Go Back  British Expats > Living & Moving Abroad > USA
Reload this Page >

Best way to recoup tax withheld on UK pension lump sum

Best way to recoup tax withheld on UK pension lump sum

Old Nov 16th 2023, 5:19 pm
  #1  
BE Forum Addict
Thread Starter
 
Joined: Apr 2011
Location: Ohio
Posts: 1,834
kodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond repute
Default Best way to recoup tax withheld on UK pension lump sum

Last month I cashed out a small UK final salary pension; the fund was being closed by my ex-employer and handed off to an insurance company, and it made financial sense for me to take my cut under the ‘trivial commutation’ rule since it was well under the £18k threshold, and it was a bonus way to access this money early and reinvest it here, since I’m only 52.

My lump sum was £9,659 - the company paid out 25% tax free, withheld 20% tax on the remainder, and deposited £7,244 in my UK bank account. The tax withheld was £1,449.

I know how to account for this on my US taxes - choose some variant of Other Income reporting box on my 1040, report the whole amount including the 25% that’s not tax free here.

But what’s the best way to claim the UK tax back? I’m considering three possible options:
- claim a foreign tax credit on my 2023 US return
- complete UK form R43 as the amount is below the Personal Allowance threshold
- complete Form 2002 to get a NT code with HMRC

The first one seems easiest, as the other options seem to involve HMRC mailing me a GBP check that I’ll then have to mail back to my UK bank, and worry about it going missing either way. But I’m not sure if it’s the correct approach (or how much the IRS would truly care even if it wasn’t, but I did it anyway 🙂). I’m also not sure if I can do the UK forms now, or if I have to wait until next April to request the tax back.

In case it’s relevant to how best to tackle this, I will be cashing out another similarly small UK pension amount in 3 years when I am 55, and then will be receiving a UK state pension from the age of 67. I have no other sources of UK income.

Thanks for any insights and suggestions.

Last edited by kodokan; Nov 16th 2023 at 5:54 pm.
kodokan is offline  
Old Nov 16th 2023, 11:31 pm
  #2  
 
lansbury's Avatar
 
Joined: Apr 2005
Location: Milwaukie, Oregon
Posts: 9,965
lansbury has a reputation beyond reputelansbury has a reputation beyond reputelansbury has a reputation beyond reputelansbury has a reputation beyond reputelansbury has a reputation beyond reputelansbury has a reputation beyond reputelansbury has a reputation beyond reputelansbury has a reputation beyond reputelansbury has a reputation beyond reputelansbury has a reputation beyond reputelansbury has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

Providing you can get the full amount as a foreign tax credit, I would go that way. Claiming a refund from HMRC, as far as I know, cannot be done until the close of the tax year.

If you do decide to claim the refund, see if your UK bank does mobile deposits. If so just use the bank app on your phone, and cut out the mailman.

Last edited by lansbury; Nov 16th 2023 at 11:35 pm.
lansbury is offline  
Old Nov 17th 2023, 12:46 am
  #3  
BE Forum Addict
Thread Starter
 
Joined: Apr 2011
Location: Ohio
Posts: 1,834
kodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

Originally Posted by lansbury
Providing you can get the full amount as a foreign tax credit, I would go that way. Claiming a refund from HMRC, as far as I know, cannot be done until the close of the tax year.

If you do decide to claim the refund, see if your UK bank does mobile deposits. If so just use the bank app on your phone, and cut out the mailman.
Ah, I suspected that a UK refund might involve waiting 6 months. I think then that I’ll run the foreign tax credit scenario through the tax software, and see what it spits out.

Mobile check deposit - I have First Direct and Wise, neither of whom sadly seem to offer this when I checked earlier today. One of the rare times that the UK banking processes aren’t as good as the US ones!
kodokan is offline  
Old Nov 17th 2023, 1:34 am
  #4  
Furby
 
Glasgow Girl's Avatar
 
Joined: Apr 2016
Location: St. Louis, MO.
Posts: 868
Glasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

I would use Form 2002. Two reasons.

First, technically the foreign tax credit is only allowed for foreign tax that is legally due in the UK, and as a US resident there is no legal requirement to pay UK tax on pension income (even though it was deducted and required to be reclaimed). Would the IRS care, probably not, unless you were audited, and that audit was by someone very well versed in foreign income, and both are unlikely.

