For UK-connected individuals residing in the United States, managing UK pensions can pose unique challenges and opportunities. Different types of UK pensions, such as the State Pension, workplace pensions, and personal pensions, come with their own set of rules and tax implications. If you have contributed to a UK pension scheme and are now living in the U.S., you may be concerned about how to access these funds and the tax liabilities involved. The United States and the UK have different approaches to retirement savings and their taxation. While the UK offers tax relief on pension contributions up front, the U.S. focuses on tax-deferred growth, each requiring different management strategies.
A significant concern for UK connected individuals living in the U.S. is the issue of double taxation on their UK pensions. Fortunately, the U.S.-UK Tax Treaty aims to mitigate this issue, albeit with complex and often nuanced provisions. The Treaty generally allows UK pensions to be taxed only in the country of residence, which would be the U.S. for those residing stateside. However, understanding how your specific type of UK pension is taxed under U.S. tax law, and how to claim treaty benefits, is critical. For example, Lump Sum Death Benefits from a UK pension may be subject to different tax treatments under the treaty. Consultation with a tax advisor knowledgeable in both U.S. and UK tax laws is strongly advised. Please get in contact with one of our advisors, who can discuss your situation in futher detail and explain where we maybe able to help.
