How do you save/invest money

Buy a few Premium Bonds as well

Two financial economists — Lobe and Hoelzl — have analyzed the main driving factors for the immense success of Premium Bonds. Every third Briton invests in Premium Bonds. The thrill to invest is significantly boosted by enhancing the skewness of the prize distribution. Using data collected over last fifty years they find that the bond bears relatively low risk by conventional risk measures.

( http://en.wikipedia.org/wiki/Premium_Bond)

http://www.nsandi.com/products/pb/index.jsp


Its good to diversify, they increase your tax free holdings and you never know!

Buy a few Premium Bonds as well

I wonder how the IRS would classify them? I bet there'd be US tax due on any prize

Gambling winnings - 100% taxable to a US person...

I use one of the big no-load firms in the States. I had an account with them before I came to the UK and I've just kept up my regular monthly investment schedule. Now that I've looked at the new HMRC rules for overseas investing by non-Doms they don't look too bad, particularly if you are an American and use to having your worldwide income taxed. The CGT exemption is pretty generous in the UK and it won't be very often that I realize such a gain in a tax year.

Any gain on selling the "fund" would not be taxed as a capital gain by the UK, but as income...just a caution!

Any gain on selling the "fund" would not be taxed as a capital gain by the UK, but as income...just a caution!

I understand that I just add any gain onto my income for UK tax purposes, but do I get the UK capital gains exemption on gains from US based funds if I elect to be taxed on my worldwide income in the UK once I get up to 7 year residence

Gambling winnings - 100% taxable to a US person...

wow! thats drastic.

I understand that I just add any gain onto my income for UK tax purposes, but do I get the UK capital gains exemption on gains from US based funds if I elect to be taxed on my worldwide income in the UK once I get up to 7 year residence

I am sorry, your understanding is wrong.

You get to claim the remittance basis. If you do not claim then you report worldwide income & gains.

A US fund is not eligible for the UK capital gains tax exemption or the 18% CGT rate.  Gains are reportable and taxable as income unless you claim the remittance basis & pay the £30,000 charge (individual US stocks are treated more kindly by the UK than funds).

Given that UK rates are 40% & US rates right now are 15% this could be a fairly expensive tax cost. 

WOW thanks for the info, I'm glad I sold all my mutual funds and repurchased them before I came to the UK as I was worried about something like this and thought it best to realize my capital gains and pay at the US 15% rate. The whole area of the small expat investor wanting to buy mutual funds is an area where there is significant room for improvement. I'm right at the 20%/40% UK tax band interface so any US fund gains would probably be taxed at 40% in the UK it's annoying that I can't use the UK CGT allowance. I'll never be worth me paying the 30k and doing the remittance basis.

Gambling winnings - 100% taxable to a US person...


wow! thats drastic.

I would assume Guya means that the whole amount of the gain (100% of it) is taxable, not that the tax rate is 100%, is that right, Guya?

I understand that I just add any gain onto my income for UK tax purposes, but do I get the UK capital gains exemption on gains from US based funds if I elect to be taxed on my worldwide income in the UK once I get up to 7 year residence

I am sorry, your understanding is wrong.

You get to claim the remittance basis. If you do not claim then you report worldwide income & gains.

A US fund is not eligible for the UK capital gains tax exemption or the 18% CGT rate.  Gains are reportable and taxable as income unless you claim the remittance basis & pay the £30,000 charge (individual US stocks are treated more kindly by the UK than funds).

Given that UK rates are 40% & US rates right now are 15% this could be a fairly expensive tax cost.

If you get an offshore investment account (if you are residing in the UK) and invest in a US fund and never remit that money to the UK, ie it stays in the offshore account or you transfer to a US bank account, let's say, would you still have to report on UK tax return?  Or would you just report on US tax return?

I was hoping that be going offshore the UK effectively would not "see" this investment.

If you get an offshore investment account (if you are residing in the UK) and invest in a US fund and never remit that money to the UK, ie it stays in the offshore account or you transfer to a US bank account, let's say, would you still have to report on UK tax return?  Or would you just report on US tax return?

I was hoping that be going offshore the UK effectively would not "see" this investment.

I think this depends on your residency status and how long you've been in the UK. Right now it's not an issue for me as I've only been here for a couple of years. I don't remit any gains to the UK so I haven't included them on my UK taxes, it will be an issue if I stay here though

I am sorry, your understanding is wrong.

You get to claim the remittance basis. If you do not claim then you report worldwide income & gains.

A US fund is not eligible for the UK capital gains tax exemption or the 18% CGT rate.  Gains are reportable and taxable as income unless you claim the remittance basis & pay the £30,000 charge (individual US stocks are treated more kindly by the UK than funds).

Given that UK rates are 40% & US rates right now are 15% this could be a fairly expensive tax cost. 

I read this on the HMRC website, it says that if you choose to be taxed on an arising basis you keep your income and capital gains allowances. Is it the case that foreign mutual funds are not recognized by HMRC and they just categorize capital gains from their sale as income so even if you have a UK CGT allowance you can't use it. It seems that honest US citizen investors are getting caught in the offshore/hedge fund hysteria. I think I'll ask HMRC if US funds sold by firms like Fidelity, T Rowe Price, Vanguard etc that have transparent reporting and issue annual capital gains and dividend information can qualify for capital gains tax treatment

"People entitled to the remittance basis may choose not to claim it. They will then be taxed in the same way as other UK Residents (on the Arising Basis). Tax will become due on worldwide income and gains for that tax year. But the RBC will not apply and they will be entitled to UK personal tax allowances and to the AEA for Capital Gains. They will need to complete a UK Self Assessment return if they have any foreign income or gains for that year.

People entitled to claim the remittance basis are able to decide on a year by year basis whether they want to do so. In one year, a person might opt to pay the RBC and lose their allowances, while in the next year they might choose to pay tax on all of their worldwide income and gains."


Edited with good news.

Well I just found out that my US based mutual funds are classed as distributing funds by HMRC and so are treated just like UK funds. Here's a link to list. It looks like a lot of US retail funds are ok

http://www.hmrc.gov.uk/offshorefunds/dist_fundlist.htm

they say crime dont pay and yr not gonna get out of this alive

i would advice you to invest in human nature.

If you are lucky enough to invest in the minority of US funds that are currently approved as distibutor funds by HMRC then you are indeed lucky because the vast majority of the US fund universe is not approved & therefore gains on most funds are currently taxable as offshore income gains.

From April 2009 the current distributor status will be abolished & replaced with a reporting status instead.  I have heard no news than any US funds will pay the costs of become reporting funds, so the distrubutor status will only assist until 5 April 2009. We will have more news at the pre-budget report stage this Autumn.

You are still just slightly back to front on the choice too. You choose to claim the remittance basis if you wish - as you would have done on previous UK returns.  If you do not choose this, the default is the arising basis.

I would assume Guya means that the whole amount of the gain (100% of it) is taxable, not that the tax rate is 100%, is that right, Guya?

Yup - I meant to say that all of the prize is taxable not you pay 100% in tax!!