Second, and more importantly. Broadly speaking, the tax credit is limited to the amount of tax you would have paid on that income in the US. Because of the way the calculation is performed, if the UK tax rate is higher than your effective (average) IRS tax rate then you will be leaving something on the table, and since the UK tax rate was 20% that is a likely scenario. While you can carry the tax credit forward for 10 years unless you have future foreign income for which the UK tax rate is less than your effective IRS tax rate, you will never recover the balance. That is possible if you get an NT code for your next pension payment before you receive it, but obviously will take a while to recoup the funds. Plus, I am not certain that you can get an NT code in advance of any payment from a new payment source these days. I am not 100% certain but I think you need to wait until you have had some kind of payment from whoever is providing the funds before applying for an NT code which is why they recommend taking a small amount first (or the 25% tax free lump sum only) before cashing in the whole pot.

I would run the numbers and see how it works out. The allowed tax credit will be your US tax liability for 2023 multiplied by the amount of your foreign income divided by your total income (which will include all income, dividends, interest, capital gains, capital gains distributions, foreign income, etc). Anything over that will have to be carried forward and potentially lost.

Last edited by Glasgow Girl; Nov 17th 2023 at 2:35 am.
Glasgow Girl is offline  
Old Nov 17th 2023, 4:19 am
  #5  
Forum Regular
 
Joined: Jul 2018
Location: California
Posts: 254
vespucci has a reputation beyond reputevespucci has a reputation beyond reputevespucci has a reputation beyond reputevespucci has a reputation beyond reputevespucci has a reputation beyond reputevespucci has a reputation beyond reputevespucci has a reputation beyond reputevespucci has a reputation beyond reputevespucci has a reputation beyond reputevespucci has a reputation beyond reputevespucci has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

Originally Posted by kodokan
... check deposit...
Whenever I got refunds it was always by bank deposit. I got an email each June with this message:"Your latest tax calculation is now ready to view online.

Sign in to HMRC online with your Government Gateway password and ID, and go to your messages. Or download the free HMRC app.

For security reasons, we have not included a link with this email.

Why you got this email

You chose to get online tax letters instead of letters by post.

This means we send you an email to let you know when you have a new message."

I logged on and entered my UK bank sort code and account number, and the refund went into my account a few days later.

vespucci is offline  
Old Nov 17th 2023, 12:20 pm
  #6  
BE Forum Addict
 
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,124
durham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

Originally Posted by vespucci
Whenever I got refunds it was always by bank deposit. I got an email each June with this message:"Your latest tax calculation is now ready to view online.

Sign in to HMRC online with your Government Gateway password and ID, and go to your messages. Or download the free HMRC app.

For security reasons, we have not included a link with this email.

Why you got this email

You chose to get online tax letters instead of letters by post.

This means we send you an email to let you know when you have a new message."

I logged on and entered my UK bank sort code and account number, and the refund went into my account a few days later.

This is exactly what I do.

On the occasional year that HMRC owes me a refund when I do a SA then page 7(?) of the SA allows to enter your bank details so the refund goes directly to your account so no need to do anything more. If you don't have a bank account or otherwise want a paper cheque you can put an "X" in box 9 of that page.

"If you do not have a bank or building society account, or if you want us to send a cheque to you or to your nominee, put ‘X’ in the box"

durham_lad is offline  
Old Nov 18th 2023, 7:45 pm
  #7  
BE Forum Addict
Thread Starter
 
Joined: Apr 2011
Location: Ohio
Posts: 1,834
kodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

Originally Posted by Glasgow Girl
I would use Form 2002. Two reasons.

First, technically the foreign tax credit is only allowed for foreign tax that is legally due in the UK, and as a US resident there is no legal requirement to pay UK tax on pension income (even though it was deducted and required to be reclaimed). Would the IRS care, probably not, unless you were audited, and that audit was by someone very well versed in foreign income, and both are unlikely.

