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Does anyone have experience of this taxing situation

Does anyone have experience of this taxing situation

Old Jan 20th 2006, 4:28 am
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nun
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Default Does anyone have experience of this taxing situation

I'm a UK citizen whose lived in the US for 18 years and I also became a US citizen 5 years ago. I'm now thinking of retiring back to the UK. Does anyone know how income I take from my US 401k/IRAs and remit back to the UK will
be taxed. Someone must be doing this already
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Old Jan 20th 2006, 5:09 am
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Default Re: Does anyone have experience of this taxing situation

Originally Posted by nun
I'm a UK citizen whose lived in the US for 18 years and I also became a US citizen 5 years ago. I'm now thinking of retiring back to the UK. Does anyone know how income I take from my US 401k/IRAs and remit back to the UK will
be taxed. Someone must be doing this already
I have an answer on the US side of this.

Unless you renounce your US citizenship you will be taxed by the US on your worldwide income ad infinitum. Distributions of ordinary IRAs are taxed as ordinary income. If the UK also taxes it as such, you'll get foreign tax credit from the US to offset that.

Roth IRAs are much more problematic imo, because distrubutions from them are tax-free. If the UK taxes them as ordinary income (and I have no idea whether or not they do) you've effectively lost the benefit of having the Roth IRA in the first place.
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Old Jan 20th 2006, 12:22 pm
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Default Re: Does anyone have experience of this taxing situation

Originally Posted by Giantaxe
I have an answer on the US side of this.

Unless you renounce your US citizenship you will be taxed by the US on your worldwide income ad infinitum. Distributions of ordinary IRAs are taxed as ordinary income. If the UK also taxes it as such, you'll get foreign tax credit from the US to offset that.

Roth IRAs are much more problematic imo, because distrubutions from them are tax-free. If the UK taxes them as ordinary income (and I have no idea whether or not they do) you've effectively lost the benefit of having the Roth IRA in the first place.
I do know that the ROTH issues isn't a problem, because under the US/UK tax treaty qualified retirement plans from one country are treated the same way in the other country, so a ROTH is tax free in the US and UK. Also I recently found out that if you get both UK and US social security you are taxed on both of them in the country where you reside.

What I want to know is are distributions from 401ks taxed at source or do you get the full amount and then have to pay tax your self.
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Old Jan 20th 2006, 2:57 pm
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Default Re: Does anyone have experience of this taxing situation

Originally Posted by nun
I do know that the ROTH issues isn't a problem, because under the US/UK tax treaty qualified retirement plans from one country are treated the same way in the other country, so a ROTH is tax free in the US and UK. Also I recently found out that if you get both UK and US social security you are taxed on both of them in the country where you reside.
That's good news; thanks for the Roth info.

Originally Posted by nun
What I want to know is are distributions from 401ks taxed at source or do you get the full amount and then have to pay tax your self.
You mean does tax get withheld at source by the US, presumably? Why is this an issue?
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Old Jan 20th 2006, 3:11 pm
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Default Re: Does anyone have experience of this taxing situation

Originally Posted by Giantaxe
That's good news; thanks for the Roth info.



You mean does tax get withheld at source by the US, presumably? Why is this an issue?
Its not really an issue, I just wanted to check. I talked to the place where I have my retirement accounts today and they said that you can elect to get distributions
with or without tax witheld. I'd rather get the money pre tax and then pay up
at the end of the year. I've done some more research and I think that if I get the money sent to me in the UK I'll pay UK income tax on it and then get a credit for
that in the US as I read that under the treaty the country you reside in has first claim to the tax. I'm still not entirely sure and I'd love to talk to someone who has real world experience of UK/US income and retirement tax issuses
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