Nypool1e

Hi, newbie here, I wonder if you can help me. I have lived in NYC for the last 30 years & I have dual citizenship. I am planning on returning to the UK permanently along with my American wife (recently married, yay!). When I return I know I have to inform HMRC, could anyone tell me what my financial/tax responsibilities are on my return. I have savings here in the US, I just started receiving social security payments (yes, I’m an old geezer now) I don’t intend to work in England or receive my UK pension for a number of years, I shall be living on my & my wife’s savings. I have owned a property in England since 2014 which my siblings care for & we will be moving into on our arrival. I have this knot in my stomach thinking that I owe the UK government a substantial amount of money/tax, does anyone have any insight into this issue? Thanks.

durham_lad

All the while you have lived in the USA you have been non resident in the UK and not subject to any taxes on your income. If you earned income on your UK house then that would have been subject to US taxes. When we moved to the USA we rented out our UK house for 6 years as we thought we would be returning but in the event stayed 30 years, becoming US citizens after 11 years.

There are some financial moves you can make before returning to the UK as once you return you will become subject to UK taxes ongoing. Your SS will be taxable only in UK, as will your OAP once you start taking it. The rest of your income will possibly be taxable in both countries so you will need foreign tax credits to lower the overall burden.

Nypool1e

Thank you for your help Durham lad. Out of interest, where in Durham are you from originally? I too am from the land of prince bishops, Hartlepool to be exact, yes, a monkey hanger! After posting this morning I called HMRC & spoke to a lad from Consett who pretty much told me what you just did which has put my mind at ease. Now, my wife & I can now focus our attention on getting a visa for her to reside in the UK. Once again, thank you.

Nypool1e

[QUOTE=Nypool1e;13064557]Thank you for your help Durham lad. Out of interest, where in Durham are you from originally? I too am from the land of prince bishops, Hartlepool to be exact, yes, a monkey hanger! After posting this morning I called HMRC & spoke to a lad from Consett who pretty much told me what you just did which has put my mind at ease. Now, my wife & I can now focus our attention on getting a visa for her to reside in the UK, which is a story all on its own. Once again, thanks.

durham_lad

I’m from Seaham originally, specifically Dawdon, where all my family for a couple of generations worked down Dawdon pit. Seaton Carew was a regular day trip for us growing up. I was delighted when the Hartlepool mascot, H’Angus the monkey ran for mayor on a platform of bananas for all school children about 20 years ago and won. He turned out to be a pretty good mayor and went on to win re-election. (Stuart Drummond is still a prominent business man in Hartlepool)

durham_lad

Of the things to be aware of before moving back are US mutual funds outside of retirement accounts, Roth IRAs, and once back avoid any UK equivalent funds even with ISAs as they will be taxed heavily by the IRS as PFICs.

The UK-US tax treaty is very important if you aren’t aware of it yet.

Nypool1e

Hi Durham lad, Stuart was actually in the Hartlepool mail recently, he is in the process of moving to Australia, good luck to the lad. Isn’t Seaham the first stop on the train to Newcastle from Hartlepool although I hear they recently opened a station at Horden. Have you & your wife moved back to the north east? We looked into homes in Hartlepool but I have a cottage in North Yorkshire that we are going to use instead. It’s only an 80 minute drive away so I can get home to watch Pools play when they are at home, are you a Sunderland fan? I don’t have any mutual funds, I do have a couple of IRA’s, are you saying I should be ok tax wise regarding the UK government coming after me for anything should I decide to withdraw any funds from them? Did you & your wife adjust easily to returning to the UK? Sorry for all the questions lol, cheers mate.

durham_lad

I also heard that they have reopened the station at Horden although I haven't ridden the train to Seaham since 2011.

We moved back to Guisborough which is where we lived for 6 years over 40 years ago and where our 2 children were born. I no longer have any close relatives left in Seaham although we do go there from time to time as I have a sister in Murton, very close to Seaham. My brother lives in Queensland and my other sister lives a short walk away here in Guisborough. Our son also lives in Guisborough, he moved back from Texas in 2017.

I do follow Sunderland still, although the last game I saw was Boxing Day in 2009 with my brother when he was visiting from Australia.

Ask away on any financial/tax questions and I'll answer if I can.

Traditional IRAs are recognized as such by HMRC and will be taxed as regular income once you start making withdrawals. The USA will also tax IRA withdrawals while you are living in the UK so you will have to apply foreign tax credits (form 1116) to reduce your US taxes. Although the HMRC will tax your US SS, it is not taxed at all by the IRS. (As per the tax treaty)

Roth IRAs are tax free both in the USA and UK so depending on your tax situation you might want to do some Roth conversions now to avoid potentially higher taxes once you have moved back. In my case I knew that once I am receiving US SS, and UK OAP on top of my UK and US private pensions that I will be in the 40% bracket so that mandatory IRA withdrawals from age 72 will be taxed at 40%. I now have no IRAs having converted them all to Roths which I started doing the year I retired in 2010.

Nypool1e

Thanks for the advice on Roth conversion Durham, I had a cursory perusal online on the benefits/disadvantages of doing this & came to the conclusion that I should seek out a professional CPA to advise me. I get the gist but am unsure whether I should convert the whole amount or just a percentage due to tax bracket implications. The only money I “earned” was unemployment (I was laid off due to COVID) plus my SS kicked in so I expect to make $40,000 this year. I don’t think I will be in the 40% tax bracket when I return to England as the only money I will earn will be SS, any expenses I incur will be paid for out of my savings not returns from investments etc, so 40% tax bracket seems high to me! Although I could be wrong, I’m so out of touch with being away from home for 30 years. I have never been to Guisborough although back in the day we used to spend evenings at Stokesley & Yarm, nice little towns. My cottage is in Pickering, North Yorkshire, I’m sure you know it, my wife (American) loves it & can’t wait to set up home there, new appliances, getting a dog (Labrador) & basically looking forward to this new chapter in our lives. Even though she hasn’t experienced a north east winter yet she lived & worked in Minnesota & says their winters are brutal compared to ours. I hope you noticed Pools came back from 2-0 down to win 3-2, shame about Sunderland.

durham_lad

I really like Pickering, that is a great place to retire to. I did see Hartlepool​​​​’s great comeback in the 2nd half. I also look out and cheer on the NE sides. I think you are really going to enjoy moving back. Compared to a Minnesota winter Pickering is going to feel like the south of France to your wife.

The only other financial thing that you may consider is that each person is taxed as an individual in the UK so you may consider dividing up your income to maximize your tax free allowances as a couple. For example we put all our after tax savings and investments in my wife’s name since she has no other income until OAP and SS start coming in.