Second, and more importantly. Broadly speaking, the tax credit is limited to the amount of tax you would have paid on that income in the US. Because of the way the calculation is performed, if the UK tax rate is higher than your effective (average) IRS tax rate then you will be leaving something on the table, and since the UK tax rate was 20% that is a likely scenario. While you can carry the tax credit forward for 10 years unless you have future foreign income for which the UK tax rate is less than your effective IRS tax rate, you will never recover the balance. That is possible if you get an NT code for your next pension payment before you receive it, but obviously will take a while to recoup the funds. Plus, I am not certain that you can get an NT code in advance of any payment from a new payment source these days. I am not 100% certain but I think you need to wait until you have had some kind of payment from whoever is providing the funds before applying for an NT code which is why they recommend taking a small amount first (or the 25% tax free lump sum only) before cashing in the whole pot.

I would run the numbers and see how it works out. The allowed tax credit will be your US tax liability for 2023 multiplied by the amount of your foreign income divided by your total income (which will include all income, dividends, interest, capital gains, capital gains distributions, foreign income, etc). Anything over that will have to be carried forward and potentially lost.
Thanks for such a thorough reply, and excellent useful information. Most importantly, I didn’t realize the foreign tax credit was calculated in that way; I’ve been thinking it’s a straight dollar for dollar credit! Very important to know!

I think I’ll tax software it out when I file for 2023, and if the credit looks like I’ll be leaving too much money on the table, I’ll wait until April and either apply for my UK Personal Allowance, or complete a self-assessment return. I have a Government Gateway logon that works for checking my National Insurance, so hopefully it’ll let me file a simple tax return too.

One more question, if it’s not too much trouble - is getting/ applying the NT code specific to the institution sending the payment? Would there be any point trying to get one set up now on the basis of this one-off payment, to give me any benefit for my next one-off payment in 3 years’ time? Or should I not bother with getting the NT code until my state pension starts paying out in 15 years?

Thanks too to the others who chimed in about being able to use bank account deposit details - if the foreign tax credit doesn’t work out, I’m now more reassured that claiming it back on the UK end will be simpler than I thought.
kodokan is offline  
Old Nov 18th 2023, 10:04 pm
  #8  
BE Forum Addict
 
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,124
durham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

Originally Posted by kodokan
Thanks for such a thorough reply, and excellent useful information. Most importantly, I didn’t realize the foreign tax credit was calculated in that way; I’ve been thinking it’s a straight dollar for dollar credit! Very important to know!

I think I’ll tax software it out when I file for 2023, and if the credit looks like I’ll be leaving too much money on the table, I’ll wait until April and either apply for my UK Personal Allowance, or complete a self-assessment return. I have a Government Gateway logon that works for checking my National Insurance, so hopefully it’ll let me file a simple tax return too.

One more question, if it’s not too much trouble - is getting/ applying the NT code specific to the institution sending the payment? Would there be any point trying to get one set up now on the basis of this one-off payment, to give me any benefit for my next one-off payment in 3 years’ time? Or should I not bother with getting the NT code until my state pension starts paying out in 15 years?

Thanks too to the others who chimed in about being able to use bank account deposit details - if the foreign tax credit doesn’t work out, I’m now more reassured that claiming it back on the UK end will be simpler than I thought.
Filing a self assessment through the Government Gateway is pretty straightforward but the first thing you need to do is apply for a Unique Taxpayer Reference number (UTR) through that website. That can take a few weeks so best to apply soon.
durham_lad is offline  
Old Nov 18th 2023, 10:26 pm
  #9  
Furby
 
Glasgow Girl's Avatar
 
Joined: Apr 2016
Location: St. Louis, MO.
Posts: 868
Glasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

Originally Posted by kodokan
One more question, if it’s not too much trouble - is getting/ applying the NT code specific to the institution sending the payment?.
That is something I do not know, but I think it is now specific to the payment source. That makes sense because the UK allows countries with whom there is a double tax agreement in place the right to tax some income streams with no UK tax deducted at source, for example pensions, while retaining the right for the UK to tax other income streams at source, for example rental income. I could be wrong on that though, and possibly getting an NT code for the first pension will also work for all other pension income. If it was me I would go ahead an apply for the NT code because you have nothing to lose by doing so, and you can always can always call them an ask when you have submitted the application.


