This note (briefly) covers the tax situation of a UK resident who receives US pension income. This deals with non-US taxpayers and therefore, if you are a US citizen or resident, this is not for you.
US pensions would include payments from 401K plans, IRAs, Roth IRAs, SEP IRAs, KEOGH plans as well as US social security pensions.
This can be a complex subject and you should always seek advice for your particular circumstances.
US pensions generally allow flexible drawdown, although this does not apply to social security pensions. Whether the pension is taken as a lump sum or as a more regular payment, can affect the UK taxation of the distribution.
The US taxation of US pensions (paid to non-US taxpayers residing in the UK) is relatively straightforward. There is no US taxation if the pension is subject and liable to UK tax. If US tax is withheld you should seek a refund of this tax (file a form 1040NR), HMRC will not give you a credit for this tax against any UK tax charged on this income. If the pension is not subject to UK tax (perhaps you are claiming the remittance basis and it is not remitted into the UK) it will be subject and liable to US taxation.
If you do not claim the remittance basis of taxation in the UK (you are UK domiciled or deemed domiciled) these US pensions will be subject to UK taxation. However, the following points should be considered when calculating or considering your UK tax liability in respect of these pensions.
- If any part of the pension would not be liable to US tax if you were a US resident, the UK will not tax the pension. Thus, pensions from Roth IRAs or pensions that include tax basis (“after tax” contributions) will not be liable to UK tax.
- In some circumstances, lump sums from non-UK pension schemes are free of UK tax.
US Social Security pensions are subject to UK tax. You will qualify for this pension if you meet both of these conditions.
- You paid US Social Security contributions for a period of at least 18 months, and
- The period of US and UK social security contributions is for a period of 10 years or more.
This pension has to be claimed from the US Social Security Administration. Their website ( The United States Social Security Administration (ssa.gov) ) provides a great deal of useful information including retirement benefit forecasts and online applications for benefits.
Please let us know if you have any questions or require assistance with these matters.