Steve_

Mmm, I disagree on that one if you're from the UK, Article 4 of the tax treaty makes it impossible, technically speaking. You're either one or the other.

LouisB

This is relavent to me. I just sold one ISA and have a remaining cash only.

Looks like my first day in new US job is 20th of March.

So it's important to convert this to regular non-ISA savings before I leave the UK?

Other than dismal £ to $ rates I could convert to $ and invest in a US tax free equivalent?

Also, these rules are same regardless of visa, I.e. Immigrant/non-immigrant etc?

(Sorry for slight Hijack that but very similar type of ISA questions)

theOAP

If it is a pure cash only ISA (paying a rate of interest only) it will not be a problem for US reporting. It would be treated as any other interest bearing savings account.

Be careful of the hybrid accounts some banks and building societies sell such as a combination cash/other type ISA. As you are aware, anything other than a cash ISA (stocks and shares, combo, etc.) is not recommended. They are not forbidden, but the US unfriendly reporting and taxation required means they are likely not to be profitable.

You cannot contribute to an ISA if you are not resident in the UK. If your cash ISA account can 'tick over' year to year on its own, it would do so. But again, be aware of the type of cash ISA account. Some (both fixed rate and variable) require a yearly contribution in order to maintain a higher rate of interest. If contributions are not made, the interest rate drops to an abysmal amount. If you're not resident in the UK, you won't be able to make these yearly contributions.

I'm out of touch with account types in the US, but I think you'll struggle to find any type of comparable 'tax free' account in the US. Of course, your UK ISA will not be tax free for US reporting either.

The 'foreign accounts' rules are the same for all US Persons as defined by the IRS, no matter where you live. The IRS has various specific rules, but generally, if you are resident in the US you will have an IRS reporting obligation. There are exceptions (educational J?), but I'm not the one to discuss this.

MidAtlantic

If it is just a plain cash ISA you can keep it with no problems. You cannot add to it when you are non UK resident and the interest will be taxed as savings in the USA.

LouisB

Brilliant info, thanks - I will check the ISA to ensure it's plain vanilla cash only.

LouisB

So if I'm working in the US as non-immigrant worker on visa, US rules apply - can't pay into ISA but can I withdrawal from it?

What happens if I come back to UK for a while (keeping house in the UK). Does that not change anything all the time I'm employed by my sponsor? Guess I'm just wondering if I was back in the UK from time to time can I pay into it then?

Actually, it's not going to be tax free, so probably there's no point anyway...

But generally how do I know whether I'm under US tax rules, is it based on where I am staying or who employs me?

kodokan

Green card, or Substantial Presence test: https://www.irs.gov/individuals/inte...ien-tax-status

You have to be UK tax resident to contribute to an ISA, not just physically there for a while on holiday or a business trip.

LouisB

Right ok, so prior to green card it's a matter of being sufficiently resident for long enough, makes sense.

LouisB

Just want to check one more detail...

Once I'm US tax resident and assuming vanilla cash ISA then while I can't contribute to it and interest would be taxed as regular savings interest, my remaining question is,

Would I be able to withdraw from it, transfering all or part of it to say a UK regular savings account while being US resident? While I don't mind money being taxed and not being able to pay in, defininite don't want it tied up or having large penalties for withdrawals.

MidAtlantic

That is primarily a question about the terms of the account. You would need to check with the UK provider.

For transfer you are very unlikely to be able to open a new account in the UK while resident in the US. If you mean transfer to another existing account or to the US then there should be no problem.

nun

This is not correct.

Article 4 only provides rules for determining residency if the tax treaty is applied. It recognizes the possibility of dual residency and has tie breaker rules for the application of the treaty.

LouisB

Ok thanks, by transfer I just meant move money out of UK cash only ISA to another existing UK bank account perhaps via online banking, while in US or under US tax rules.

I'll check then the cash ISA I hold is cash only and nothing more.

LouisB

Hey, checked and my cash ISA is pure cash so should be no issue.

Sold off the stocks one, wasn't a terrible time to do so, phew.

Now I have that cash which I'm hanging onto for a short while in case of cash flow issues while moving, can I double check that there should be no issue paying down remaining interest only UK mortgage loan with the cash savings after starting in the US?

I mean to pay down probably most of it as a lump sum, but perhaps leave a little left on mortgage since it have 10 years to go and a small residual would be no risk for a while.

theOAP

Interest only UK mortgage?

Did you take out the mortgage at just the right time in the mid-1980's? Technically, there's no problem. But if it wasn't in the mid 80's, are you willing to pay a large amount of US tax on the inevitable currency gain?

http://britishexpats.com/forum/usa-5...estion-893700/

Foreign Mortgage Repayment and Exchange Rate Gain - US Tax & Financial Services

LouisB

I don't understand, the ISA is cashed in, all done before becoming a US worker.

I have a loan for the house. I'm not selling it, just talking about paying off mortgage loan partially or fully.

No the mortgage was much more recent than that, circa 2001

I could clear it all today, before leaving UK, is there a problem if I don't?