mrmacfixit

I have been living in the US for some years and draw US SS, UK OAP and a UK military pension.
HMRC started to take a huge chunk from my military pension a while ago, ostensibly to cover back taxes, and said some of the owed tax was due to the lack of a "form" which prevented my having a Personal Allowance.
Now, armed with the correct form, I am told by HMRC that there is no such thing as a Personal Allowance as it is not included in the Tax Treaty with the US.
As OAP and Military pensions are only taxable by the UK, unless one is an American citizen, does this mean that I will be paying 20% tax on everything that I receive in the UK and not be able to claim it back at the end of the tax year?

I realize that this subject has probably been done to death, but all the information I am finding on these type forums contains old information.

Thanks

Peter

lansbury

My wife who is dual US (by birth) UK (by naturalization) has never bothered to fill the forms out. She doesn't pay tax on her UK state or private pension because combined they do not exceed her personal allowance.

Fill the forms out to get yourself exempted from UK tax.

The IRS form https://www.irs.gov/individuals/inte...ation-requests

HMRC info which says you get the personal allowance https://www.gov.uk/tax-uk-income-live-abroad/overview

mrmacfixit

Thanks for the quick reply:
Then there is this, which indicates that Personal Allowance does not exist for UK citizens in the US.
https://www.gov.uk/government/upload...n_Treaties.pdf
Check Page 40 under Personal Allowances.
Below is a quote from a letter I received from HMRC in April 2016.
Quote
UK Personal Allowance is given to ex-Pats living abroad, where there is a Double taxation Agreement (DTA) with the country in which they are resident. In the case of the United States of America there is no DTA in force, and therefore the UK Personal Allowance is not due.
Unquote.

You can see why this is confusing.

lansbury

Here is the UK form you need to fill out. Send it with the IRS form and fee to the IRS and they will certify your US tax status and forward the form to HMRC.

https://www.gov.uk/government/public...ndividual-2002

Your military pension is a government service pension and if you only hold UK citizenship can only be taxed in the UK. You would need to claim that as a deduction against your US tax when you file your tax return with the IRS. One reason I took US citizenship was to get my police pension exempted from UK tax and only taxable in the US. Made doing tax returns much easier.

mrmacfixit

Seems a moderator is holding up my replies, at least that's what it said when I hit the Post button

Jerseygirl

New member posts that include a link are automatically delayed for moderator approval. This is to prevent spammers from posting.

mrmacfixit

https://www.gov.uk/government/upload...n_Treaties.pdf
Page 40 seems to indicate that Personal Allowances are not included in the treaty and that, along with a letter from HMRC stating that UK Personal Allowance is given where there is a Doubt Taxation Agreement (DTA) with the country in which you are resident. In the case of the USA there is no DTA in force, and therefore the UK Personal Allowance is not due.

Confusing.

P

mrmacfixit

OK, that makes sense.
How long does that usually take as it seems another one, sans links, bit the dust just now

Peter

lansbury

But there is a Double Taxation Agreement with the US. It is part of the tax treaty. My wife has got her personal allowance every year since 2006/7 UK tax year. Here is the treaty https://www.treasury.gov/resource-ce...s/uktreaty.pdf

mrmacfixit

I too received my personal allowance for many years until I didn't!
Right now I cannot post a link to the actual treaty but there are a couple of posts waiting Moderator approval that contain the link which would indicate no Personal Allowance is included in the treaty.
I do know that the Exchequer was looking at ways to remove the PA from Ex-Pats but had not yet implemented it.

Looking at that letter again, I wonder if the meaning is supposed to indicate that I, personally, have not implemented participation in the DTA and not that there is not a DTA in force with the USA.

Peter

Speaking with HMRC is not altogether helpful but I will try again tomorrow morning.

lansbury

The link to the treaty is in my post above. The first paragraph on page 1 has the words "avoidance of double taxation".

If a personal allowance is given where there is a double taxation agreement then there is such an agreement with the US. Unless the 2001 agreement has been superseded but it is the latest one I can find online on the IRS web site.

nun

If you are a US resident the UK OAP is only taxable in the US....no UK tax, and obviously the US SS is not UK taxable.
File a US-Individual-2002 form to claim the treaty exemption, although HMRC will not withhold any tax form your UK OAP.

The military pension will be UK taxable and US taxable, but you can claim a FTC in the US for the UK tax you pay. You should file a UK self assessment and to get the UK personal allowance file an R43.

https://www.gov.uk/government/public...-in-the-uk-r43

Aoi

Page 4 of the Digest of Double Taxation Treaties explains UK Personal Allowances for non-residents: