IRA Distributions and with holding tax for Citizens

Hi I have now made two transfers from my Trad IRA to my Roth RA ( over two tax years ) and now have my tax bill for 2020 which gives me a tax rate of about 11%, which i am fine with. I was talking a lot about this with durhamlad last august, very helpful he was!
Given I need to leave these sums for 5 years I will likely need to withdraw money from the actual Trad IRA , maybe next year. I notice from the Vanguard site that they will likely withhold 30% being as i am a duel US citizen ( i think its 10% if you are not) they also talk about a W9. All money would initially be sent to my US bank account, not directly to the UK.
1. If i complete a W9 will they no longer withhold anything and i will add the transfer to my UK self assessment?
2. If i don't complete a W9 and pay the 30% do i still have to show this on my UK self assessment at all? I am concerned i will pay more tax even with the tax treaty?
Anyone have experience ( as a US Citizen) of withdrawing money from a Trad IRA and how US and UK taxation will occur?

I’ve never done an IRA withdrawal with Vanguard so don’t know the answer, but have a couple of questions.

Why do you need to send them a W9? Surely they already have your SSN on record with them, you should not need to tell them what it is with a W9.

How do you plan to pay the taxes on an IRA withdrawal? If you request Vanguard make a withholding of, say, 10% then that will be applied to your taxes which you shall report on your next tax return. It saves having to make an estimated tax payment plus it means for sure that you paid the tax when the taxable event happened. (You could run afoul of the tax code if you make a withdrawal in January and don’t pay the taxes due until the 4th quarterly estimate the following  January)

hello durhamlad, i got this from them

For U.S. citizens or resident aliens
Unless you instruct us not to withhold taxes, the IRS requires us to withhold at least 10% of your withdrawals from traditional IRAs, SEP-IRAs, and SIMPLE IRAs for federal income taxes. When you request a distribution online, by phone, or by mail, you can:

   
 
Let us automatically withhold 10% of the distribution.
 
Ask us to withhold more than 10% of the distribution.
 
Ask us not to withhold taxes at all.

If your distribution is delivered outside of the United States, you may not elect out of federal income tax withholding, and a withholding rate of more than 10% may apply.

If you instruct us not to withhold taxes, you will still owe federal income tax on the taxable portion of your IRA distributions, and you may have to make estimated tax payments. If your estimated payments and withholdings fail to satisfy your tax obligations, you may be subject to IRS penalties. You may want to consult a tax advisor regarding your personal situation.

Resident aliens must provide us with a completed IRS Form W-9 (unless we already have it on file) at the time of the distribution request, or else we must apply the withholding rules for a nonresident alien.

For nonresident aliens
The IRS requires us to withhold 30% of your withdrawals from traditional IRAs, SEP-IRAs, and SIMPLE IRAs. If you are eligible for a reduced withholding rate based upon a tax treaty that your country has with the United States, you may claim the reduced rate by providing us with a completed IRS Form W-8BEN.

I assume that any IRA distribution would be taxable in uk , say 40%, which will always be higher than the likely rate on my US tax return, so i should not pay US taxes as i am paying UK taxes at a higher rate - is this thinking correct?- so if they withhold in the US say 10-30% then i have to try and claim this back? i would rather they did not withhold at all, but from the note above they seem to feel they have to for US citizens non resident.
The ideal situation would be that i don't touch my Trad IRA for another 4 years and wait till the 5 years are up and start withdrawing from my Roth, but i don't think i can wait 4 more years.

Since any withdrawals from your IRA will not be paid direct to your UK bank (I think you said you had a US bank) then it looks like you can choose whatever withholding rate you want, or none at all.

If you look at one of your  Vanguard 1099 forms from earlier years you should see your SSN listed on the statements under  “Recipients TIN: “.  If you don’t have a document to assure yourself that they already have your SSN from when you opened your account then contact them to check. I very much doubt you will need to send a W9.

Withdrawals from your IRA are taxable by HMRC for a USC living in the UK, plus the IRS will also tax the withdrawal.

When you file your IRS return you will then file form 1116 to claim a tax credit for taxes paid to HMRC so in effect you only pay taxes to HMRC. (HMRC are the primary tax collector here). Although it may seem strange to be claiming a foreign tax credit on US source income this is made clear on form 1116 where you will check a box labeled “Resourced By Treaty” which tells the IRS why you are paying foreign taxes on this US income and claiming them back.  I have to do this every year for my US private pensions.

Thanks, that makes sense.
So if I can get IRA withdrawal without Vanguard withholding into my US bank account and then include it in my UK Self Assessment ( so its taxed by HMRC.) And then when i do my annual US return i again show it there but use the correct mechanism ( form 1116) to ensure i don't pay additional tax to IRS. I believe that is what you are saying.

Thanks, that makes sense.
So if I can get IRA withdrawal without Vanguard withholding into my US bank account and then include it in my UK Self Assessment ( so its taxed by HMRC.) And then when i do my annual US return i again show it there but use the correct mechanism ( form 1116) to ensure i don't pay additional tax to IRS. I believe that is what you are saying.

Correct.

I believe that FI's need to verify you every 2 years, or when you open a new product. I had a similar experience when I opened up a new Stateside account and despite them already knowing me for over 20 years.

I prefer to pay more tax then I need and then claim it back at tax time. It's cutting the balance of sufficient FTC's and the non aligned tax reporting years.

I believe that FI's need to verify you every 2 years, or when you open a new product. I had a similar experience when I opened up a new Stateside account and despite them already knowing me for over 20 years.

I prefer to pay more tax then I need and then claim it back at tax time. It's cutting the balance of sufficient FTC's and the non aligned tax reporting years.

I agree.  I always pay estimated taxes to the extent I meet the “safe harbor” so I can’t be penalized for under payment of taxes.

The OP has not said that Vanguard have contacted him and asked for a W9 which is why I suggest he contacts them if he really thinks they want a W9.

I agree with everything Durhamlad says. I routinely withdraw from my Fidelity IRA and deposit into either my US account or Transferwise global account. I pay 10% withholding but don’t have to. I get it all back anyway at tax time by claiming  the foreign tax credit ( as I pay HMRC tax on the IRA withdrawals). It sounds more complicated than it is. I am a dual US/UK citizen.