UK Tax implications

[bcking 3,157]

As we get closer and closer to my wife moving we are looking towards long term questions. Anyone have a good source for these sorts of things?

 

1. UK taxes - What is her responsibility? I know if I were to move abroad i would have to pay some US taxes wherever I go.

2. NI/Pension contributions - Does she continue to pay them? I know Social Security and UK pension cross-react, what happens during periods where she isn't working but is in the US? She states that if you don't continue to pay into your contributions you don't qualify for your pension.

 

 

[Dave H 12]

Hi bcking.

I moved here in 2011 from England, all I did was inform the tax office in person that I was moving to America and gave them my new address. I had worked in England for almost 30 years and was informed I would not get my full tax amount unless I paid the additional months to make 30 years contributions. I gave them a check to cover the remainder, just a few hundred pounds. But you don't need to pay anything if you don't want to. She must inform a pension company too if she has a company pension. I transferred mine offshore so it doesn't get taxed twice.

I am sure if your fiancée talks to them they will give her all the info but she is not obligated to pay while she lives in America. She must also tell her bank the same to because she may have to pay taxes on any money left in her account, she may have to close the bank account if the bank doesn't bank internationally but most do.

Good luck

Dave.

[bcking 3,157]

Thanks for the info,

 

She is much closer to the beginning of her working life, so I'm not sure if it would be quite as easy. She worked for 5 years and then has been out of a job since June. She hasn't been "actively looking" (since she knew she was moving here) so she has to pay the contribution gap between June and when she moves (next month). However if she gets a job in the US then what?

 

There is a decent chance we will be moving back to the UK down the line. Whether that is in a few years time to raise our children (we both prefer the environment in the UK for children) or in a few decades. If she works in the US for a US company and pays into social security, if we return does that get transferred over into a pension?

 

So in the end if she did 5 years UK --> 10 years US --> 15 years UK would she get credit for having worked 30 years? If she didn't pay her contributions for those 10 years in the US, but did pay social security, is that still okay?

 

As for my first question it sounds like you didn't have to pay any taxes in the US. Is it below a certain income that you don't? As an American if I move to the UK and I make I believe above 140,000 USD (I forget the exact number) I have to pay US taxes on it in addition to UK taxes. Does the UK not do something like that? 

[Dave H 12]

21 minutes ago, bcking said:

Thanks for the info,

 

She is much closer to the beginning of her working life, so I'm not sure if it would be quite as easy. She worked for 5 years and then has been out of a job since June. She hasn't been "actively looking" (since she knew she was moving here) so she has to pay the contribution gap between June and when she moves (next month). However if she gets a job in the US then what?

 

There is a decent chance we will be moving back to the UK down the line. Whether that is in a few years time to raise our children (we both prefer the environment in the UK for children) or in a few decades. If she works in the US for a US company and pays into social security, if we return does that get transferred over into a pension?

 

So in the end if she did 5 years UK --> 10 years US --> 15 years UK would she get credit for having worked 30 years? If she didn't pay her contributions for those 10 years in the US, but did pay social security, is that still okay?

 

As for my first question it sounds like you didn't have to pay any taxes in the US. Is it below a certain income that you don't? As an American if I move to the UK and I make I believe above 140,000 USD (I forget the exact number) I have to pay US taxes on it in addition to UK taxes. Does the UK not do something like that? 

She will only get what she pays into the UK tax I believe, anything from America won't count so I am led to believe. I have worked in American since 2011 and not paid any additional taxes to U.K. But if she pays into a 401-K in America that  maybe able to be "Cashed Out". 3 years in tax contributions is classed a s full term so if she's only paid in 5 years she will only get 5 years benefits when she retires at 66 years old or whatever the age is now.

Sorry I can't answer the question in regards to moving back to U.K. and what is needed by American in tax issues.

https://www.greenbacktaxservices.com/blog/expat-taxes-explained-filing-taxes-as-american-uk/

Edited March 26, 2017 by Dave H

[yuna628 9,541]

File a P85, to HMRC and she'll most likely receive a nice sum back into her account, if she hasn't done so already. Get rid of any kind of ISA accounts if they are held. If she has a good bit of money in savings she'll likely have to file an FBAR with the IRS - which is just to notify them how much you've got (there's plenty of threads about that nonsense). Can't answer that pension stuff per say, as he probably only contributed bare minimum into it before he left for the US, and he'll start earning his US pension in a few more months of work. There is a good expat (britishexpats) forum/wiki that could probably answer the pension/returning to the UK questions.

[Wuozopo 4,285]

2 hours ago, bcking said:

As we get closer and closer to my wife moving we are looking towards long term questions. Anyone have a good source for these sorts of things?

 

1. UK taxes - What is her responsibility? I know if I were to move abroad i would have to pay some US taxes wherever I go.

2. NI/Pension contributions - Does she continue to pay them? I know Social Security and UK pension cross-react, what happens during periods where she isn't working but is in the US? She states that if you don't continue to pay into your contributions you don't qualify for your pension.

 

 

1. File a UK form called P-85 to get taken off the tax rolls. If she has overpaid any taxes, they calculate it for her and mail a check. I have a UK bank account still so easy enough to deposit a check in pounds to it. Much easier than trying to deposit in a US bank. Up to her. I use my UK account to order things for my kids from Amazon.co.uk and such things like that. The bank does not tax your money left there. If it's over $10k, you file an FBAR online with the US Treasury each year to report a foreign bank account. No tax, just a report to tell balance.

