UK Citizen with a US 401k - What happens when I retire here in UK

Guya could you elaborate on what a tax free LSD is / was ?

thank you

Guya You have omitted reporting income within the "wrapper" on any UK return since 200”

I held only shares within that wrapper (Yes I am fully aware its an IRA and not a 401k) and none of those shares had dividend distributions so there was no gain other than gain from the share value. I HAVE HAD NO INCOME or benefit from the IRA account and will not have income from it until I retire and take distribution from it. (my original question, what happens when I do retire?)

As a sidenote, I’m Scottish and I do not recognise the current English (actually German) Royal family which claims to have Monarchy over the Scottish Throne.

Starfrog,

Quick note. I’ve added a footnote to reply #10 in this thread. It’s important that you read it. I’ll butt out of here and let you get back to your original question.

theOAP

Thank you for the additional information it has been most helpful. I wish you a pleasant bank holiday weekend.

It is not a 401(k).  It is an IRA.  An IRA has no special treatment under domestic UK tax rules.  It is merely a "wrapper" that domestically is ignored by HMRC.

Surely a 401k doesn't have any special treatment under domestic UK tax rules either. Wouldn't both a 401k, IRA, 403b etc be covered under the UK/US Tax Treaty in the same way. If you got professional advice when you came back then I'd go back to them and ask some questions, there are often differences in interpretation between tax professionals. Guya often gives advice that is highly accurate, but doesn't quite answer the question asked and leaves one feeling more confused than ever.

I'd disclose my US 401k, IRAs etc to HMRC and invoke the appropriate US/UK tax treaty paragraphs so they wouldn't be taxed until I made withdrawals.

Here is something that is applicable from the HMRC website. I think your reading of the tax situation is correct, but that you might want to provide documentation to HMRC that you have the IRA.

http://www.hmrc.gov.uk/cnr/res-dom-faqs.htm#e

...............
Here is something that is applicable from the HMRC website. I think your reading of the tax situation is correct, but that you might want to provide documentation to HMRC that you have the IRA.

http://www.hmrc.gov.uk/cnr/res-dom-faqs.htm#e

Thanks for posting this link to the HMRC FAQ.

In part it says;
"Roth IRA - paragraph 1(b) of article 17 provides for a distribution to be exempt from tax in the UK to the extent that it would be exempt in the US. This means that withdrawals from this IRA should be exempt from UK tax.
Traditional IRA - the UK treatment follows the US treatment: sums are taxed on withdrawal."

Why is there no mention of 403b accounts and distributions anywhere in this faq?  Are 403b accounts treated the same way; i.e. taxed only on withdrawal/distribution?

Sorry if my question has been answered in an earlier post, but I do find this type of material difficult to process.  I plan to retire to the UK in a couple of years, and a large part of my retirement assets are in 403b, Roth IRA and Traditional IRA plans. 

Why is there no mention of 403b accounts and distributions anywhere in this faq?  Are 403b accounts treated the same way; i.e. taxed only on withdrawal/distribution?
 

403b is recognised as a pension scheme as far as the in Article 3 subparagraph(o) of the treaty explanation notes.

This is all correct, but the treaty is elective so you do need to file annual UK returns electing the treaty if you wish to benefit from it.

Hey! I agree with nun that a newcomer link: http://www.tc.umn.edu/~schw0888/Finance/401k-plans.html [nonactive] doesn't have any special treatment under domestic UK tax rules. I also think that when it comes to tax there are different interpretations from professionals, and generally everybody, as to what is actually meant, maybe you should check up on that again.

Hi,
I'm sorry to resurrect this thread but I'm in an almost identical position to Starfrog and am trying to understand the whole process.  I didn't feel as if the question was answered definitively.  The main difference between myself and Starfrog is that mine is a plain ol' 401k - I didn't convert to an IRA when I left the US company.  I'm clearly not a tax expert, but I'm having a hard time understanding why HMRC would need to be told about a foreign pension plan that's just sat there accruing.  I CAN understand that they may want a piece of it when I take the lump sum distribution when I'm 59.5.  I'm finding some of the answers here a little disturbing - talk of tax and penalties - so please correct me if I've got the wrong end of the stick.  Are you saying that not only do the US want to tax me 30% when I take my distribution, but that HMRC want to tax me while it's accruing? That seems perverse.  If it is the case, what money would I use to pay the tax I currently owe HMRC?

Are you saying that not only do the US want to tax me 30% when I take my distribution, but that HMRC want to tax me while it's accruing? That seems perverse.  If it is the case, what money would I use to pay the tax I currently owe HMRC?

Are you ordinarily resident in the UK and a UK citizen (ie not US citizen)? You need to apply the tax Treaty. You should let HMRC know about your US IRA, 401k etc and claim the appropriate Tax Treaty provision so that HMRC knows how to treat it. They'll let it compound tax free until you begin taking payments. If you don't declare what you've got then HMRC won't be able to tax it properly.

As far as NRA withholding from periodic payments I believe that that rate is 0% under the Tax Treaty.

Things like this are when a qualified expert is really needed. If your situation is pretty stable I'd pay for a professional to do your taxes to HMRC and IRS for the first couple of years and then you might be able to do it yourself.

Can I jump on to this thread? Haven't found much info elsewhere on retirement planning for UK.
I'm a US citizen currently working in the US -- already past my SS eligibility age! Planning on retiring the end of 2011 and moving back to the UK. Husband is British and is retired in UK and already collecting works pension and will get state pension in another year. I worked some in the UK but probably not enough for state pension.  I understand that SS can be paid out to a UK bank account but how does the tax work on that? I am seeing someone about my work pension next week -- which is an annuity (total less than my annual salary!) Would it be better to try to get that paid as a lump sum? I never enrolled for the TDA (401 etc.) so that is not an issue.

Can I jump on to this thread?

I would suggest starting your own.  It helps if the discussion matches the subject of the thread.

I would suggest starting your own.  It helps if the discussion matches the subject of the thread.

Thanks for that.