nettlebed

I have a term insurance policy that is maturing soon, and the lump sum I get (assuming I survive) would not be liable for income tax in the UK.

Does the US have some sort of way of recognising this, or am I liable to US tax on the lump sum?

scrubbedexpat099

First you would need to tell them.

dunroving

From a US tax law perspective, I don't know. On principle, I'd say if you earn income in the UK from a tax-exempt vehicle such as an ISA or endowment policy, I'd interpret that as tax-exempt income, i.e., I wouldn't declare it.

Similarly, if you contribute to a Roth IRA in the US and then return to the UK, I wouldn't declare it as taxable income in the U.K.

scrubbedexpat099

For it to be non taxable it would need to be in an IRS approved vehicle.

Not the same issue as far as the Roth is concerned as UK does not tax world wide income..

Yorkieabroad

I don't know either, and I am in no way qualified to give a definitive answer, but gut feel says it may be the opposite.

The US taxes on worldwide income - would they would worry about the fact that the country in which that income arose chose not to tax it? I suspect Uncle Sam would still want his slice.....I know this is the case for say investment gains. I've been overseas long enough for sales of investment property in the UK to be exempt from UK CGT, but those sales as still liable to US CGT...I know its not directly comparable, but isn't it a similar principal. Whether the same applies to life policies, I don't know.

On the other hand....what Boiler said!

dunroving

So when I start receiving payments in the UK from my (non-Roth) US pension plan, do I not have to pay UK income tax on it?

scrubbedexpat099

I do not know, probably not, I am unlikely to have that issue so have not thought that one through. More I think of it the more I think not.

My assumption is that no UKC's tell the IRS about gains in a UK Tax shelter, but they probably should.

Thydney

My dealings with the IRS have told me everything is taxable with the exception of payments made directly from the public purse.

JAJ

The UK does tax worldwide income for those resident and domiciled in the UK.

dunroving

When I first looked into a Roth IRA in the US, I chose not to go that route for that very reason. I was afraid, after paying into a Roth with post-tax income, I'd get taxed again if I retired in the UK. Doesn't seem at all fair, and I wasn't sure if it would happen, but I didn't want to take the chance.

Plus, paying income tax at the highest end before contributing to a Roth didn't seem advatageous in comparison to not paying income tax at a lower tax bracket in retirement.

Sorry, bit OT but somewhat relevant I suppose.