Question, having recently returned to the UK from the States, I still have a bank account there with a nice amount in it. I look at the pound against the dollar ratio, do the sums & I’m wondering if I should transfer a certain amount from the US to the UK before the pound rises again (not that I think it will go up anytime soon).

We have because we are moving back to the UK in 18 months or less. Kind of depressing to see how things are going in the UK at the moment but we still think it's better than staying in Texas! Hopefully, by 2024, things will be looking up but no doubt the Tories will still be in power as Labour seems stuck in some sort of rut. As we are moving back to Scotland, we will have the joy of the SNP and Nicola Sturgeon. Like the Tories, despite all the scandals the press has reported, they seem to be unbeatable!

If you have money in a bank account it is bleeding value daily because of inflation, so you need to do something with it.

Currently the pound sterling has been squeezed by two significant factors that could easily be reversed, but might not be any time soon.

Specifically, during times of war and major uncertainty, in this case the war in Ukraine, money flows into the US and pushes up the value of the dollar, and the UK, and the value of sterling have also suffered because of the political uncertainty caused by the Boris Johnson fiasco. Obviously the war in Ukraine isn't going to end quickly, but ending the uncertainty of the leadership of the British government, by the appointment of a new PM, may be enough to stop the slide in the value of sterling.

Can I ask - how does that work? I thought the IRS had an exchange rate that accountants/CPAs use, and that value then becomes your income in USD.

I'm in the same boat as many people here. I only got one year in the US with a good exchange rate, then you-know-what happened and the value started to slide. Truly depressing. I can only remind myself that money isn't everything.

The IRS website says to use an exchange rate from a reputable source such as XE.com for ad-hoc transfers but for periodic transfers such as monthly pay or pension payments then by end of January they publish an annual average exchange rate that you can use. Since I live in England I use the HMRC monthly published rate. Just Google IRS exchange rate to find the average rate for each year.

I think all he's saying is that, although he is getting a lot less in USD due to the poor exchange rate, he's also paying less tax, because his USD income is lower.

A possibility is that (like me) he has his pension (if that is what he is referring to) sent directly to his US account, where it arrives in dollars, no exchange rate calculation necessary.

Now back in the US again, yesterday was interesting breakfast in London and dinner at home in Oregon with the Mrs L.

Spot on mate that is exactly what I meant.

Well now it’s as high as I can ever remember it ($ to £)

if we do transfer $ to UK, I presume a gain is calculated for tax when we do our next IRS Return?

if you have a UK rental property with a buy to let interest only mortgage coming up for paying-off the balance in the next 12-18 months, it’s not a bad time to be moving money is it…?

I believe you will only be subject to taxes on transfers if you engage in buying and selling currency with the aim of making a profit by timing the currency market. Where did this money come from that you would be sending to the UK?

If you make a one-way exchange there's no "base cost" to calculate a gain against. You had USD110,000, now you have GBP100,000 ... where's the gain? There isn't one. Now, if the pound were to recover, and you were to convert GBP100,000 back into USD130,000, then you would have a USD 20,000 taxable gain.

Hypothetically, if you had previously transferred GBP78,500 to the US and received USD110,000 (@ USD/GBP 1.400), then you might have a USD23,650 gain (GBP21,500 @ USD/GBP 1.100). I am not sure how long a gap the IRS would need for the two transactions to be seen as independent. If the money sat in an account between the USD being credited and then transferred out and used to buy GBP then you might find it difficult to argue that the transactions aren't linked and the gain taxable, but if the USD arrived and was used to buy a house, or a car, then other money waws accumulated from income/ earnings, or the sale of an unrelated asset, then so long as there was a fair gap, I would say that the IRS won't be able to make a link and tax the difference. I don't know for sure, but I would guess that you should allow at least 24 months to avoid the IRS trying to link the two transfers.

Yep, that makes a lot of sense. It’s earned income (so will be reported as such and taxes paid)

In essence, it’s not GBP moved to USD then back. Also certainly much more than 2 years elapsed since any transfers.

I know you are not a tax advisor not lawyer, but as always I appreciate your input Pulaski (and others here)

In fact, I think it was Pulaski who once made me think twice about paying off the balance on a UK interest only mortgage early. Good advice.

Well, this is truly depressing. Looks like I need to keep the GBP in the UK for the forseeable future.

Are there any financial experts anyone uses who are aware of the specific requirements of UK expats living in the US? I know that having a large amount of cash in a foreign currency is another layer of complexity.

Although I’ve recently returned to the UK I still have a US bank account with a nice amount in it & looking at the falling pound against the dollar I’m looking into transferring the US funds to the UK before Sterling goes back up, will I be taxed on the transfer in the future, also will I set off alarm bells with the IRS for transferring a substantial amount. I have transferred money before from the US to the UK without any repercussions.

There is very little extra complexity in holding large amounts of foreign currency. It needs reporting with an FBAR filing and if the amounts are large enough also reported on your IRS return but no extra taxes