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UK Taxes on US SS and North Carolina state pension

UK Taxes on US SS and North Carolina state pension

Old Apr 4th 2012, 2:14 pm
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Default UK Taxes on US SS and North Carolina state pension

Wish us luck! We've decided to take the plunge and move back/retire to the UK next year. I'm a UK citizen who has lived in the US since 1978 (I have US citizenship). My wife is American. Our income will consist mostly of my U.S. Social Security payments and a North Carolina state pension (also 401-k and TIAA-CREF withdrawals but I'll ask about that in a separate thread).

It is my understanding under the tax treaty that under current law the UK will tax my US Social Security and North Carolina pension as foreign pensions, which means that 90% of this income will be taxed at the standard UK tax rates for my age (I'll be 60 when we move). Is that correct or are there any other special considerations for social security under the tax treaty? And am I correct that the UK will treat both US Social Security AND North Carolina state pension as foreign pensions?

A related question is just whether anyone has any experience/advice related to the most cost-effective way to transfer continuing funds such as pension and social security payments between US and UK accounts.
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Old Apr 4th 2012, 3:17 pm
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Default Re: UK Taxes on US SS and North Carolina state pension

Originally Posted by mickok View Post
It is my understanding under the tax treaty that under current law the UK will tax my US Social Security and North Carolina pension as foreign pensions, which means that 90% of this income will be taxed at the standard UK tax rates for my age (I'll be 60 when we move). Is that correct or are there any other special considerations for social security under the tax treaty? And am I correct that the UK will treat both US Social Security AND North Carolina state pension as foreign pensions?
AFAIK, your beliefs above are true. Your individual personal allowance (£8,105 for 2012-13) will apply before you are obliged to pay UK tax on the income. Note that UK taxpayers file individually, no option to file jointly. The UK-USA Tax Treaty allows that you pay tax on pensions only in the country of residence.


Originally Posted by mickok View Post
A related question is just whether anyone has any experience/advice related to the most cost-effective way to transfer continuing funds such as pension and social security payments between US and UK accounts.
US SS can be paid direct in £'s to a UK bank account. I was not able to determine what exchange rate will be used. We have no actual info of exchange rate because we only just signed up for US SS to commence in the new UK tax year 2012-2013

I am still tackling the past year IRS filing plus the FBAR & Form 8938 requirements to have yet put much direct thought into filing UK tax yet.
I did just find that FBAR can be e-filed.

Best wishes to you on your journey back to UK.

John
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Old Apr 4th 2012, 4:42 pm
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Default Re: UK Taxes on US SS and North Carolina state pension

Originally Posted by J.JsOH View Post
AFAIK, your beliefs above are true. Your individual personal allowance (£8,105 for 2012-13) will apply before you are obliged to pay UK tax on the income. Note that UK taxpayers file individually, no option to file jointly. The UK-USA Tax Treaty allows that you pay tax on pensions only in the country of residence.




US SS can be paid direct in £'s to a UK bank account. I was not able to determine what exchange rate will be used. We have no actual info of exchange rate because we only just signed up for US SS to commence in the new UK tax year 2012-2013

I am still tackling the past year IRS filing plus the FBAR & Form 8938 requirements to have yet put much direct thought into filing UK tax yet.
I did just find that FBAR can be e-filed.

Best wishes to you on your journey back to UK.

John
Thanks John!

It's reassuring to get some confirmation. I completed the FBAR and 8938 for the first time this year (I have an offshore account in preparation for the move) and it's seemed pretty straightforward..

I hope the move to Norfolk is working well for you after all those years in North Carolina. We're in Asheville now and while we're looking forward to the move, I know there is also much that we will miss from our time here.
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Old Apr 4th 2012, 7:00 pm
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Default Re: UK Taxes on US SS and North Carolina state pension

Originally Posted by mickok View Post
Thanks John!

It's reassuring to get some confirmation. I completed the FBAR and 8938 for the first time this year (I have an offshore account in preparation for the move) and it's seemed pretty straightforward..

I hope the move to Norfolk is working well for you after all those years in North Carolina. We're in Asheville now and while we're looking forward to the move, I know there is also much that we will miss from our time here.
Mostly we are quite happy here, although not yet convinced that Norfolk is the best place for us, although this is where we lived pre-US. The Mrs is happier than me, but then she generally is anyway, I'm a grumpy old man, more so while going through emotions of acclimating here. Life over there was fine, the Mrs wanted to come back for the healthcare aspect and because she never really settled in over there, now I seem to be the one unable to yet fully feel happy here. But things are OK here and no major problems, just learning to deal with it.

We lived near Raleigh and always enjoyed visits to Asheville and surrounds and beer / pizza in Barley's taproom. There are plenty things we miss from US but we don't dwell on them, regard our time there like we would look back on a vacation, great at the time, now new adventures beckon.

Living 'overseas' we get the automatic 2 months extension to file and I used the full 6 months extension allowed to establish the 330 days residence rule here for the year we moved over.
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Old Apr 4th 2012, 7:33 pm
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Default Re: UK Taxes on US SS and North Carolina state pension

Originally Posted by J.JsOH View Post
Mostly we are quite happy here, although not yet convinced that Norfolk is the best place for us, although this is where we lived pre-US. The Mrs is happier than me, but then she generally is anyway, I'm a grumpy old man, more so while going through emotions of acclimating here. Life over there was fine, the Mrs wanted to come back for the healthcare aspect and because she never really settled in over there, now I seem to be the one unable to yet fully feel happy here. But things are OK here and no major problems, just learning to deal with it.

