I'm finally returning to the UK permanently later this year after 18 years on a US green card.. I have a traditional IRA and want to understand what happens when I start withdrawing from it as a UK resident in 2027.

My situation:

• 51 years old living in CA, returning to UK end of 2026
• Traditional IRA contributed pre-tax, deductible contributions) about $350k
• Roth IRA about $60k
• Will formally abandon green card via Form I-407
• Compliant on IRS tax returns and FBARs
• Plan to file W-8BEN with IRA provider and Article 18 protective election with HMRC on arrival
• Assets worldwide under $1m

What I believe to be true - please correct me:

Under Article 17 of the US-UK tax treaty, if I take periodic/regular payments from my IRA as a UK resident:

• Taxed only in the UK at my marginal rate (likely 20%)
• Zero US withholding tax
• Zero 10% early withdrawal penalty despite being under 59½

Is this correct? Has anyone actually done this successfully - specifically the under-59½ part?

Specific questoins:

1. Does the treaty genuinely eliminate the 10% early withdrawal penalty for UK residents taking periodic payments?
2. How did your IRA provider react - did they accept the W-8BEN without pushback?
3. Any HMRC gotchas on the Article 18 protective election?
4. Anything else I am missing?

Thanks in advance.

My situation was slightly different as my IRA provider "forced" a distribution in response to my submitting a W8CE (I was a covered expatriate for exit tax) so I couldn't avoid the 10% penalty. However, what I was subsequently told by my UK accountant was that the tax treaty only covers taxes, not penalties (or fines or interest for late payments...) so (a) the IRS had every right to apply the 10% and (b) I could not treat as a foreign tax credit because it was not a tax payment (it was a penalty.) Since the penalty isn't applied until you file your 1040/NR I'm not sure how the IRS would actually get it back from you otherwise but hopefully others on the forum will have more relevant experience to share with you.

Thanks. I'm sure that someone has walked through my footsteps before. I failed to consider the 1040/NR and how that could play out as everything is theoretical in my mind.

I don’t know the answer but what I did in a similar situation, starting at age 55, was to do IRA to Roth conversions which is taxable but avoids the 10% penalty. After age 60 I was able to begin to make Roth withdrawals tax free in both countries. I continue to make Roth withdrawals.

Thanks. Roth is certainly an option and I found this article on RULE72/SEPP a few minutes ago.

https://www.fidelity.com/learning-ce...nance/72t-rule
https://www.forbes.com/sites/wesmoss...t-unlocks-iras- if I read the playbook mentioned on the Forbes site, IRS won't tax me a 10% withholding penalty if I take a chunk of IRA money, put it in a "pot" and withdraw it based on strict conditions, of course, I would to have to pay UK income tax just as I would if I had turned 59.5 years. I think I read this right.

Yes, I believe you read that correctly, the 72t rule is well used by those who want early access to their IRA without invoking the 10% penalty.

Depending on your needs and tax brackets I would consider converting a chunk of it to your Roth before moving back, probably being taxed at a much lower rate than once you are subject to HMRC taxes. The first year you return you can file a split year tax return so as long as the conversion is done before the date you become tax resident it will be taxed only by the IRS.

OH wow.. did not factor the lower tax rate if I convert to Roth!! Thank You!!