tusitala

Just joined this board, hopefully I am posting this in the right place!

Retiring back to Scotland in a year with my American wife after spending most of my working career in the US. We plan to live off our pension and US Social Security and retirement accounts.

Can someone who has already done something like this give me a rough idea how you go about submitting tax returns to both the US and the UK every year and how you avoid dual taxation (paying full amounts to both countries)

If you don't do it yourself, how do you find someone in the UK who can help you with the American side and were they very expensive?

Also, how do you account for the difference in tax years, US is calendar year and I think the UK is April to April.

Note - this is not about specific tax deductions and rules at this time, just how you go about filing taxes in two different countries.

Thanks for the help,

Andy

theOAP

The easy bit, US Social Security is only taxed in the UK via the US/UK double tax treaty.

The harder bit, the first year back will not be straightforward due to the differing tax years. The general practice, in the second and later years, is to file and pay UK tax first, and then claim FTCs (Foreign Tax Credits - you're retired so no FEIE) on your US return. The first year will eventually work itself out with little or no financial loss (eventually). One way is by using maximum extensions for US reporting.

The more difficult bit; you've listed pensions separate to retirement accounts. What type of accounts are the "retirement accounts"? Are the pensions government pensions?

The complicated bit, compliance with the rules on investments in both countries and filing the US return if your situation is in any way complicated. Having the greater proportion of your income from the US leads to easier US reporting. There will also be restrictions on the types of UK investments any US Person (you don't mention if you also have USC) can have without suffering impossible US reporting (both time and loss of profit). UK reporting will be by Self Assessment.

The annoying bit, filing information only returns for the US (FBAR, FATCA, trusts, etc.).

Worldwide, only 16% to 18% of USCs abroad pay any US tax, and the figure is probably less for those in the UK due to UK tax rates. The difficulty may be the US compliance and filing.

tusitala

Wow, thanks for the great information !

In answer to your questions,

I am a dual U.K./ U.S citizen
The retirement accounts are 401k and Roth accounts
Other than the dual filing our taxes are pretty simple after we get past the first year (house sale etc)
Had our future income not been from the US I might have considered not dual filing but I don't think I have a choice
(Sidebar - my grandfather emigrated to Scotland from New York in 1918 and I am pretty sure he never filed any US tax returns for the rest of his life!)

It sounds like I could probably do my U.K. Taxes then later ship everything off to my regular tax person in Seattle along with a copy of the U.K. Tax info for the FTC. This might not be as bad as I feared!

I still have things to think about like if I should sell some stocks while I am not subject to higher U.K. Taxes and the best strategy for drawing down the 401k etc

I am also aware of the recent $18,600 minimum income rules which preclude a large portion of the UK from bringing in a foreign spouse. Fortunately we can meet this ridiculous requirement.

Thanks again for the help I expect I will be posting many more questions in the coming months and be glad to help others here where I can

Andy

morpeth

If you send me private message I can give you name of accountant I use in UK who does both US and UK taxes at reasonable rate, and efficiency.

tusitala

Will do, think I have to post three times before I can private message , this post should get me there but i might have to wait till I am "unlocked"

Thanks

TiaMaria57

Hi Morpeth,
I would very much appreciate your accountats name since we are moving back next Spring. It’s going to be very much a learning curve for us and at present we have no idea who to turn to in the UK who could handle this for us. Would you mind if I private message you too for the name of your accountant?
Thank you in advance. Tia Maria.

tusitala

Hi Maria(?)

As you are finding out moving back to the U.K. Is not as simple as you might of thought.

We are planning to move from the Seattle area to Scotland in about a year, how about yourself?

Andy

morpeth

No problem, just send me a PM.

A lot I found depends on timing since UK and USA have different tax years, so that can be a consideration.

morpeth

I found UK system much easier though I chose o have an accountant do the filing for a variety of reasons, in part because fellow I use also can do US taxes.

The first year is a bit challenging due to , typically complicated, US rules on residence , foreign income exclusions and all that- and the rather bizarre rules if you are a Green Card holder. Or are you USC ?

The information filings such as FBAR etc a pain I the neck, but one are to keep very much in mind is if you own part of a business outside the country filing costs and go up quite a bit.

theOAP

That's unfortunate. If one partner is a UKC only, it opens a number of investment opportunities in the UK.

The plus side is you can file Married Filing Jointly for the US. There is no joint filing in the UK.

A Roth is quite good since distributions are not taxed in either the US or UK, currently, under the Treaty. Most maximise their Roth holdings for this reason.

Given your situation, you will likely want to continue with investing primarily in the US for tax simplification with only minimal investing (savings accounts) in the UK. That always opens up varying exchange rate vulnerabilities, but the alternatives are even less appealing.

As a US citizen, you don't have a choice. You're grandfather was in a kinder, simpler era.

Those with extremely simple sources of income (a salary under $100,000 in the UK and with only little or no savings in the UK) may be able to do this, but it is risky for those with more numerous sources/types of income. There are some real 'gotcha's' regards US reporting and HMRC rules regards US handling can also be a problem. Although it may be simply due to oversight or being unaware, reporting can create real problems if the tax person is not totally up to date with both US and UK regulations. And, tax laws are constantly changing in both countries.

You may find 'tax preparation mills' who will do US tax for the expat at a fairly cheap price ($400 to $500) for those with minimum sources/types of income, but more involved returns usually cost more, and are easier to get wrong (as many using those services have discovered). Don't be surprised at quotes for $1,000 for a US return only if prepared by a qualified and competent US/UK advisor. Hopefully morpeth's fellow is more price competitive.

Jensmate

I'm in almost the same position and I'll be asking for that accountants name too.
As a dual UK/US citizen I'll be moving back early next year and will be living off my US Social Security, my Federal retirement and my Federal TSP 401k. Any advice on filing taxes? It's the one part of moving that scares me the most since I have limited computer literacy.
It looks like I'll be moving back alone with no one to forward mail etc to me. Does anyone have experience of having all their financial eggs in another country with no family or friends there to help if there are problems?
Thank you.

morpeth

I sent you a PM with the contact info.

I went through the same process, while a minor issue seems having a good mailing address to get timely notifications important- using UPS or Mail Boxes USA address, especially being able to call to check on mail worked out best for me.

On taxes on issue to keep in mind is the different filing dates between US and UK, and different tax years.

Jensmate

Thanks Morpeth!

MrFlibble

I'm pretty much in the same boat as Jensmate. Dual US/UK citizen (wife US citizen) and retiring back to the UK in a couple of years after 20 years in Texas. I'll have US Social Security and a 401k which I'll roll over to an IRA. No Roths or Brokerage accounts. And in the UK I'll have some State Pension including 10+ years of voluntary class 2 contribs as well as a smallish Final Salary pension from BP.

Would love to get that contact info from you Morpeth.

Vadio

You definitely do NOT need an accountant - your tax returns will be very simple.