We lived near Raleigh and always enjoyed visits to Asheville and surrounds and beer / pizza in Barley's taproom. There are plenty things we miss from US but we don't dwell on them, regard our time there like we would look back on a vacation, great at the time, now new adventures beckon.

Living 'overseas' we get the automatic 2 months extension to file and I used the full 6 months extension allowed to establish the 330 days residence rule here for the year we moved over.
(I lived in Raleigh for a number of years, working at NC State) Let's hear it for grumpy old men, I figure I've earned a little self-indulgence by now! I do get the feeling that I'll never feel really settled now, the price of being an expat for so long I guess. But I'm glad for the experiences living here. We're looking at the Newcastle area - I grew up in East London but I like the north and hopefully we'll find some sense of community up there.

And that's good to hear about the extensions, that will help a lot as we get adjusted and start to figure things out, thanks so much for your help!
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Old Apr 4th 2012, 8:18 pm
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Default Re: UK Taxes on US SS and North Carolina state pension

Just like to add my best wishes to both of you, mickok and J.JsOH, in your new adventures. This is of interest to me, I hope to be in a similar position soon. My wife and I have lived in the US since 1991, and are planning to retire early 2013, and hopefully retire to England soon after. We too will have US SS, my wife's NY State Pension, my TIAA-CREF and assorted 403(b) etc.

I'm amazed that you say that in the UK there is a £8,105 personal allowance per person. I think in the US it is about $11,000 for a married couple, so much less of an allowance (we have always taken the standard deduction rather than itemise.)
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Old Apr 4th 2012, 9:09 pm
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Default Re: UK Taxes on US SS and North Carolina state pension

Originally Posted by robin1234 View Post
Just like to add my best wishes to both of you, mickok and J.JsOH, in your new adventures. This is of interest to me, I hope to be in a similar position soon. My wife and I have lived in the US since 1991, and are planning to retire early 2013, and hopefully retire to England soon after. We too will have US SS, my wife's NY State Pension, my TIAA-CREF and assorted 403(b) etc.

I'm amazed that you say that in the UK there is a £8,105 personal allowance per person. I think in the US it is about $11,000 for a married couple, so much less of an allowance (we have always taken the standard deduction rather than itemise.)
Thanks Robin, and best wishes you both also!

I guess the main fear I've had about our move is that there might be some unexpected financial gotcha (tax or other) that would take us by surprise once we moved. But I'm feeling increasingly reassured that won't happen.. The UK tax rates haven't seemed that bad to me either (of course the VAT is high but we're not big on buying stuff). The biggest issue is that US Social Security and state pensions are hardly taxed in most states, but will be taxed only slightly less than other income in the UK. Then again I'm one of those people who is generally happy to pay taxes for services.

Now if someone could just reassure me that the exchange rate won't take a nose dive in the next 30 years!
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Old Apr 4th 2012, 11:35 pm
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Default Re: UK Taxes on US SS and North Carolina state pension

Originally Posted by mickok View Post

Now if someone could just reassure me that the exchange rate won't take a nose dive in the next 30 years!
Then there's always hyperinflation to worry about (just make sure you have a wheelbarrow handy, when you go down to the bakers for a loaf of bread..)
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Old Apr 5th 2012, 4:51 am
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Default Re: UK Taxes on US SS and North Carolina state pension

Originally Posted by mickok View Post

It is my understanding under the tax treaty that under current law the UK will tax my US Social Security and North Carolina pension as foreign pensions, which means that 90% of this income will be taxed at the standard UK tax rates for my age (I'll be 60 when we move). Is that correct or are there any other special considerations for social security under the tax treaty? And am I correct that the UK will treat both US Social Security AND North Carolina state pension as foreign pensions?

A related question is just whether anyone has any experience/advice related to the most cost-effective way to transfer continuing funds such as pension and social security payments between US and UK accounts.
Yes the UK will tax 90% of those pensions

See FN9 here

http://www.hmrc.gov.uk/worksheets/sa106-notes.pdf

For the US SS there is no US tax due because of the tax treaty, but you will be taxable on the NC state pension in both the US and the UK. You will have to file US 1040s as usual and also SA100 and SA106 in the UK.

You can get you SS direct deposited to a UK bank

http://www.socialsecurity.gov/pubs/10137.html#a0=8

Ask NC if they can do the same with their pension if not you can simply put it in an american bank and do a wire transfer
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Old Apr 5th 2012, 8:08 am
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Default Re: UK Taxes on US SS and North Carolina state pension

Originally Posted by mickok View Post
Thanks Robin, and best wishes you both also!

I guess the main fear I've had about our move is that there might be some unexpected financial gotcha (tax or other) that would take us by surprise once we moved. But I'm feeling increasingly reassured that won't happen.. The UK tax rates haven't seemed that bad to me either (of course the VAT is high but we're not big on buying stuff). The biggest issue is that US Social Security and state pensions are hardly taxed in most states, but will be taxed only slightly less than other income in the UK. Then again I'm one of those people who is generally happy to pay taxes for services.

Now if someone could just reassure me that the exchange rate won't take a nose dive in the next 30 years!
I too am fearful of suffering a financial gotcha. It hasn't happened drastically yet in the 20 months we been back but I still expect some something to pop up and bite me.

The latest surprise is that the higher tax relief Age Related Allowance has been removed in the latest budget meaning that when I reach 65 I will now pay £300+ per year additional tax than if the allowance stayed in place. OK, so I got to pay my share, fair do's but what made me unhappy was the Government trying to whitewash me that me I wouldn't lose out.

Problem is we have no control over what Governments might do. It makes it nigh on impossible to accurately predict our future wealth (or non-wealth) As a soon-to-be pensioner I have come to think that I will be whipped until I bleed dry.
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