UK Taxes on Remitted money from simple US Bank Account

I hope to buy a house this year in the UK.  I have money for a down payment in a US interest bearing savings account.  This money has been sitting there a few years earning interest.

When I remit this money over to the UK, how much UK tax do I have to pay?

Thanks.

Paul

Paul - the "technical" answer is no-one knows because we haven't seen the Finance Bill yet.

So there are really too many variables about the UK tax on remitted income after 5 April to be certain.

If you budget for 40% in UK tax you'll be about right but it is not clear at the moment...

Guya,

I realize things are changing.  But the basics I don't understand.  You say budget 40% (good assumption, assume highest tax bracket).  But 40% of what?  The total gross amount remitted?  40% of the interested earned this tax year?  40% of the interest earned in multiple tax years?

Thanks.

Paul

Paul - the "technical" answer is no-one knows because we haven't seen the Finance Bill yet.

So there are really too many variables about the UK tax on remitted income after 5 April to be certain.

If you budget for 40% in UK tax you'll be about right but it is not clear at the moment...

Guya are you just being conservative here and assuming that the worst case senario is that all the interest will be taxed as income at the highest tax rate, ie 40%. If the OP in the 20% tax bracket and the interest doesn't take him over that limit isn't it possible that he'll only pay tax on 20% of the interest.

Guya,

Could you please respond to my last question??

I pay tax on 40% (or whatever it turns out to be) on what exactly?

Paul

Budget for 40% of the historical interest remitted.  Historical interest is the interest from the date of your arrival in the UK to the date you closed the account.  If you end up in the 22% bracket, you'll have a nice spot of change left over.  If you budget for 22% and end up in the 40%, you'll be forced to refinance just to get the money to pay the tax.  So that's why Guya's recommending budgeting for 40%.

Even better, you may be able to "cease source" your account before the year's end (5 April 2008), and pay no tax at all upon remittance.  Check with a UK tax professional as to whether or not your account could benefit from the cease sourcing rules.  You have just days to co-ordinate this.  And no, before you ask, I won't answer any further questions on an open forum regarding the cease sourcing rules.  Each case is individual and requires a full consultation to determine eligibility.

IRS Circular 230 Disclosure:  To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code or (2) promoting, marketing or recommending to another party any tax-related matters addressed herein.

Just a brief update.

The Finance Bill 2008 is expected to be published tomorrow.

It will effectively close the source ceasing rules from 5 April 2007 (the last date to have ceased a source that would have been tax effective). 

This forum is not, to my mind, an appropriate place to discuss individual issues in too much detail.  In the words of Donald Rumsveld these are just some of the known unknowns:

1. If you claimed non-UK domicile on your prior UK returns
2. If you claimed the remittance basis on your prior UK returns
3. The amounts of US tax you paid on the interest income as it arose
4. The "mix" between capital and accumulated income in the account
5. Whether you will claim the remittance basis in the current UK tax year
6. What the Finance Bill will say on foreign tax and prior year accumulations
7. Whether the US Treasury would permit you to treat the interest as foreign source if remitted to the UK
8. Whether the US Treasury would permit you to treat the interest as foreign source if not remitted to the UK

I strongly recommend professional advice.  As this is a UK tax question I'd suggest speaking with a UK acccountant/tax adviser such as a Chartered Accountant or Chartered Tax Adviser so that you get appropriate advice.