Cashed out US retirement account - Do I have to pay UK taxes on it too?

Hello,

I cashed in my retirement account from the USA. I paid the relevant US taxes, and now have transferred the funds to my UK bank account. Do I have to pay UK taxes on the funds too? I would hate to think that I would get taxed twice on my retirement cash distribtion.

I am a UK citizen/US citizen now residing in the uk.

Thanks!

As a US citizen you are subject to US tax on worldwide income.  So on any growth in excess of your basis you will have paid US income tax plus a 10% excise tax.  You may have also paid State taxes.

The UK will charge tax on worldwide income and gains unless you elect the remittance basis on your UK tax returns.

Whether or not you elect the remittance basis you could elect the treaty on a UK return if that gave you a better answer than not using the treaty.

You may still have taxable foreign currency or remittance issues to declare on a UK tax return.

Thank you Guya for your reply.

Excuse my ignorance on UK Taxes - but what do I do if I do not file a UK return. I never have filed a UK Tax return as I have my taxes taking from my wages throughout the year. Would I still need to report the fact that I have cashed in my US retirement account?

And just to confirm - I wont get taxed twice on this distribution (I have already paid US federal taxes and dont want to get taxed by the UK too)

Thanks!!

You need to file a UK tax return either on the arising or remittance basis.  If you need help take advice from a dual UK/US qualified tax adviser.

As a US citizen you are subject to US tax on worldwide income.  So on any growth in excess of your basis you will have paid US income tax plus a 10% excise tax.  You may have also paid State taxes.

When you mention a "10% excise tax" are you assuming the OP cashed out early and has to pay the 10% penalty on the withdrawal?

Hello, I am in a similar situation, naturalised USC / born UKC, planning my move from USA to UK.

Here is how I would answer the OP's question.
IMO
If you are UK resident & domiciled then you are liable for UK tax on your world-wide taxable income. If you have income then it is likely that you should be filing a UK return. If you haven't done so then I suggest you visit your local HMRC tax office and discuss with them whether or not you should be filing a return.

You don't say what what type of US Retirement e.g. Roth IRA, Traditional IRA, 401k etc ?

If you withdrew from a Traditional IRA or 401k then, as everyone else that has one of these, you are liable for US income tax on it - and also UK income tax by falling under the HMRC tax laws. However, having paid US Tax on the withdrawn income, when you make your UK tax Return you would enter the withdrawn amount + the foriegn (US) tax that you have already paid andd this will likely be credited to you , reducing your potential UK tax amount.

If you withdrew from a Roth IRA then this should have been free of all income tax in the USA and because of the Tax Treaty also free of all tax in the UK and therefore would not be reported as UK income because it is not as taxable event. If you did have US Tax withheld on a Roth because you have a non-USA address then you can claim that tax back next time you file your US tax, as you should do as a USC.

Good luck.

Jumping in here with a question -- how do you find a qualified dual UK/US tax adviser?

Thank you Guya for your reply.

Excuse my ignorance on UK Taxes - but what do I do if I do not file a UK return. I never have filed a UK Tax return as I have my taxes taking from my wages throughout the year. Would I still need to report the fact that I have cashed in my US retirement account?

If you have income that doesn't come out through PAYE, you have to fill in a self-assessment form. The pages are available on the HMRC website, or you can have a tax adviser do it.

You can do your self-assessment online, but I've never done it that way so I don't know how well it works with entering foreign income and taxes.