vulcan

I have questions. Why would there be no UK tax at all. The UK tax officer said tax after the 25% allowance would be 40 to 45% depending on the the fund total. Why no tax.

The UK tax officer said only 25% of the original fund would be tax free. Taking it in parcels of £20k per year from a £100k fund would not alter the original tax free amount of £25k. In the 2nd year you would have only £5k tax free allowance remaining. The remaining years no tax free allowance.

Why would only 75% of the fund be subject to US tax? Why not 100%.

In individual cases it could be advantageous to spread the withdrawals over a number of years for US tax purposes. Submitting a R43 may reduce UK tax liabilities through allowances.

mrken30

If you give up your green card you will be exempt from US taxes. You can always visit the US on a visa waiver program, but you will lose permanent resident status. It's completely different if you have taken US citizenship, then you need to rescind your citizenship.

Samxboy

Interesting....so lets consider this....my 25% tax free allowance is 170,000 GBP or roughly $250,000.
You're saying I could take for example 3 annual payments of 50,000 gbp and a final 20,000 gbp without UK tax applying. I calculate the federal tax on that annual amount to be about $10,000. Whilst that is not a small amount it's about half what I would pay if I took the whole amount in year 1.
Of course that's assuming I get taxed as opposed to the alternate viewpoint that taking incrementally avoids the lump sum 'scenario' and hence avoids US tax.
Not sure if I want to be the first to try this but it's an interesting proposal.

nun

Giving up a green card should not affect your eligibility for US visas. Of course the US expatriation process for long term residents can be quite complicated and you should look at forms I-407 and 8854.

nun

Giving up your green card does not exempt you from US taxes if you have US income.

mrken30

or capital gains or inheritance tax. I still have to pay tax on my UK income even though I am entitled to very little being a non resident. They even take my voting rights away after 15 years.

nun

The UK tax officer is applying the UK law without reference to the treaty. If you are a US tax resident and taking income from a UK pension then there is no UK tax due....you'd file form "Individual 2002" to exempt all income from UK tax. If you are taking a lump sum the article 17.2 applies and HMRC will tax 75% of the lump sum and if you are a US tax resident the IRS will tax 100% of it.

Google "Uncrystallised Funds Pension Lump Sum". 25% of each withdrawal will be UK tax free.

If you can convince the IRS that your UK pension payments are periodic then Article 17.1 applies and any UK tax free amounts are also tax free in the US, hence only 75% of the UK pension would be US taxable.

vulcan

As I've mentioned before you can book a telephone consultation with a UK tax officer and put any questions you have to them re your UK pensions and tax.

The direction of the stock markets has me in wait and see mode.

However my personal circumstance would make it US tax efficient to take my fund over a period of 5 to 10 years in equal amounts. In my position the only way to reduce any UK tax is by trying to claw back after the fact with the R43.

You have a substantial pot if you actual 25% is $250k. Before making any decision if I were in your shoes I would spend some money on professional advice. For you it has far reaching consequences that will dictate your future.

lansbury

I think I understand what your point is. If you take periodic payments of £4k, you pay tax on £3k and £1k is tax free in the UK. If nuns idea holds water I don't see why it wouldn't apply to the £1k tax free part of the periodic payments, but the downside is in order to get the whole amount of the original tax free sum free of tax in the US you would have to take your whole pension in periodic payments, and no regular income. That might work for some but I doubt for the majority.

Hopefully I have understood correctly but I wouldn't be surprised if I'm way off.

lansbury

If you are a LPR or US citizen living in the US why are you paying UK income tax? I have substantial pension earnings from the UK, both State, occupational and private, on which HMRC has exempted me from UK tax on the full amount.

mrken30

i get rental income which is taxable in both the UK and US. I can deduct my UK taxes from my federal but unfortunately not against my state taxes. I have not got to my pension days yet. it would be interesting to know if I am taxed on a pension that I take when I'm 55.

lansbury

I know rental income is taxable but we are discussing pensions.

To quote nun from a post above. If you are a US tax resident and taking income from a UK pension then there is no UK tax due....you'd file form "Individual 2002" to exempt all income from UK tax.

vulcan

I don't have any UK income but soon to receive State pension which I understand to be tax free at source however subject to US tax.

In talking to the UK tax officer I said I am a US tax payer for global income. I asked if there was any way I could stop my private pension company deducting UK tax from a lump sum payment by means of some sort of certificate. He said the only solution was to recover it though a R43. I've spoken to my pension company who have said there are no exceptions that allow tax free payments. Perhaps this just applies to lump sums?

lansbury

Someone gave you wrong information on the face of it. I have a UK State pension, and occupational pension administered by Equiniti, and an annuity which I used a pension fund to purchase from Prudential. On all three I pay no UK income tax. The last two I needed to claim exemption from UK tax, as you say State pension is tax free if you live overseas.

You need to file form "Individual 2002" to exempt all income from UK tax. See here https://www.gov.uk/government/public...ndividual-2002. You will need when the time comes to submit that form via the IRS with IRS form 8802 and whatever the IRS fee is at the time.

MMcD

Thanks Lansbury....gonna let this sleeping dog lie because for 16 seconds, after reading nun's last reply to me, I'd decided he and I were actually in complete agreement all along (well...less or more or less ).

Then more posts popped up here, with new scenarios - and now I don't think even * I * understand my point (well....I do...but, never mind)....

Bottom line....thanks
And just a side note...because it's not something you'd be aware of...my first BE post was a question about this very issue - IRS taxability of lump-sums.
And YOU were the 2nd person to reply (the 1st being irrelevant to my concern).
So - hey - a belated thanks for the good advice but bad news you gave me back then