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TaxRobin
TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 13339
Experience:  International tax
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We are a couple considering a move back to the UK from the

Customer Question

Hello. We are a couple considering a move back to the UK from the US. I am British and my wife is American. All of our income producing assets are in the US and we would like to keep it that way. I would like to understand what our likely tax exposure would be with the UK Inland Revenue. Is that something you can help with?
Submitted: 3 months ago.
Category: Tax
Expert:  TaxRobin replied 3 months ago.

Hello and thank you for allowing me to assist you.

Expert:  TaxRobin replied 3 months ago.

Your UK residence status affects whether you need to pay tax in the UK on your foreign income.

Non-residents only pay tax on their UK income - they don’t pay UK tax on their foreign income.

Residents normally pay UK tax on all their income, whether it’s from the UK or abroad.

The tax treaty between the US and UK covers relief for double tax.

It will depend on what these specific income producing assets are and how the treaty addresses the tax.

Customer: replied 3 months ago.
It would be great to talk live, Robin, so that I can explain what the income producing assets are. Is it 44 GBP MORE to do that?
Expert:  TaxRobin replied 3 months ago.

There is an additional charge for phone but it will not be me specifically you speak to if you request that.

Customer: replied 3 months ago.
Ah, I see. I have searched all of this info on the web already, and I need more specific advice. We have a portfolio in the US that consists of equities, mutual funds, real estate investment trusts, and bonds. As UK residents (I'm British and my wife is American) I'd like to understand what rate the UK taxes these types of investments. We would be at the highest bracket, since our investments yield $100,000's per year. The US taxes us about 22% on gains from the portfolio. What bracket and rate would the UK tax us at, as UK residents?
Expert:  TaxRobin replied 3 months ago.

You know you have a certain amount that is not taxable. The standard Personal Allowance is £11,000, which is the amount of income you don’t have to pay tax on.

Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £122,000 or above.

Higher rate for income £43,001 to £150,000 is 40%

There is an additional rate for income over £150,000 (45%)

As you would still be taxed in the US on a goodly amount of that and your wife on all her portions, the UK will allow you a tax credit on the 22% you pay in the US.

Customer: replied 3 months ago.
OK, this is starting to make sense. So, we would essentially pay the US the 22% via our annual returns to the IRS, and then pay the difference (up to 45%) to the UK. Put another way, these types of investments are treated by the Inland Revenue as ordinary income tax?
Expert:  TaxRobin replied 3 months ago.

Yes.

Under the treaty depending on if you are a non US person when you leave, you may be allowed to claim a lower tax on some of the income. The dividends can be claimed at a lower tax rate ( 5 or 15 per cent deduction).

Your wife would not be allowed that as a US citizen.

Customer: replied 3 months ago.
I think I understand now Robin. And so to be clear for our particular situation, as UK residents we can expect to pay a total tax rate of about 45% on the income from the investment portfolio we've discussed (part of that to the US and part to the UK via the treaty's tax credit?)
Expert:  TaxRobin replied 3 months ago.

Yes.

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