redvanman

Hi Guys,

So I am UK citizen and have been living with a perm resident card in the US for around 12 years. I have an American wife with 2 children born in the US. Both children have dual citizenship. We are looking to move back to the UK next year but my daughter(19), sadly will stay in the US.

I am toying with the idea of being a US citizen before we leave so that I can see my daughter more often or stay for an extended time if needed. My reservation is TAXES. I know I would have to report everything back back to the US and I worry about an in heritance or interest or profit from bank accounts or shares would be taxed in the US. I also have enough in social security to have a pension so I also have that to consider.



Any advise would be super helpful and if anyone knows at what limits taxes would apply that would be helpful to put my mind at ease.

lansbury

You never know what the future may hold. With 3 members of your family having US citizenship, the ease for you to come and go as you wish IMHO outweighs any disadvantages. Also you do not know what new laws, or changes to current laws, will be made in the future which might be detrimental to you returning as a visitor. The UK changed their laws just after we left making it much hard to get a visa for future applicants. With immigration being a political football here who know where it will lead.

My wife a US citizen lived in the UK for several years. It took her a few hours one day a year to do her taxes. The UK/US Tax Treaty prevents you from being double taxed. She obtained UK citizenship before we moved to the US, and I got US citizenship at the first opportunity. The knowledge of knowing we can travel back and forth without restrictions is well worth any hassle dual citizenship brings. An often quoted piece of advice is, as far as possible, members of a family should have the same citizenship's,

Glasgow Girl

Good points from Lansbury.

To add to those, things to consider as a US citizen living in the UK are:

* how hard will be it be to open a bank account, brokerage account and obtain a mortgage. Some U.K. providers simply won’t deal with US citizens because of all the reporting issues placed upon them by US authorities. However there are many, many US citizens living in the UK and clearly they are able to get mortgages and open accounts so there must be a fair number of providers who will work with them. Some of the folks on this site who now live in the UK could advise better on that.

* ISA style investments will be taxed in the US, so the tax free benefit is effectively lost.

* PFIC style investments which are essentially all mutual fund type investments sold outside of the US (such as ETFs, Unit Trusts, OEICs, Investment Trusts, etc) will require complex reporting and be taxed very disadvantageously, the bottom line being that they should be avoided at all costs. However you should be able to invest in US based equivalents so should not be totally locked out of mutual fund style investments. I think some US brokers will not work with U.K. residents, but some will. If that interests you best to have a couple of accounts open before you leave.

* individual shares, bank accounts and bonds are not PFICs so no issues there, although of course IRS tax will be due on any income from such investments

* estates and inheritances are tax free in the US so long as they are under the federal limit of $13M/$26M (single/married) and are not held in a trust

* your 401K and IRA should be able to remain where they are. I think that US social security will be taxed by the UK only so that might help mitigate any difference in taxes that would otherwise apply. Your social security will be subject to WEP but that is going to happen anyway, regardless of citizenship so not a factor in the decision making.

* FBAR reporting to FInCEN, and FATCA reporting with your IRS tax return is relatively straightforward so long as you avoid PFICs and have no interest in, or ownership of a trust, or any other unusual situations.

* absent PFICs, trusts, and any unusual situations you are unlikely to have to pay significantly more tax as a US citizen, and perhaps there won’t be any additional tax due.

* you will have to keep abreast of the foreign account reporting requirements because failing to keep up to date with new regulations can be quite costly

* your wife and children will have to deal with all of the above anyway, unless they renounce citizenship (in which case if your total net worth is above $2M there will be additional taxes to pay) and if a joint account that may make opening accounts, getting a mortgage, etc problematic regardless of your citizenship.

Pulaski

With family who are US citizens, and who are living in the US, for me this would be the beginning and end of the discussion.

London1966

Check with your company to see if they allow someone with a foriegn address to keep your investments where they are.

I consolidated a number of 401k's to Northwestern Mutual and was discussing about where I might live after retirement and it came up that they would not be able to hold my investments if I didn't have a US address - PO boxes arenot allowed either.

It's amazing what you can't do with your money in retirement funds if you have a foriegn address - trying to move a pension fund in the UK to a new provider to allow me to do drawdown instead of lump sum and anuetity.

Brendan

durham_lad

Under the circumstances I would definitely apply for US citizenship.

As mentioned above take time to prepare your finances before moving back. We rolled our 401ks into IRAs with a brokerage that has good support for overseas customers. Similarly with a US bank, the one we had did not support overseas customers so we switched banks before we left.

In my case I have US pensions so would have to file US tax returns anyway so the extra burden of being a USC abroad is less of an issue.

PetrifiedExPat

Precisely this. I love Mrs PEP, but, I absolutely want the same citizenship as my daughter. You never know what $hit show is down the line.

bay_area_miata

Can I ask which brokerage and bank you used that were more friendly to overseas customers? Planning for this now.

durham_lad

Back in 2015 we opened an HSBC US account which supports UK addresses and phones and does not use a phone number for security verification codes. Since then they have closed that option except for high value “Premier” customers, which we maintain because we maintain a high balance in a HSBC UK fixed term bond savings account. Our daughter moved back in 2022 and she kept her US Chase account, which supports overseas accounts and as soon as she arrived back in England opened a Chase UK account and both those accounts work well for her. She also opened a Wise account with both USD and GBP account numbers and that works great for her as well.

We use Vanguard for our brokerage accounts and they support our UK address and UK phone numbers. We also created Wise USD accounts and linked them to our Vanguard accounts and they work really well. Just last week I made a transfer from a Vanguard account into the Wise USD account and as soon I was notified the money was there I used my Wise app to transfer the money to our UK HSBC bank account and it was there in seconds.

S Folinsky

I collect on Social Security and I get a 1099 every year and am definitely taxed on that income. I voluntarily have withholding on those payments (thereby reducing the quarterly estimated payments). My spouse has both a government pension and SS. The SS is subject to WEP. The retirement benefits administrators sometimes note that WEP is occasionally on the legislative chopping block inasmuch as former public school teachers are biggest victims of WEP. (They still curse Ronald Reagan over that one, but I digress).

PetrifiedExPat

For me, my daughter was born in the US. End of thought process, I became a dual citizen.