Originally Posted by kodokan
Would there be any point trying to get one set up now on the basis of this one-off payment, to give me any benefit for my next one-off payment in 3 years’ time? Or should I not bother with getting the NT code until my state pension starts paying out in 15 years?.
Yes, for the reasons identified above. Plus, if you have been out of the UK tax system for some time then you have to have new UK sourced income to apply for a tax code to get back into the system. Perhaps the income from your first pension will meet that requirement, and/or the previously granted NT code will carry over. If you find out that a new NT code is required for the new pension income (and assuming you are now reestablished back in the UK tax system) you should apply for it about one year prior to withdrawing the funds from your second pension. It is supposed to take 6 to 8 weeks, but in practice takes a LOT longer, plus you will need documentation from the IRS which will also take some time. If you are not reestablished in the UK tax system and the NT code does not carry over, then you should withdraw a nominal amount first (or the tax free lump sum) and then apply for the NT code, that way you won’t have much (if any) tax to reclaim when the time comes. If you don’t have an NT code you will be taxed at emergency tax codes which won’t be fun. Be aware that most UK pension providers will not allow US residents with pensions to go into drawdown, and many will require that you withdraw the entire amount not just the tax free portion so you may not be able to withdraw a portion first to minimize the initial tax bite.

Rinse and repeat for the state pension!

if you do find out a definitive answer as to whether or not the NT code applies to all income, or at least to all income of a specific type (like pensions) it would be very helpful if you could report back. It will help quite a few others with their planning for similar scenarios.

Glasgow Girl is offline  
Old Nov 19th 2023, 12:37 am
  #10  
BE Forum Addict
Thread Starter
 
Joined: Apr 2011
Location: Ohio
Posts: 1,834
kodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond reputekodokan has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

Rightio, I’ll apply for a UTR (that I didn’t know I needed - thanks!), report back in a couple of months how the foreign tax credit scenario looks on this payout, and then follow up with anything I learn about the NT code and income from varying sources. That last one might take 3-15 years though…
kodokan is offline  
Old Nov 19th 2023, 9:58 pm
  #11  
Forum Regular
 
Joined: Aug 2023
Location: Japan
Posts: 45
Jakeinaka is an unknown quantity at this point
Default Re: Best way to recoup tax withheld on UK pension lump sum

Very informative thread! I will have a similar situation soon but in my case drawing funds from a private pension.
The 25% tax free is clear, the taxed part for which I will need to reclaim from HMRC isn't the same. My pension provider says I will be taxed at an emergency rate
which I then reclaim, in my case using form Japan 1DT. Not so simple as the Japanese tax office will not stamp anything they can't read. I have heard though
that they have a bilingual form which if supplied to HMRC with the UK form is acceptable.
Anyway, I digress, can anyone clarify what the NT and UTR codes are, will I need them and if so how to get them? I've been out of the UK for some years, have access
to the government website, and the only tax codes I can find are still listed as the last time I was employed there (last NHI contribution was 2007), which is the basic allowance. Is that code still relevant
or will I be hammered with the emergency tax code? I don't even know what that is.
I'm planning to make a withdrawal in January, and reclaim after the UK tax year has ended.

Thanks!
Jakeinaka is offline  
Old Nov 20th 2023, 7:27 am
  #12  
BE Forum Addict
 
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,124
durham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

Originally Posted by Jakeinaka
Very informative thread! I will have a similar situation soon but in my case drawing funds from a private pension.
The 25% tax free is clear, the taxed part for which I will need to reclaim from HMRC isn't the same. My pension provider says I will be taxed at an emergency rate
which I then reclaim, in my case using form Japan 1DT. Not so simple as the Japanese tax office will not stamp anything they can't read. I have heard though
that they have a bilingual form which if supplied to HMRC with the UK form is acceptable.
Anyway, I digress, can anyone clarify what the NT and UTR codes are, will I need them and if so how to get them? I've been out of the UK for some years, have access
to the government website, and the only tax codes I can find are still listed as the last time I was employed there (last NHI contribution was 2007), which is the basic allowance. Is that code still relevant
or will I be hammered with the emergency tax code? I don't even know what that is.
I'm planning to make a withdrawal in January, and reclaim after the UK tax year has ended.

