EliDaBulldog

Firstly, I am so happy I found this forum from a Google search!

I am a single guy, I have both US and UK citizenship. I have been living in the US for 35 years now. I arrived when I was 16. I have now decided to move back to the UK, to be close to all my family, as I have been here all by myself this whole time.

My main questions center around taxes. I am in the process of selling all my properties, I have three. Two are rental properties and one is my primary residence. Once I sell all my properties, I should have a balance in seven figures to take home. I plan on leaving some of this money is the USA to pay my capital gains taxes on the real estate gains, on my 2022 tax return in 2023. My question is will the UK goverment collect any taxes on the money I move over to the UK?

I had a preplanned trip in July to visit my family. During this trip, I am thinking about setting up my bank account and purchasing a home (cash) and establishing a UK address.

Any help and feedback would be greatly appreciated!

durham_lad

Provided your sales of houses are completed before you move back then there is no tax to pay when moving the proceeds over to the UK. We did this a few years ago with no problems at all. When you actually move the money you may, for money laundering purposes, need to state or even prove where the money came from, so keep proof of sales ready. No problem leaving money in the USA but check ahead of time if the bank and/or brokerages you will have your money adequately support overseas customers. For example if they use a text message to validate login will they support a UK phone number.

When opening a bank account in the UK you may well have difficulty if you don't have a permanent address as you'll be asked for a utility bill or similar to prove residency. You should be able to buy a house even if you don't live here yet but if you own overseas property then the stamp duty on the UK house you buy will be higher. When we were buying our house in the UK we had to prove we could pay (we were buying cash) and the lawyers accepted a statement from our US brokerage showing sufficient funds. We didn't move the house money over until it was actually required to complete 3 months later.

Good luck in your move - we lived in the USA for 29 years before moving back, as dual citizens.

PS
We have borderless bank accounts with Wise who allow you to have UK and US accounts in both countries with the appropriate bank sort code and account numbers to make it easy to transfer money. Note that the Wise bank is not covered by the Federal or UK insurances for balances so only use it for transitional sums. We have US brokerage accounts including Roth IRAs with dividends etc being paid into our Wise accounts so it is easy to quickly and cheaply transfer the $s into £s.

That is something else to do if you have retirement accounts such as a 401k. Probably move the money into a rollover IRA in a brokerage that supports overseas customers before you move back. This is a non-taxable event.

Pulaski

As Durham_lad has already stated, moving funds you already have in a bank account, to a bank in the UK has no tax consequences.

Make sure to have the documentation related to the sale of your home and rentals when going through the process of buying a home in the UK as someone showing up in the UK with a significant amount of money can (should!) ring alarm bells with estate agents and solicitors, so expect at least a question about the source of your money, and in the case of your dealings with your solicitor, you might be asked to prove your story.

I suspect in most cases this isn't actually happening, but be aware that is is possible if the estate agent and solicitor are aware of the anti-money laundering laws in the UK, and it will be less stressful if you have already collected your documents in a file, including not just documents related directly to the sales, but also receipts of funds into your US bank account, and then the transfer to your bank in the UK, as all these steps help illustrate your openness and that you're not hiding anything.

EliDaBulldog

Thank you so much Pulaski and Durham lad for all this information! This is so very helpful and greatly appreciated!

Durham lad - On the three month period of paying for a house, can you expand upon this please? I am planning on buying a new build home,would the same waiting period apply?

Pulaski

UR welcome .... And further to my advice above, when you open your bank account, for the same reason, be sure to alert the bank to the fact that you will be tranferring a relatively substantial amount (give them an estimate if possible) from the US and the source and reason for the transfer. And do you best to ensure that whoever you are dealing with at the bank makes a record of this information in your (electronic) customer file. I appreciate that this might be difficult to do with certainty, but that sort of information should be something that bank employees are trained to pay attention to and to record.

EliDaBulldog

Pulaski - Speaking of moving money, what is the best way to do this? I have been with Chase bank in the USA for 12+ years now and this is where all my funds currently reside. I spoke to Chase UK and they said I can use my US account in the UK, as-is. However, I assume that is keeping everything in USD. I plan on opening a UK bank account and moving a large portion of my funds into GBP. I read on here, lot of people recommend Wise, but they do have a bit of fee, especially give the large amount I maybe moving over. Is there any other method to move the funds?

Pulaski

Wise is usually recommended here as "the cheapest" way to move funds, and that is likely true for most transfers, given that most transfer are relatively small. There are also numerous competitors to Wise in the "online broker remitter" market, that also offer relatively low cost exchnage and transfer/ remittance services.

