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I am a US citizen resident in the UK. I read in IRS pub 915

Resolved Question:

I am a US citizen resident in the UK. I read in IRS pub 915 that the Social Security pension income I receive is exempt from US taxes due to a US/UK tax treaty. I also receive retirement income from the US Civil service and the US military. Are they also exempt from US and or UK taxes based on a tax treaty?
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi
Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.
I am afraid in the UK - all of these incomes (if remitted to the UK) are considered for UK taxes - the tax treaty is in place to make sure you are not charged tax twice on the same income - but does not maintain the exemption awarded from the payment county in the country of residence.
The only consideration you may have, is as follows -
If you are able to not bring or spend the Social Security pension in the UK, then if you have lived in the UK for less than 7 out of the last 9 years, you can ask to be taxed on the remittance basis
Although this will see you having a loss of UK personal allowances (which a;lows the first £10,600 of income tax free)its will see this particular income tax free -
Whether this is worth the hassle - as it may be you need this income to manage your financial position in the UK or for other personal reasons but it would not be worth it if the UK exchange rate made this Social Sec pension less than £10,600
Or if you have lived in the UK for MORE than 7 out of the last 9 years then when asking for the remittance basis of taxation you then incur an annual remittance charge - which is currently £30,000 and for those that have lived in the UK for more than 12 of the last 14 years the annual charge is £50,000
(this is in addition to the loss of personal tax allowances - first £1,600 tax free)
So you do need to consider this carefully.
Of course if you bring or spend all the pensions into the UK then the first £10,600 is tax free and the remaining amount (from all pensions) is liable to UK tax.
The double taxation treaty then looks at what USA tax may have been suffered against the taxable USA pensions, which you claim as a credit against the UK tax position.
Let me know if you wish me to advise further
Thanks
Sam
Sam, Accountant
Category: Tax
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