Vadio

Don't forget that part of the US SS is essentially 'tax tree' in the UK as they only tax 90% of the benefit.

nun

Yes good point!

theOAP

Correct Vadio, we keep saying this but I imagine those unfamiliar with HMRC rules wonder how come we're so sure of this statement.

For those questioning whether the 10% reduction really exists: go to the following GOV.UK page and download the Foreign Notes (2015). In the PDF which opens, go to page FN 7. You will find the following:

Overseas pensions, social security benefits and royalties, etc.

Fill in columns A to F if you received a pension or social security benefits from overseas during 2014–15. (Bold Mine)

and

10% deduction

You can take 10% off the value of overseas pensions, annuities and social security pensions so that only 90% of the amount you receive is taxable in the UK. (Bold Mine)

https://www.gov.uk/government/public...-foreign-sa106

https://www.gov.uk/government/upload...notes-2015.pdf

If filing on paper, Column B is the gross amount and Column F is the 90% taxable amount. I believe Vadio indicated on the on-line filing, only the 90% taxable is included. Vadio to confirm.




And from HMRC directly:


Section 575 (as amended by IT(TOI)A 2005) provides that the taxable amount of a foreign pension is 90% of the actual amount arising in the tax year unless the income is charged in accordance with Section 832 of IT(TOI)A (relevant foreign income charged on the remittance basis).


http://www.hmrc.gov.uk/manuals/eimanual/eim74500.htm

Vadio

I've done my UK SA on-line for the past 2 years. Each time I initially put in 100% of my SS benefit, to test whether the taxable amount was adjusted to reflect the 10% reduction. The UK tax due was calculated based on the exact amount I put on the form. Went back, reduced the SS amount to 90%, and Eureka...the tax agreed with the calculations on my Excel spreadsheet.

Same with hubby's UK SA; did it both ways, and concluded that I needed to put in the (lower) taxable amount, not the total actually received.

Interesting question re: total benefit or benefit less Medicare B premiums. Neither of us signed up for Medicare B, so I never gave that much thought. One thing is for sure....if you call HMRC, they (likely) won't have a clue.

nun

A higher percentage (50% or 85%) of your SS will be tax free if you stay in the US...but the UK has some very generous personal and capital gains tax allowances as well. If you are canny with the sources of your income it is possible to come up with a very low tax bill.

fulwood

I really really need to educate myself on pensions/ss etc before I move back.. didn't know UK even taxed social security. anyway.

windsong

Me, too.

It's the tax issues that I need to understand. I have a U.S. accountant but I understand what Nun is saying in her comments to my inquiry above and am now wondering if I will also need a UK accountant who deals with dual citizens. I really hate to think what they will charge, though. It's been about 30 years or more since I prepared my own tax returns in the U.S. and combined with UK returns, I think I might lose my mind.

Janelle

Yes the whole taxes issue makes you feel like you're losing your mind, but I can't thank the members who share information enough for helping to ease my mind and steer me in the right direction.

durham_lad

+1000

We move back next year and I find these threads invaluable.

robin1234

I always avoided accountants in the US because I found them very dim bulbs, and also terrible procrastinators. I had to help out my mother in law a couple of times, when she'd given an accountant all her materials very early, but he'd sat on them till it was too late to correct all his ridiculous errors and omissions before the filing deadline. And this was just standard US income & residence.

I feel UK practice will be a learning curve for me, and one phone call to HMRC will be enough to last me a very long time.

Agreed, many thanks to those who've posted in this thread and other threads, with good insights and information.

rebeccajo

Indeed. Real life experience can be the most reassuring. Whether a person is just dreaming, actually planning, or already on the ground.

And just like real life, it's always good to say thanks to those who help.

Vadio

IMHO, most accountants err on the side of caution - and if they aren't sure, they play it safe. After all, you are paying the tax, not them.

It is a minefield, but even in the first year, it's more a tolerance for paperwork than anything else unless your situation is very complicated. Hiring a dual-qualified accountant could cost more than paying tax to 2 countries, and ignoring treaty benefits altogether.

I tend to avoid accountants also. The only one who ever gave me good advice was a personal friend....who said "we charge a minimum fee to prepare a return; yours is simple - do it yourself."

theOAP

I miss JAJ.

nun

Where has he/she gone?

durham_lad

He/she was last on the forum July 11, so is still around, just not posting these days.