That said, for larger transfers your bank is likely to be competitive with Wise, but you need to be sure to ask your bank for "a dealing desk rate" (use those words), and if you have a six figure sum to move then the dealing desk rate will certainly apply to you. Depending on your bank account terms and conditions you might have to pay a wire fee (probably $30-$35) to wire the funds to the UK, and again depending on terms and conditions there might be a small fee in the UK, maybe £15-£20 to receive the wire. When you send the wire you will likely be asked to provide a note to attach to the wire, to explain its purpose, so something like "Proceeds of sale of home and investment properties, needed to buy a home in the UK" should suffice.

Be aware that banks are sensitive to the fraud risk of sending a wire out of the US, as once the wire has left the US there is rarely any way to get the funds back, so be sure to check with your bank how you can instruct a wire to be sent, especially if you are outside the US at the time, as this situation has caught some people out in the past.

And yes, US banks generally only allow accounts in USD. Until a few years ago (2014-ish?) it wasn't actually legal for a US bank to allow customers to hold non-USD accounts, which is one reason why the Cayman Islands became an off-shore banking center, serving US customers who wanted to hold non-USD funds, and US banks that want to offer non-USD accounts, but were unable to do so in the US, so opened a branch there.

durham_lad

The 3 month period was simply how long it took from our offer being accepted to completion of the sale. Conveying can be quicker than this, it depends on the length of the chain of house buyers. Fortunately our chain was short - us, the people whose house we were buying and the person they were buying from. We had to prove we had the funds to pay, but didn’t need to actually transfer the money until “closing”.

I regularly use Wise to transfer up to $15k at a time but for the large sum for the house purchase I got a “dealing desk” rate following advice from Pulaski. I have both a US and a UK HSBC bank account and their global transfer is very fast and they advertise it as no fees but it consistently more expensive than Wise by tens of £s for sums up to $15k.

dean350

As someone who recently transferred large amounts to UK for a house purchase I would add that you should do a small test transaction first and then consider splitting the sum into three or four tranches. Check very thoroughly all account numbers and be in touch with your UK solicitor by telephone (not email) to monitor the transactions.

morpeth

I usually use Wise, however for larger sums TorFX in my experience has best rates, and superb customer service.

Pulaski

There may be some value to this, notably getting a blended exchange rate during times of volatility - you might lose a little over all, but at least you can be sure that you didn't move all your money on a day with a poor exchange rate. That said, bear in mind that sending in several tranches might disqualify you from accessing the dealing desk rate, so indirectly forcing you down the path of using an on-line FX broker-remitter such as Wise to get a decent rate.

An additional point is that, depending on how much money you need to move, and how many tranches you break it into, is that you can inadvertently ring alarm bells in the source and/or the destination banks, because having multiple similar transactions "for no apparent purpose" can lead to them getting flagged as "suspicious". The likelihood is that [1] you would never know, and [2] there will be no consequence that you're ever aware of or would impact you, but you are running a risk, though perhaps a small one, of opening a can of worms by "playing games" with your remittances. And whatever else you do, please do not attempt to discuss this with your banks, as they are not allowed to answer your questions directly, and you will almost certainly put yourself in precisely the situation you should want to avoid.

MidAtlantic

I agree. When I moved to the US in 2009, and for a few times subsequently, I used TorFX. Their service was excellent and, at that time, they provided the best rates.
Now that I transfer relatively small amounts I find that Wise is the best.

Have others seen Atlantic Money? Not yet available, but planning Wise type transactions for a flat £3 fee. https://atlantic.money/

EliDaBulldog

Thanks everyone for the money transfer tips!

One additional question I had, I am considering renting my primary residence in the USA, instead of selling right away. If anyone else has done this, can you tell me what the tax impact is?
Do I need to pay taxes on the rental income in the USA and UK or just one country? My understanding is that since there is tax treaty with UK and US, that I would not get double taxed. But if I get taxed only on one side, and that happens to be UK, will I end up getting taxed at much higher rate compared to the US tax rate?

Pulaski

So, your rental income will be taxed primarily in the US, with the good news being that there are numerous deductions you can make such that your taxable rental income may be very low. Deductions are basically any and all costs you incur in owning and operating your rental home - mortgage interest, property taxes, management fees, repairs and maintenance, insurance, and depreciation on both the building (but not the land) and appliances, etc. Note: annual depreciation at a rate of 1/26.5 of the acquisition price is mandatory. By the time you have deducted all those, there won't be much tax due, and whatever tax you do pay can be set against your UK tax liability.

Now for the bad news, your rental income is part of your world-wide income taxable in the UK. So you have another tax computation on your rental income, and the UK is a lot less generous with tax deductions on rental properties. The net effect is that you pay the higher taxes due in the UK, but part is paid in the US and credited against your UK tax liability.

EliDaBulldog

Thanks again Pulaski ! I actually have had multiple investment properties for years now so I am well aware of the depreciation and other deductions I can take. I just wanted to know if the UK will be collecting on my rental income. As you mentioned and as confirmed to me by a British CPA, I will have to pay in the US and some in the UK too.