FATCA, NISA....losing touch with reality

It may be time for me to bow out of this discussion. My situation is completely different to that of you three.

To explain:  I have final salary pensions and SS/State pensions. I have current accounts (checking), savings accounts, and a cash ISA.

Voila tout!

When I said simplify, I meant simplify.

As of the end of 2013, I had closed all accounts in the US. I could invest in individual shares in the UK, but I have no desire to do so. I do understand the statistics on inflation versus cash versus savings accounts versus the stock market. Years before retiring I examined what my situation would be tax wise after retirement. I’m happy with the decision I made, and FIRE confirms even with a 7.5% yearly inflation increase on outgoing, a 3.5% yearly return on savings, and a 2.5% yearly COLA on the pensions.

(TIP:) Since I’ve invested the full amount allowable each year in the ISA, it’s now become a reasonable amount. The UK tax free aspect must now be weighed carefully against the taxed savings accounts in order to maintain a positive outcome on 1116 Passive. I’m still OK, but it gets closer each year.

Everyone needs to assess what their life goals are, what alterations may be required to assure they can be achieved, and learn to be satisfied with their results………and hope for no surprise financial disasters.

And by the way, with all that simplifying, my US tax return is still over 50 pages. Thank you FATCA.

It may be time for me to bow out of this discussion. My situation is completely different to that of you three.

To explain:  I have final salary pensions and SS/State pensions. I have current accounts (checking), savings accounts, and a cash ISA.

Voila tout!

When I said simplify, I meant simplify.

As of the end of 2013, I had closed all accounts in the US. I could invest in individual shares in the UK, but I have no desire to do so. I do understand the statistics on inflation versus cash versus savings accounts versus the stock market. Years before retiring I examined what my situation would be tax wise after retirement. I’m happy with the decision I made, and FIRE confirms even with a 7.5% yearly inflation increase on outgoing, a 3.5% yearly return on savings, and a 2.5% yearly COLA on the pensions.

(TIP:) Since I’ve invested the full amount allowable each year in the ISA, it’s now become a reasonable amount. The UK tax free aspect must now be weighed carefully against the taxed savings accounts in order to maintain a positive outcome on 1116 Passive. I’m still OK, but it gets closer each year.

Everyone needs to assess what their life goals are, what alterations may be required to assure they can be achieved, and learn to be satisfied with their results………and hope for no surprise financial disasters.

Myself, durhamlad and F4mandolin have the complication of substantial US assets and the probability of being taxed on an arising basis in the UK. If you are not a UK citizen it might be useful to really think about arising vs remittance basis.....at least F4mandolin can ease tax filing as the UK won't touch his US Government pension money.

This might not be a common situation, but I personally know quite a few US/UK dual citizens who have worked most of their life in the US and have US mutual funds, pensions, 403bs etc and might well retire back to the UK: they are not uncommon in academia and the defense industry.

We US/UK duals can certainly move non-retirement accounts to the UK and invest in individual shares or just savings accounts to avoid a basket (d) 1116, but that would still leave the retirement accounts and sensible tax planning obviously requires gradual withdrawals from those. So the 1116 basket (d) path will still be required.......once you think about it for a bit it really isn't that terrible, just follow the example in the ACA memo for each basket (d) income source and any actual UK income you have.

Hmm....never did figure out how to attach a file..or the table. This is the short and very messy version.

Fred                                            Sarah
2015 pension=$15,348                   Up to 300KPounds cash. Her only income is this.
     Annuity supplement=$10,212     UK tax only. Only about
     Total Yearly= $25,560               30KPounds after a year or so.
     US tax only 

2019 Age 62
     pension=$15,348 US tax only
     SS=$16,008 UK tax only
     Total Yearly=$31,356

2020                                            Age 60 Pension 1,200 Pounds year.
                                                  Total yearly= 1,200 + bank interest
                                                UK tax only

2022                                            Age 62- Spousal SS=$5,760yr UK tax only??
                                                  Yearly total= 3,674Pounds equivalent (SS)+
                                                   1200 Pounds.  4,874 Pounds.
                                               UK tax only                     

2025                                           Age 65- New Pension =2,000 Pounds yearly
                                                             pension= 1,200 Pounds yearly
                                                             SS= 3,674 Pounds yearly equiv.
                                                     Yearly total= 6,874 Pounds
                                                  UK tax only

2027                                          Age 67- new pension= 5,876 Pounds yearly
                                                            pension= 1,200
                                                            pension= 2,000
                                                            SS=3,674 Pounds equiv.
                                                         Yearly total = 12,750 Pounds
                                                     UK tax only

1.If Fred (US citizen) files US taxes separate and 15% bracket goes to $36,900, then next year I can still make make up to $11,000 selling Vanguard without going to the 25% bracket. Wife (UK) only worries about the UK taxes which would be 0.
2.If at 62 the SS is not counted in the US, income would only be $15,348yr. Fred can make $21,000 selling Vanguard funds and still avoid 25% bracket. After 59.5 I can also start selling off my TSP money as long as the total stays under the $21,000 limit ($36,900). TSP only taxed in the US. SS on Fred’s UK taxes would also be non-taxed since it is within the £10,000 personal allowance limit.
3.Wife age 60....still no issues with UK tax.
4.Wife age 62...SS spousal benefit. I still do not have to file jointly since SS spousal is not counted for US tax??
5.At wife’s age 67, she pretty well fills up her personal allowance. I can continue to sell up to $21,000yr of my TSP without going to the evil 25% bracket.
**Is this a plan that works? I would tend to think doing the taxes on this would be as easy as it can get. As long as the bigger piles of cash are kept in my wife’s name I wouldn’t even have to do FBAR+FATCA. Although would the house be an issue?

