US Tax on SIPP / JISA / UK Limited Company
#16
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Re: US Tax on SIPP / JISA / UK Limited Company
#18
Re: US Tax on SIPP / JISA / UK Limited Company
@nun: agree re ISA; re SIPP: I see your point re FBAR reporting; is my understanding correct that FBAR is about disclosure, not taxation, and that instead form 8938 is used for taxation? If so, is there a way of indicating on the form that the SIPP is a qualified pension according to the treaty?
@nun:exactly, but how do I "use the treaty to defer tax on gains"? Something that I do on my 8938?
Bottomline is that if you use the treaty you won't include the contributions or the gains in the pension funds on your 1040......just leave them off when calculating your taxable income.
#19
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Re: US Tax on SIPP / JISA / UK Limited Company
I have a few associated questions - if, as a US resident and UK citizen, I take a capital distribution from a personal UK Pension Plan
i) is the first 25% taxable in the UK,
ii) is anything above the first 25% taxable in the UK as income, and
iii) does the US tax the total amount withdrawn as income and handle it under the Double Taxation treaty ?
Thanks
i) is the first 25% taxable in the UK,
ii) is anything above the first 25% taxable in the UK as income, and
iii) does the US tax the total amount withdrawn as income and handle it under the Double Taxation treaty ?
Thanks
#20
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Re: US Tax on SIPP / JISA / UK Limited Company
I have a few associated questions - if, as a US resident and UK citizen, I take a capital distribution from a personal UK Pension Plan
i) is the first 25% taxable in the UK,
ii) is anything above the first 25% taxable in the UK as income, and
iii) does the US tax the total amount withdrawn as income and handle it under the Double Taxation treaty ?
Thanks
i) is the first 25% taxable in the UK,
ii) is anything above the first 25% taxable in the UK as income, and
iii) does the US tax the total amount withdrawn as income and handle it under the Double Taxation treaty ?
Thanks
#21
Re: US Tax on SIPP / JISA / UK Limited Company
I have a few associated questions - if, as a US resident and UK citizen, I take a capital distribution from a personal UK Pension Plan
i) is the first 25% taxable in the UK,
ii) is anything above the first 25% taxable in the UK as income, and
iii) does the US tax the total amount withdrawn as income and handle it under the Double Taxation treaty ?
Thanks
i) is the first 25% taxable in the UK,
ii) is anything above the first 25% taxable in the UK as income, and
iii) does the US tax the total amount withdrawn as income and handle it under the Double Taxation treaty ?
Thanks
If you are a US tax resident then the UK pension income is not taxable in the UK so the answers to your questions are.
i) No
ii) No
iii) Yes the US will tax the income, but as long as it is treated as a periodic income payments it will be tax free to the extent that it would have been tax free in the UK.
#22
Re: US Tax on SIPP / JISA / UK Limited Company
So do the IRS treat the 25% as a roth 401k and the other 75% as a traditional 401k?
#23
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Re: US Tax on SIPP / JISA / UK Limited Company
Thanks for the quick response Cook County and Nun,
I should have clarified that I am think of either taking 25% now as a lump sum and leaving the rest in a UK investment vehicle, or taking a 100% withdrawal now and investing it here in the US.
I believe that this is described as an uncrystallised funds pension lump sum and from Nun's comment I take that I would be liable for US tax although the comment ""it will be tax free to the extent that it would have been tax free in the UK." isnt clear...does that mean that the initial 25% lump sum is tax free in the US, and any subsequent payment would be tax free up to my UK personal tax allowance ( 11,00 pounds at present) ?
I should have clarified that I am think of either taking 25% now as a lump sum and leaving the rest in a UK investment vehicle, or taking a 100% withdrawal now and investing it here in the US.
I believe that this is described as an uncrystallised funds pension lump sum and from Nun's comment I take that I would be liable for US tax although the comment ""it will be tax free to the extent that it would have been tax free in the UK." isnt clear...does that mean that the initial 25% lump sum is tax free in the US, and any subsequent payment would be tax free up to my UK personal tax allowance ( 11,00 pounds at present) ?
Last edited by reltub; Aug 30th 2016 at 7:43 pm.
#24
Re: US Tax on SIPP / JISA / UK Limited Company
Thanks for the quick response Cook County and Nun,
I should have clarified that I am think of either taking 25% now as a lump sum and leaving the rest in a UK investment vehicle, or taking a 100% withdrawal now and investing it here in the US.
I believe that this is described as an uncrystallised funds pension lump sum and from Nun's comment I take that I would be liable for US tax although the comment ""it will be tax free to the extent that it would have been tax free in the UK." isnt clear...does that mean that the initial 25% lump sum is tax free in the US, and any subsequent payment would be tax free up to my UK personal tax allowance ( 11,00 pounds at present) ?
I should have clarified that I am think of either taking 25% now as a lump sum and leaving the rest in a UK investment vehicle, or taking a 100% withdrawal now and investing it here in the US.
I believe that this is described as an uncrystallised funds pension lump sum and from Nun's comment I take that I would be liable for US tax although the comment ""it will be tax free to the extent that it would have been tax free in the UK." isnt clear...does that mean that the initial 25% lump sum is tax free in the US, and any subsequent payment would be tax free up to my UK personal tax allowance ( 11,00 pounds at present) ?
#25
Re: US Tax on SIPP / JISA / UK Limited Company
Any UK pension distribution is treated as foreign pension income and taxed according to IRS regulations that might be modified by the treaty. Article 17.1b is one of the few articles that actually modifies IRS rules.
#26
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Re: US Tax on SIPP / JISA / UK Limited Company
To do this you can file 8833 forms and claim tax deferral on yours and your employers contributions and on any gains by using Article 18. However, claiming a treaty exemption on income from a pension does not need to be claimed on 8866 so interpret that as you will.
Bottomline is that if you use the treaty you won't include the contributions or the gains in the pension funds on your 1040......just leave them off when calculating your taxable income.
Bottomline is that if you use the treaty you won't include the contributions or the gains in the pension funds on your 1040......just leave them off when calculating your taxable income.
#27
Re: US Tax on SIPP / JISA / UK Limited Company
This has cleared up some of my questions regarding HMRC. Not sure how up to date it is.
https://www.oldmutualwealth.co.uk/gl...ithdrawals.pdf
https://www.oldmutualwealth.co.uk/gl...ithdrawals.pdf
#28
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Re: US Tax on SIPP / JISA / UK Limited Company
Nun - is there a minimum number of years that the payments need to be distributed over in order to maintain the 25% tax free element in the eyes of the IRS ?
#29
Re: US Tax on SIPP / JISA / UK Limited Company
"Generally, periodic payments are pension or annuity payments made for more than 1 year that are not eligible rollover distributions."
#30
Re: US Tax on SIPP / JISA / UK Limited Company
Does that just mean crossing over 2 tax years, I wonder? Could you get payments in December and January?