For UK-connected individuals living in the United States, navigating the savings landscape can be complicated, especially when it comes to tax-advantaged accounts like the UK's Individual Savings Accounts (ISAs) and America's 401(k)s. ISAs, which are tax-free savings or investment accounts in the UK, are not recognized by the U.S. Internal Revenue Service (IRS) as tax-advantaged. This means that any earnings from most ISAs may be subject to U.S. taxation. On the flip side, 401(k) plans offer tax-deferred growth and are a standard savings vehicle in the U.S., but UK tax treatment of these accounts may be less favorable. Therefore, cross-border financial planning becomes crucial to help ensure that you are not inadvertently creating a tax liability.
Tax and legal advice is not provided by Amerity Wealth Management, LLC or its advisory representatives. Legal, tax and accounting advice must be obtained through legal and/or accounting professionals.
Both the United States and the United Kingdom have comprehensive taxation systems that consider worldwide income, leading to the possibility of double taxation for individuals with financial interests in both nations. Thankfully, the U.S.-UK Tax Treaty aims to mitigate this issue, offering certain protections and benefits for eligible taxpayers. Understanding how your savings in one country might be taxed in the other can help you make more informed decisions. For example, while pensions may generally only be taxed in the country of residence, other types of investment income like dividends or interest could be subject to dual taxation—requiring strategic planning and potentially the use of foreign tax credits to avoid being taxed twice.
Tax and legal advice is not provided by Amerity Wealth Management, LLC or its advisory representatives. Legal, tax and accounting advice must be obtained through legal and/or accounting professionals.
Due to the complexities involved in being connected to both the U.S. and UK financial systems (and in many cases other jurisdictions), tailored financial advice is crucial. At Amerity our experienced cross-border financial planning advisors can help you understand how best to allocate your savings, taking into account tax efficiency, growth prospects, and your personal financial goals. Whether it's considering the Foreign Account Tax Compliance Act (FATCA) reporting requirements for U.S. residents with UK financial accounts, or optimizing the balance between ISA, 401(k), and other savings options, specialized guidance can potentially help you maximize your savings potential while minimizing your tax liability, for now and the future.
No guarantees are offered that you will attain your financial goals and objectives. Investing involves risk including the loss of initial principal.
