Most tax efficient way to move lump sum £s from UK to US.
May 18th 2023, 3:19 pm
#1
Just Joined
Thread Starter
Joined: Mar 2012
Posts: 8
Most tax efficient way to move lump sum £s from UK to US.
Hi all , I am a dual UK/US citizen and will be moving from UK to California permanently later this year. I doubt I will return to the UK but you never know (am mid forties). I have read some really helpful posts about liquidating particular investments before I move over to avoid but have a few questions.
I will sell my UK house before leaving and will have a lump sum, I won’t need the cash straight away in the US, but in a couple of years can hopefully buy a property in California. I have to decide what to do with the cash, to leave it in my UK bank account with terrible interest rate, invest it somewhere in UK or move it over to the USA (will I have to pay tax on that?) I won’t have paid CGT in UK as it’s my only property.
Which UK investments which aren’t subject to US tax or reporting requirements? What about NS& I products (premium bonds, other Bonds?
I have a small cash ISA, and premium bonds - should I liquidate those?
I don’t have any UK private pensions or a SIPP, have enquired and could only invest a max of £2880 per year so that doesn’t look like a good option.
Also, will I have to report any child accounts in UK I hold for my 5 year old child (also a dual citizen) eg Junior ISA, children’s savings account or should they be liquidated too?
Many thanks!
I will sell my UK house before leaving and will have a lump sum, I won’t need the cash straight away in the US, but in a couple of years can hopefully buy a property in California. I have to decide what to do with the cash, to leave it in my UK bank account with terrible interest rate, invest it somewhere in UK or move it over to the USA (will I have to pay tax on that?) I won’t have paid CGT in UK as it’s my only property.
Which UK investments which aren’t subject to US tax or reporting requirements? What about NS& I products (premium bonds, other Bonds?
I have a small cash ISA, and premium bonds - should I liquidate those?
I don’t have any UK private pensions or a SIPP, have enquired and could only invest a max of £2880 per year so that doesn’t look like a good option.
Also, will I have to report any child accounts in UK I hold for my 5 year old child (also a dual citizen) eg Junior ISA, children’s savings account or should they be liquidated too?
Many thanks!
May 18th 2023, 3:41 pm
#2
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 52,448
Re: Most tax efficient way to move lump sum £s from UK to US.
Anything you leave in the UK will create a tax minefield. There are good reasons to keep a current account in the UK for future contingencies, but holding a significant balance on deposit is a poor investment choice, and investing it is going to create reporting and tax burdens for little or no benefit.
I recommend that, except for a current account, you liquidate everything, including the child's accounts, and transfer the proceeds to the US. ... And any suggestion of holding off the transfer waiting for a better GBP/USD exchange rate is a mug's game, as, as nearly happened in 2022, GBP is only one political crisis away from parity with USD, so take the money and run!
You should look into making voluntary NI contributions (apply for Class 2, currently about £265/yr), as in your 40's, assuming you have already worked for over 20 years in the UK (and likely have 2-3 deemed years of contributions from being in school 16-18), you should only be a few years from qualifying for a full UK pension. .... If you don't have any private pensions it sounds like you weren't "contracted out", so that simplifies things. Check out the Voluntary NI contributions thread (start near the end as it is a very long thread, and only dig further back if you need to) for more information.
I recommend that, except for a current account, you liquidate everything, including the child's accounts, and transfer the proceeds to the US. ... And any suggestion of holding off the transfer waiting for a better GBP/USD exchange rate is a mug's game, as, as nearly happened in 2022, GBP is only one political crisis away from parity with USD, so take the money and run!
You should look into making voluntary NI contributions (apply for Class 2, currently about £265/yr), as in your 40's, assuming you have already worked for over 20 years in the UK (and likely have 2-3 deemed years of contributions from being in school 16-18), you should only be a few years from qualifying for a full UK pension. .... If you don't have any private pensions it sounds like you weren't "contracted out", so that simplifies things. Check out the Voluntary NI contributions thread (start near the end as it is a very long thread, and only dig further back if you need to) for more information.
Last edited by Pulaski; May 18th 2023 at 3:51 pm.
May 18th 2023, 3:57 pm
#3
Furby
Joined: Apr 2016
Location: St. Louis, MO.
Posts: 874
Re: Most tax efficient way to move lump sum £s from UK to US.
If the move is intended to be permanent do not invest anything further in the UK unless it is directly in individual shares,bonds or regular savings accounts. Anything else such as any kind of pooled UK funds such as OEICs, Unit Trusts, Investment Trusts, ETFs will not only cause you onerous tax reporting requirements but also subject you to punitive taxation including any unrealized profit made while still in the UK. Sell everything you have in all of these types of investments before you leave, that is critical.
