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Topic: Self assessment - us pension lump sum  (Read 264 times)

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Self assessment - us pension lump sum
« on: January 11, 2022, 04:05:57 PM »
Happy new year everyone,!  Another day, another tax return :(. So, took a lump sum 401k distribution, covered under tax treaty as not UK taxable, where does it go on the self assessment foreign pages and how do we take the treaty position? Ta.


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Re: Self assessment - us pension lump sum
« Reply #1 on: January 11, 2022, 04:27:31 PM »
My London based tax preparer put the details in section 19 "Please give any other information in this space"

Quote
During the 2019 calendar year, I received a lump sum from my IRA Pension Fund totalling
of $xxx. Since this is a lump sum from a US plan, it is subject to US tax only and
exempt from UK tax and has therefore not been included in this return.

In your case it would be "401k Plan"
Dual USC/UKC living in the UK since May 2016


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Re: Self assessment - us pension lump sum
« Reply #2 on: January 11, 2022, 05:05:49 PM »
My London based tax preparer put the details in section 19 "Please give any other information in this space"

In your case it would be "401k Plan"
Thanks Durhamlad, this jives with what I’ve just read in the HMRC ‘Foreign Notes’:

‘If you have a pension that’s not taxable in the UK because of a DTA, give full details of the pension’s payer, pension and relevant DTA in the ‘Any other information’ box on your tax return.’


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Re: Self assessment - us pension lump sum
« Reply #3 on: January 11, 2022, 06:05:46 PM »
Isn't a 401(k) taxable by both countries? You'd claim tax paid to HMRC as a FTC on the 'Re-sourced by treaty' section of your IRS 1116


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Re: Self assessment - us pension lump sum
« Reply #4 on: January 11, 2022, 07:44:10 PM »
Isn't a 401(k) taxable by both countries? You'd claim tax paid to HMRC as a FTC on the 'Re-sourced by treaty' section of your IRS 1116

I think periodic distributions are taxable in both countries, but a lump sum isn’t.

My 401k provider was more expensive and had fewer investment options than a big brokerage so the year after I retired I rolled it directly into an IRA which was a tax free event, plus the brokerage I chose services overseas customers, accepts my UK address and my UK mobile phone number for verification texts etc.

I do also have a couple of US pensions with monthly payments and use the resourced by treaty option on the 1116 to credit back the HMRC taxes.
Dual USC/UKC living in the UK since May 2016


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Re: Self assessment - us pension lump sum
« Reply #5 on: January 12, 2022, 11:10:06 AM »
I think periodic distributions are taxable in both countries, but a lump sum isn’t.

My 401k provider was more expensive and had fewer investment options than a big brokerage so the year after I retired I rolled it directly into an IRA which was a tax free event, plus the brokerage I chose services overseas customers, accepts my UK address and my UK mobile phone number for verification texts etc.

I do also have a couple of US pensions with monthly payments and use the resourced by treaty option on the 1116 to credit back the HMRC taxes.

Then it's the age old question of 'what is a lump sum'. I believe that IRS & HMRC definitions differ.


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Re: Self assessment - us pension lump sum
« Reply #6 on: January 12, 2022, 11:43:08 AM »
Then it's the age old question of 'what is a lump sum'. I believe that IRS & HMRC definitions differ.

They do indeed differ and when filing an IRS return I use the IRS definition and when filing an HMRC return I use the HMRC definition, not that I have ever had a lump sum withdrawal from a UK pension plan/account.

By always paying taxes on lump sums in the IRS return and by declaring to HMRC what I received as a lump sum in the USA I am not hiding anything and I'm sure HMRC would come back to me if they disagreed.  20/21 was my first HMRC return where I was receiving my OAP and there is nowhere that I see where one can determine exactly what you paid in the 20/21 tax year either in the mail or online. i.e. no equivalent to the the P60 I receive for my 2 UK private pensions.  My last OAP payment received was April 16th so I decided that must be declared in the next tax year however HMRC were quick to correct my return as OAP is not taxable when received on a cash basis. No problem, I paid the extra tax due and next year will remember that next year, a full year, it will be 52 weeks * my weekly sum that is updated in April.
« Last Edit: January 12, 2022, 11:52:17 AM by durhamlad »
Dual USC/UKC living in the UK since May 2016


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