 

1a. If you move abroad you do not continue to pay US tax. You file a return if you are earning, but there is a Foreign Earned Income Exclusion which would most likely make tax owed zero. There is a tax treaty between the US and UK. You pay to the place where you reside. You never pay tax to both on the same money. There is also a way to tax a tax credit against any US taxes for foreign taxes paid.

 

2. There is an agreement between US Social Security and UK State Pension. You can't collect the maximum from both. They will reduce your Social Security retirement amount somewhat, based on if you are collecting "social security" type payments from the UK. There are also Social Security Administration rules for getting credit in some cases for years paid in abroad. Just go to SSS.GOV and start using their search. With only five years into a UK state pension, probably no point in continuing to contribute. She will accrue much more in her Social Security account which is based on earnings. UK state pension is a fixed amount paid out with the max being 30 years paid in.  

 

2a. A UK private pension is fully collectible if living  in the US. It is taxable (by the IRS) much like  any pension money you might collect from an American corporation you retired from, however those kinds of company paid pensions are getting fewer and far between. More often now they have some kind of plan where the employee contributes and maybe they match a bit. Anyway, US and UK private pensions do not cancel each other. If you should have both, you collect both. 

 

A note on your other reply. Any "offshore" accounts (foreign accounts) must be reported to the US yearly. There are two forms:

FBAR if the aggregate of all accounts exceeds $10k.

IRS Form 8938 aka FATCA if exceeding $50k single or $100k married joint return. Pensions count as reportable on FATCA.

There are hefty penalties associated with failure to report.  No point in hiding assets, accounts, investments, pensions because the tax treaty prevents double taxation.

 

 

 

 

Edited March 26, 2017 by Wuozopo

[Dave H 12]

16 hours ago, Dave H said:

She will only get what she pays into the UK tax I believe, anything from America won't count so I am led to believe. I have worked in American since 2011 and not paid any additional taxes to U.K. But if she pays into a 401-K in America that  maybe able to be "Cashed Out". 3 years in tax contributions is classed a s full term so if she's only paid in 5 years she will only get 5 years benefits when she retires at 66 years old or whatever the age is now.

Sorry I can't answer the question in regards to moving back to U.K. and what is needed by American in tax issues.

https://www.greenbacktaxservices.com/blog/expat-taxes-explained-filing-taxes-as-american-uk/

I meant to say 30 years is classed as full term contributions, not 3 years, Sorry.

[bcking 3,157]

15 hours ago, Wuozopo said:

1. File a UK form called P-85 to get taken off the tax rolls. If she has overpaid any taxes, they calculate it for her and mail a check. I have a UK bank account still so easy enough to deposit a check in pounds to it. Much easier than trying to deposit in a US bank. Up to her. I use my UK account to order things for my kids from Amazon.co.uk and such things like that. The bank does not tax your money left there. If it's over $10k, you file an FBAR online with the US Treasury each year to report a foreign bank account. No tax, just a report to tell balance.

 

1a. If you move abroad you do not continue to pay US tax. You file a return if you are earning, but there is a Foreign Earned Income Exclusion which would most likely make tax owed zero. There is a tax treaty between the US and UK. You pay to the place where you reside. You never pay tax to both on the same money. There is also a way to tax a tax credit against any US taxes for foreign taxes paid.

 

2. There is an agreement between US Social Security and UK State Pension. You can't collect the maximum from both. They will reduce your Social Security retirement amount somewhat, based on if you are collecting "social security" type payments from the UK. There are also Social Security Administration rules for getting credit in some cases for years paid in abroad. Just go to SSS.GOV and start using their search. With only five years into a UK state pension, probably no point in continuing to contribute. She will accrue much more in her Social Security account which is based on earnings. UK state pension is a fixed amount paid out with the max being 30 years paid in.  

 

2a. A UK private pension is fully collectible if living  in the US. It is taxable (by the IRS) much like  any pension money you might collect from an American corporation you retired from, however those kinds of company paid pensions are getting fewer and far between. More often now they have some kind of plan where the employee contributes and maybe they match a bit. Anyway, US and UK private pensions do not cancel each other. If you should have both, you collect both. 

 

A note on your other reply. Any "offshore" accounts (foreign accounts) must be reported to the US yearly. There are two forms:

FBAR if the aggregate of all accounts exceeds $10k.

IRS Form 8938 aka FATCA if exceeding $50k single or $100k married joint return. Pensions count as reportable on FATCA.

There are hefty penalties associated with failure to report.  No point in hiding assets, accounts, investments, pensions because the tax treaty prevents double taxation.

 

 

 

 

Thank you for input.

 

1. She has the P-85 in hand, she had some specific issues with the form but is going to call up and ask someone (In general she is quite particular about language on forms since governmental forms always seem to be very vague)

1a. From what I've read this isn't exactly true. There is an exclusion, but it goes up to a certain amount. I looked it up for my sister (who lives in Germany). I thought the exclusion was something like 140,000 USD. I'm a physician and in 10 years time if I move to the UK I very well could make more than that, and from what I've read I do pay some taxes.

2. The bigger issue was if she has a pension started in the UK, then comes here and works for say 10 years, then goes back. At the end of the day if she has 20 years of a UK pension and 10-15 years in the US...what happens? Does she withdraw from both?

[Wuozopo 4,285]

Yes the 2016 exclusion is $101,300, so yes you would exceed the amount you can exclude. You might find the foreign tax credit Line 48  or deduction on Schedule A might be a better choice.