Thanks!
HMRC inform each employer and pension provider via a tax code what tax withholding to make when they make payments to someone. An NT code means No Tax which is rare for someone living in the UK. I had an NT code on a small pension I was receiving while living in the USA. Once I had started living in the UK that NT code was replaced by a regular tax code and that gets adjusted each year. My current tax code is 206T which is shown on each monthly statement from my pension provider.
https://www.litrg.org.uk/tax-guides/...-coding-notice

https://www.gov.uk/tax-codes

Most folks don’t have a UTR as their taxes are paid using PAYE. If you have to file self assessment returns then you need to be issued a unique taxpayer reference which you will use every time you file a tax return. Self assessments are needed when HMRC doesn’t know what all your income will be, for example if you run a business or have foreign income.

durham_lad is offline  
Old Nov 20th 2023, 3:05 pm
  #13  
Furby
 
Glasgow Girl's Avatar
 
Joined: Apr 2016
Location: St. Louis, MO.
Posts: 868
Glasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond reputeGlasgow Girl has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

You will almost certainly be taxed using the emergency tax code, because your income is from a new source. The emergency tax code means that they allow 1/12th of the personal allowance and 1/12th of each tax band to apply each month. The short explanation is that withdrawals above £4,189.17 each month will be taxed at the 40% and 45% tax rates, anything less than that at the 0% and 20% rates. The longer explanation is that the current personal allowance is £12,570 which means that you get £1,047.50 tax free every month. The 20% tax band allowance is £37,700, and 1/12th of that is £3,141.67 which is taxed at taxed at 20%, the 40% tax band applies to the next £87,440 of income and you are allowed 1/12th of that which is £7,286.67. Everything above that is taxed at 45%. Therefore a taxable lump sum of any size will quickly get into the 45% tax rate.

An NT code, means No Tax which means that no tax is deducted by the UK, and can be applied to pension income paid to anyone living in a country that has a double tax agreement with the UK, but you have to apply for it and of course tax is due in the country of residence. You have to have income to apply for an NT code which is why the advice is to withdraw a small amount first (if possible) apply for the NT code, and withdraw larger sums once you have that code. It can take quite a while to get the NT code so it is advisable to plan up to a year ahead of withdrawing a sizable lump sum.

Of course you can reclaim the tax paid to the UK, but better to avoid that if possible.

Last edited by Glasgow Girl; Nov 20th 2023 at 3:22 pm.
Glasgow Girl is offline  
Old Nov 20th 2023, 6:11 pm
  #14  
Forum Regular
 
Joined: Aug 2023
Location: Japan
Posts: 45
Jakeinaka is an unknown quantity at this point
Default Re: Best way to recoup tax withheld on UK pension lump sum

Thank you for that information very useful!
So the information from the Gov website about the form Japan 1DT is that it serves 2 purposes.
Under the terms of the UK-Japan Double Taxation convention, use form Japan-1-DT to:
  • apply for relief at source from UK Income Tax
  • claim repayment of UK Income Tax
I assume the first is to get a new tax code (NT?), the second seems clear.
And from my pension provider:
When you withdraw a taxable lump-sum from your pension, an emergency tax rate will be charged until your
individual tax code is received from HMRC directly.
And from my pension contact person
There will be 40% emergency tax applied for the first taxable withdrawal, which you can claim back from
HMRC and then the correct tax code will be applied for future withdrawals.
This seems to reflect the "apply for relief at source"?
So, I will make a small taxable withdrawal within my tax year (Jan - Dec), declare it and pay tax here early next year, then go through the motions with HMRC and my provider.
I should have done it earlier, but the tax free withdrawals are so much easier

Thanks again, very much appreciated
Jakeinaka is offline  
Old Nov 20th 2023, 6:15 pm
  #15  
 
Pulaski's Avatar
 
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 52,438
Pulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond reputePulaski has a reputation beyond repute
Default Re: Best way to recoup tax withheld on UK pension lump sum

Originally Posted by Glasgow Girl
I would use Form 2002. Two reasons.

First, technically the foreign tax credit is only allowed for foreign tax that is legally due in the UK, and as a US resident there is no legal requirement to pay UK tax on pension income (even though it was deducted and required to be reclaimed). .
I agree with this, because contrary to oft-proffered advice, it is not usually optional where you pay taxes - as a US resident you are liable for tax in the US, and you should not be voluntarily acquiescing to being taxed by HMRC when you are actually liable for taxes in the US. .... Though I disgree with the use of "technically", when as stated it is "actually" the case.

That said, I agree that the US Inland Revenue might never notice if you just claim the tax credit, but that doesn't make it right.
Pulaski is offline  

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service -

Copyright © 2024 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.