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Sam
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I'm a 60 yr old retired UK resident and want to bring my

Resolved Question:

I'm a 60 yr old retired UK resident and want to bring my 401k US retirement fund accrued while working in the US [2008-2010] to the UK.
My plan only allows an entire distribution [no partials] and I suspect the $145k fund will get whacked not only with the mandatory 20% US tax withholding, but for higher UK Income tax when I transfer the single large sum to the UK.
Am I correct in my understanding ... and is there any way of mitigating the 40% UK tax hit?
Submitted: 10 months ago.
Category: Tax
Expert:  Sam replied 10 months ago.

Hi

Thanks for your question- I am Sam and I am one of the UK tax experts.

One way (although may not be of any use to you) is to arrange for the whole sum to be directly transferred into a UK existing pension scheme - which I do advsie you to seek UK financial advsie on, so that a plan that meets your short and long term needs are met. This should avoid the higher rate tax charges - but of course factors that may affect this being permissible are

1) Your current contribution position

2) The life time allowance

3) Whether this is possible from a non UK position to a UK one

And I am sure you can appreciate we are UK tax experts rather than financial experts but this pathway will see NO higher rate tax suffered on an mount deemed allowable under the conditions and thresholds available for you

Another option is allow the release of the funds and suffer the UK higher rates - on which you will be given tax consideration for the USA tax suffered as we have a double taxation agreement between our two countries - AND then make your own personal arrangements to make a pension contribution into a new plan - which will allow up to your annual income position (and again looking at any other contributions and the life time allowance) a mitigation of a furtehr 20% tax (in the form of a tax refund - which you would claim at the year end through your self assessment tax return.

Or maybe a mix of the two options - or keep some of lump sum that sees you utilsie all of your 20% rate band - and the rest in a plan ...

Information for you

Life time allowances https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance

Pension contributions annual limits http://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/the-annual-allowance

THis also looks at carry forward of unused allowances

So there are two ways to mitigate some of the UK tax position but I would seek pension advsie from a couple of financial advisers (so you can compare the plans and options available and also the costs involved to undertake this for you.

If, once you have the pension advise as to how to proceed in a manner that meets your short and long term needs - if you then need any tax clarification then do come back to Just Answer - and you can always ask for me Sam if you would prefer.

Let me know if I can assist further

Thanks

Sam

Customer: replied 10 months ago.
Thanks Sam, I ad already concluded this, and given there is no clean way of rolling the 401K into a UK based pension scheme, it looks like I will have to suffer the UK tax hit.
Expert:  Sam replied 10 months ago.

HI

That's a shame - but at least you have explored all and any options to mitigate tax even if this proves not to be possible

Do let me know if I can assist further, but if you have all that you need, it would be appreciated if you rate me for the level of service I have provided (or click accept)

Thanks

Sam

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