Live update from the Chancellors Autumn Statement:

The non-dom tax, for those on the remittance basis and calculated on using number of years resident in the UK as a bases for the calculation, was £30,000 or £50,000 per year if the person is subject. It is being revised to £30,000, £60,0000, or £90,000 per year if the person subject.

New terms about what happens to ISA's on death of taxpayer. ISA no longer ceases, but can be taken on board by the surviving spouse and maintains its tax free status. New limit is £15,240 for next tax year.

New personal allowance of £10,600/year for next tax year.

Stamp Duty on homes to be reduced for 98% of purchasers. From midnight tonight. It's a major reform as to how Stamp Duty is calculated (to be more progressive based). For an average priced home (£275,000) the savings is roughly £4,500. For a home priced at £550,000, Stamp Duty will now be £17,500, down from the £22,000 previously.

Live update from the Chancellors Autumn Statement:

The non-dom tax, for those on the remittance basis and calculated on using number of years resident in the UK as a bases for the calculation, was £30,000 or £60,000 per year if the person is subject. It is being revised to £30,000, £60,0000, or £90,000 per year if the person subject.

Well that will only further inflate the SE housing bubble...George was probably worried that having to pay UK tax was keeping the right sort of immigrants out.

Well that will only further inflate the SE housing bubble...

He seems to not understand the mechanics of inflation....or either he seems to understand the mechanics of inflation very well.

Being an advocate of residence-based taxation, I think the non-domiciled loophole should be removed entirely. If you live in the UK, you should pay UK taxes just like everyone else.

For ordinary folks, the UK is certainly not a tax haven as paying £30-90K to get preferential non-domiciled tax treatment makes no sense. Rich people should play by the same rules. If Roman Abramovich and his ilk leave, then so be it.

Yes Weller....I agree. I like simplicity in basic tax function. And I think there is one chance in HELL that our politicians will get their act together..... But...in a totally "self serving" post. I am trying to get this topic to 100 posts. And being a mandolin playing American......I went in to try to sell my F4Gibson 1924 mandolin today....hoping for $5k or more. Planning on buying an octave Weber Gallatin.....Boy's and their toys....some folks prefer motors....some music systems....I prefer nicely done wood musical instruments. What has this to do with taxes???......another couple of posts......

100 here I come. Selling my F4 and hoping to buy this.....an octave mandolin.
http://webermandolins.com/instruments/octave-mandos/a-style-octave-mandolins1/gallatin-octave1

Being an advocate of residence-based taxation, I think the non-domiciled loophole should be removed entirely. If you live in the UK, you should pay UK taxes just like everyone else.

I agree, but for folks who are resident in more than 1 country there needs to be a tie break, and the country of domicile is it. 

However, if a person is only resident in the UK it was very surprising to me that they can sometimes argue that they are domiciled somewhere else and not pay UK tax.

Wouldn't this be based on over 50% of the year living in one country? Seems like this would be a simple answer. Guess this could still be a problem for a prolific business person who spends their life in an airport.

Wouldn't this be based on over 50% of the year living in one country? Seems like this would be a simple answer. Guess this could still be a problem for a prolific business person who spends their life in an airport.

If you look at both the US and the UK residency tests you will find that both tests for tax residency are achieved by much less than 50%

For example if your 4 year average is over 90 days in the UK then you are resident for tax purposes. USA is similar but different.  We didn't go the UK at all this year, and when we went to the UK last year we had to spend about 8 weeks out of the country to keep our 4 year average just below the 90 days.  Didn't matter that we spent 7 months in the USA last year we were close to being resident in both countries.

Won't be much of an issue for us.....we will likely hardly ever leave the UK.....we are very much homebodies. A week in the Canaries is about as much of "sunny nice" weather that we can take.

Won't be much of an issue for us.....we will likely hardly ever leave the UK.....we are very much homebodies. A week in the Canaries is about as much of "sunny nice" weather that we can take.

I realize that, I was just pointing out residency can be complicated, as in our case.  Beginning in April/May 2016 we will become resident in both UK and US so where we are domiciled becomes very important. (We will be domiciled in the UK as that is where we would live all the time if our kids weren't living in the US)

Yep....got it. I just wonder about people who even though retired.....spend a lot of time traveling....or those who do business and regularly travel. Not an issue with us.... So you are planning on spending over 50% of your time in the UK?