All foreign accounts are subject to FBAR (aggregate total above $10K) and FATCA (aggregate total above $75K/$150K, single/married) reporting no matter the investment vehicle. That includes pensions, normal bank accounts, life insurance, etc. Basically anything with a value held In a foreign currency. PFIC reporting is additional and applies to the pooled type of investments identified above and is in addition to the FBAR and FATCA requirements. Those forms are not too bad once ‘you get used to them, PFIC forms are extremely onerous and time consuming and usually need professional help.
Children's savings need to be reported to the IRS and will be subject to appropriate taxes.
All foreign accounts are subject to tax on interest, dividends, capital gains, etc. That includes any kind of ISA, you can keep it but the IRS won’t recognize it’s tax free status, so the wrapper is useless in the USA although you can keep it and hedge your bets in case you return. You cannot hold premium bonds in the USA, sell them.
No tax to pay when simply moving cash from one country to another, including when you exchange it. Don’t hold off waiting for the exchange rate to improve unless you are smarter than Elon Musk. Many have played that game and lost out, and you can avoid the messy reporting issues if you transfer everything over here and reinvest in US assets.
Note: if you are already a USC and have any kind of pooled investments you have a situation to sort out already. Also, hopefully you are aware that as a USC you have been subject to all of the above issues even while living in the UK. You should have been completing IRS tax returns every year. If you have not done so, you likely need some professional tax help ASAP .
All foreign accounts are subject to FBAR (aggregate total above $10K) and FATCA (aggregate total above $75K/$150K, single/married) reporting no matter the investment vehicle. That includes pensions, normal bank accounts, life insurance, etc. Basically anything with a value held In a foreign currency. PFIC reporting is additional and applies to the pooled type of investments identified above and is in addition to the FBAR and FATCA requirements. Those forms are not too bad once ‘you get used to them, PFIC forms are extremely onerous and time consuming and usually need professional help.
Children's savings need to be reported to the IRS and will be subject to appropriate taxes.
All foreign accounts are subject to tax on interest, dividends, capital gains, etc. That includes any kind of ISA, you can keep it but the IRS won’t recognize it’s tax free status, so the wrapper is useless in the USA although you can keep it and hedge your bets in case you return. You cannot hold premium bonds in the USA, sell them.
No tax to pay when simply moving cash from one country to another, including when you exchange it. Don’t hold off waiting for the exchange rate to improve unless you are smarter than Elon Musk. Many have played that game and lost out, and you can avoid the messy reporting issues if you transfer everything over here and reinvest in US assets.
Note: if you are already a USC and have any kind of pooled investments you have a situation to sort out already. Also, hopefully you are aware that as a USC you have been subject to all of the above issues even while living in the UK. You should have been completing IRS tax returns every year. If you have not done so, you likely need some professional tax help ASAP .
Last edited by Glasgow Girl; May 18th 2023 at 4:05 pm.
May 18th 2023, 8:49 pm
#5
Just Joined
Thread Starter
Joined: Mar 2012
Posts: 8
Re: Most tax efficient way to move lump sum £s from UK to US.
Anything you leave in the UK will create a tax minefield. There are good reasons to keep a current account in the UK for future contingencies, but holding a significant balance on deposit is a poor investment choice, and investing it is going to create reporting and tax burdens for little or no benefit.
I recommend that, except for a current account, you liquidate everything, including the child's accounts, and transfer the proceeds to the US. ... And any suggestion of holding off the transfer waiting for a better GBP/USD exchange rate is a mug's game, as, as nearly happened in 2022, GBP is only one political crisis away from parity with USD, so take the money and run!
You should look into making voluntary NI contributions (apply for Class 2, currently about £265/yr), as in your 40's, assuming you have already worked for over 20 years in the UK (and likely have 2-3 deemed years of contributions from being in school 16-18), you should only be a few years from qualifying for a full UK pension. .... If you don't have any private pensions it sounds like you weren't "contracted out", so that simplifies things. Check out the Voluntary NI contributions thread (start near the end as it is a very long thread, and only dig further back if you need to) for more information.
I recommend that, except for a current account, you liquidate everything, including the child's accounts, and transfer the proceeds to the US. ... And any suggestion of holding off the transfer waiting for a better GBP/USD exchange rate is a mug's game, as, as nearly happened in 2022, GBP is only one political crisis away from parity with USD, so take the money and run!
You should look into making voluntary NI contributions (apply for Class 2, currently about £265/yr), as in your 40's, assuming you have already worked for over 20 years in the UK (and likely have 2-3 deemed years of contributions from being in school 16-18), you should only be a few years from qualifying for a full UK pension. .... If you don't have any private pensions it sounds like you weren't "contracted out", so that simplifies things. Check out the Voluntary NI contributions thread (start near the end as it is a very long thread, and only dig further back if you need to) for more information.
May 26th 2023, 2:37 pm
#6
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 52,448
