government/publications/tax-changes-for-non-uk-domiciled-individuals/reforming-the-taxation-of-non-uk-domiciled-individuals [nofollow]

"The new regime will provide 100% relief on foreign income and gains for new arrivals to the UK in their first 4 years of tax residence, provided they have not been UK tax resident in any of the 10 consecutive years prior to their arrival (4-year foreign income and gains regime)."

I'm hoping I would qualify as a "new arrival" after being US resident and paying US tax for 30 years. I don't have property or physical assets in the UK - only bank accounts with my US address

Again, thanks for the quick reply and the useful links...

> https://www.gov.uk/government/publications/tax-changes-for-non-uk-domiciled-individuals/reforming-the-taxation-of-non-uk-domiciled-individuals

"The new regime will provide 100% relief on foreign income and gains for new arrivals to the UK in their first 4 years of tax residence, provided they have not been UK tax resident in any of the 10 consecutive years prior to their arrival (4-year foreign income and gains regime)."

I'm hoping I would qualify as a "new arrival" after being US resident and paying US tax for 30 years. I don't have property or physical assets in the UK - only bank accounts with my US address

Good luck with it. Do you know how it interacts with the US-UK tax treaty?

I found the catch: "If an individual chooses to be taxed under the new 4-year FIG regime, they will lose entitlement to personal allowances and the capital gains tax annual exempt amount."

See section 3.1 of "Technical note: Changes to the taxation of non-UK domiciled individuals"
https://www.gov.uk/government/publications/changes-to-the-taxation-of-non-uk-domiciled-individuals/technical-note-changes-to-the-taxation-of-non-uk-domiciled-individuals [nofollow]

Without the personal allowances I don't think FIG can be beneficial for most normal people.

I found the catch: "If an individual chooses to be taxed under the new 4-year FIG regime, they will lose entitlement to personal allowances and the capital gains tax annual exempt amount."

See section 3.1 of "Technical note: Changes to the taxation of non-UK domiciled individuals"
https://www.gov.uk/government/publications/changes-to-the-taxation-of-non-uk-domiciled-individuals/technical-note-changes-to-the-taxation-of-non-uk-domiciled-individuals

Without the personal allowances I don't think FIG can be beneficial for most normal people.

And immediately before that it states that the UK statutory resident tax test must be passed each year.

https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3