UK state pension and USA social security
#1666
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Re: UK state pension and USA social security
#1667
Re: UK state pension and USA social security
https://www.gov.uk/hmrc-internal-man...elief/dt19876a
Lump Sums
Under the old Agreement, a lump-sum payment from a pension scheme was taxable only in the country of residence. So if an individual moved from the US to the UK before receiving a lump sum from a US pension scheme, they would be taxable on the lump sum neither in the US (because of the treaty) nor in the UK (which does not tax lump sums anyway).
The new provision prevents this occurring by providing that a lump-sum payment derived by a resident of one State from a pension scheme established in the other State shall be taxable only in that other State.
The provision preserves the exemption from income tax of a lump sum relevant benefit where it is paid by a UK approved pension scheme to a beneficial owner who is a US resident. However, Article 1(4) will apply in respect of US citizens as the provisions of Article 17(2) are not amongst those listed at Article 1(5). So the US are able to tax lump sums received by US citizens from UK schemes.
Under the old Agreement, a lump-sum payment from a pension scheme was taxable only in the country of residence. So if an individual moved from the US to the UK before receiving a lump sum from a US pension scheme, they would be taxable on the lump sum neither in the US (because of the treaty) nor in the UK (which does not tax lump sums anyway).
The new provision prevents this occurring by providing that a lump-sum payment derived by a resident of one State from a pension scheme established in the other State shall be taxable only in that other State.
The provision preserves the exemption from income tax of a lump sum relevant benefit where it is paid by a UK approved pension scheme to a beneficial owner who is a US resident. However, Article 1(4) will apply in respect of US citizens as the provisions of Article 17(2) are not amongst those listed at Article 1(5). So the US are able to tax lump sums received by US citizens from UK schemes.
Last edited by lansbury; Nov 5th 2020 at 7:15 pm.
#1668
Just Joined
Joined: Sep 2009
Posts: 17
Re: UK state pension and USA social security
Oops you are right and I was wrong. The savings clause in the Treaty strikes again.
If you are a retired dual US/UK citizen living in the UK with no plans to return to the US think about renouncing.
If you are a retired dual US/UK citizen living in the UK with no plans to return to the US think about renouncing.
#1669
Re: UK state pension and USA social security
That is not what HMRC state. It is US citizens. Non citizens living in the US are not taxed by the US on the UK 25% lump sum. There is a link in one of my other posts to the HMRC web site page.
https://www.gov.uk/hmrc-internal-man...elief/dt19876a
https://www.gov.uk/hmrc-internal-man...elief/dt19876a
#1670
#1671
Re: UK state pension and USA social security
So, the latest info I have is that the lump sum withdrawal is taxed ( because although not a USC, OH is tax resident here) but only the interest that has been earned is taxable. Not his contributions.
#1672
Re: UK state pension and USA social security
Where did that information come from? It seems to be at odds with the HMRC Double Taxation Relief Manual which clearly says a citizen pays, a resident doesn't.
#1673
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Joined: Sep 2013
Posts: 1
Re: UK state pension and USA social security
My US retirement age was reached in May but I only had 29 years of US employment. I am going to work until the end of 2020. As I understand it, the Social Security benefits are calculated from your last Tax return - mine being in 2019.
Does that mean that, after they get my 2020 Tax return, I will no longer have a deduction for WEP due to my UK pension, or is it only calculated on years worked up until your Retirement age?
Thanks
Does that mean that, after they get my 2020 Tax return, I will no longer have a deduction for WEP due to my UK pension, or is it only calculated on years worked up until your Retirement age?
Thanks
#1674
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Joined: Jan 2006
Location: San Francisco
Posts: 12,865
Re: UK state pension and USA social security
My US retirement age was reached in May but I only had 29 years of US employment. I am going to work until the end of 2020. As I understand it, the Social Security benefits are calculated from your last Tax return - mine being in 2019.
Does that mean that, after they get my 2020 Tax return, I will no longer have a deduction for WEP due to my UK pension, or is it only calculated on years worked up until your Retirement age?
Thanks
Does that mean that, after they get my 2020 Tax return, I will no longer have a deduction for WEP due to my UK pension, or is it only calculated on years worked up until your Retirement age?
Thanks
https://www.federalretirement.net/we...WEP_Calculator
Your US full retirement age is moot in this regard because the US continues to collect SS taxes on earned income past that date. So do the calculation of how many substantial earnings years you have by looking at your earnings on your SS record. Even if it's 29 taking this year into account, your maximum WEP will be minimal given its phasing out between 20 and 30 years of contributions.
Last edited by Giantaxe; Nov 10th 2020 at 3:41 am.
#1675
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Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,131
Re: UK state pension and USA social security
"Years" in this respect are calendar years and they must be "Substantial Earnings Years". This link contains each year's substantial earnings threshold:
https://www.federalretirement.net/we...WEP_Calculator
Your US full retirement age is moot in this regard because the US continues to collect SS taxes on earned income past that date. So do the calculation of how many substantial earnings years you have by looking at your earnings on your SS record. Even if it's 29 taking this year into account, your maximum WEP will be minimal given its phasing out between 20 and 30 years of contributions.
https://www.federalretirement.net/we...WEP_Calculator
Your US full retirement age is moot in this regard because the US continues to collect SS taxes on earned income past that date. So do the calculation of how many substantial earnings years you have by looking at your earnings on your SS record. Even if it's 29 taking this year into account, your maximum WEP will be minimal given its phasing out between 20 and 30 years of contributions.
I am retired and part of my income is an unqualified pension paid by my old US company and reported via a W-2 so I am still paying into SS with FICA taxes (no Medicare just SS payments). I will have 28 years of contributions when I start collecting SS but I’m hoping that 2 years after I start collecting that the WEP will go to zero.
#1676
Re: UK state pension and USA social security
#1677
Account Closed
Joined: Mar 2004
Posts: 2
Re: UK state pension and USA social security
Even more interesting how the gain would be calculated, not something you get from your Pension Provider.
#1678
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Re: UK state pension and USA social security
Consequently I get my regular, qualified, pension paid through the pension plan and reported on a 1099R plus a much smaller unqualified pension paid through their payroll system and reported on a W2.
#1679
Re: UK state pension and USA social security
In the case of my pension the contributions I made to it were taken from my salary, before tax was deducted. The flip side being you paid tax on all the pension you received. I thought that was fairly standard for pensions in the UK.
#1680
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Joined: Mar 2004
Posts: 2
Re: UK state pension and USA social security
When it is something like this, I don't think people should post without giving the source of the information. This is an important topic and others need to be able to check and form their own opinion. I also find it hard to believe that HMRC would put out a public statement on aspects of the tax treaty, without at least consulting with the IRS. In this case from the wording of the HMRC document it would seem the intent was part of the treaty discussions.
In the case of my pension the contributions I made to it were taken from my salary, before tax was deducted. The flip side being you paid tax on all the pension you received. I thought that was fairly standard for pensions in the UK.
In the case of my pension the contributions I made to it were taken from my salary, before tax was deducted. The flip side being you paid tax on all the pension you received. I thought that was fairly standard for pensions in the UK.