I'm a UK/UK dual citizen and I've spent the last 25 years working in the US, but now I'm planning a return to the UK in the next couple of years. So I'm faced with organizing my finances. The only financial connection I have with the UK is my state pension as I have 28 years of NI contributions (25 of those have been voluntary). My retirement funds are in US accounts like ROTH, IRAs, 457 etc and I won't be drawing from those for a few years yet. They are well taken care of under the treaty and I'm pretty sure I know how they'll be taxed. Their treatment is a lot simpler and clearer than that of things like UK personal pensions.
The other thing to worry about is how to deal with non-retirement accounts. In the US I invest in mutual funds, but a US citizen should avoid investing in the UK equivalent of mutual funds because they are punitively taxed by the IRS.....their fees are also a real rip off. However, as a UK resident it's also tricky to invest in US mutual funds as they are generally regarded as "offshore funds" and their tax and dividends is taxed by HMRC as income. Luckily HMRC publishes a list of offshore funds it treats as "reporting", which means they are taxed just like UK funds, and this list includes all of Vanguards US based ETF, so that's an easy solution.
More good news follows when you look at how capitals gains an dividends from US reporting funds are taxed. As a US citizen there will be no US withholding on your dividends and capital gains distributions and in the UK the first £10600 of capital gains is free of tax and all dividends are tax free if your income is less than £35000. So (if you have enough invested) it's possible to take a reasonable income from your US investments and pay no tax in the UK. Of course you will still have to pay US tax. If you do get taxed by the UK you will have to use the treaty and take FTC on 1116.
