jhonscotland

HI All

I am new to this forum and I apologize if this has been asked many times before. I have tried to find a suitable thread, but to no avail.

I am 47 and have lived in the USA for 5 years. I receive a UK Forces pension in to my UK bank account, and pay UK tax on it. I am fully employed in the USA and disclose my UK pension on my USA tax return.

I am thinking of becoming a US Citizen. Does anyone know if this will affect tax contributions on my UK Forces pension?

Thanks in advance.

nun

See Article 19.2(b) of the US UK Tax Treaty

http://www.treasury.gov/resource-cen...s/uktreaty.pdf

Once you become a US citizen your UK Forces pension becomes only taxable in the US. To exclude the pension from UK tax you can file a USIndividual-2002

http://www.hmrc.gov.uk/cnr/us_individual_2002.pdf

The notes on part C2 specifically address the situation of a US citizen resident in the US and receiving a UK Government pension.

Government service
If you receive a pension paid by the UK for service to the UK Government or a local authority, there are special provisions in the UK/USA Double Taxation Convention. Your pension from that employment will be exempt from UK tax only if you are a United States national as well as being resident there.

jhonscotland

Great info.

This is the dilema I am in because of the UK/USA treaty agreement, I inform the USA about my UK pension and how much I get, but do not pay tax on it. I pay UK tax, but only a small amount because of the personal tax allowance being 9,440 pounds.

Am I right in saying that because I have a good income in the USA, if I became a US Citizen, then I would not pay UK tax, but pay more tax on my UK Forces pension? If this is the case, it doesnt seem worth becoming a citizen/.

nun

Yes that nicely sums up the situation. You'd enter your UK Forces pension on line 16 of the 1040 and be taxed on it at your marginal tax rate. No more UK personal allowance unless you have other UK source income.

Taxation isn't usually a good reason to decide upon taking US citizenship. I'd put family, employment, voting and ease of movement above tax......as long as you understand the tax and financial implication of taking US citizenship.....and it appears that you do.

jhonscotland

Great point, just struggling with the decision after serving for 25 years.

Thanks for your help.

lansbury

I was in a similar position. Had to decide if the advantages of US citizenship to me outweighed have to pay tax on effectively on an extra £9440 as the allowance is now.

To balance that the portion I paid tax on in the UK, I pay a lower percentage of tax in the US. You need to do the maths and see how it all works out.

nun

What would US citizenship gain you? apart from a vote. Why are you thinking about US citizenship now? has anything changed? If you have US citizens in your family it would be good to have if you ever decided to move back to the UK. It would also be helpful in getting a US security clearance.

paul32x

That's useful info, thanks, as I became a US Citizen last year and get an RAF Pension. Can you get that pension paid over here in the US as well?

nun

You can get UK SS paid into a US account so I maybe the same is true for an RAF pension......actually a quick google pulled up this MOD webpage with documents to direct payment of pensions to various countries


https://www.gov.uk/government/public...yment-mandates

paul32x

Thanks very much.