Investment Options for US Citizen in UK

Disclaimer: THIS DOCUMENT IS NOT TAX, FINANCIAL, OR LEGAL ADVICE. The authors of this document are not tax, financial, or legal professionals! This is an extremely complex subject, and even experts disagree. You should ensure you fully understand any actions you take and seek professional advice where warranted. Even innocent mistakes can be extremely costly and may not be uncovered for years or decades.

Author update: I’ve started a new site to include the content here, plus more as I do some more research (a 40 page document is getting unwieldy): https://fireacrossthepond.com/ 

I don’t plan to update this document further, although will happily take suggestions - I also plan on leaving this up indefinitely. Content is current as of 21 March 2021.

Investments for US Citizens in the UK

Date of Information: March 2021

Introduction

Intention

This document describes the many options available for US citizens residing in the UK who want to save for long term goals - primarily retirement (including early retirement), although some of the options are suitable for mid-term goals as well, such as a house purchase.

There is also high-level information on other related topics - purchasing a home in the UK, inheritance tax, things to think about before moving to the uK, and the US/UK tax treaty.

Scope

This document primarily assumes that you are a US citizen now residing in the UK, working for a UK employer, and intend to retire (potentially retire early) in the UK. Further complexities such as self-employment, working for a US or other non-UK employer, intentions to return to the US or a third country, non-US citizens who are or were US tax residents, etc. are mostly out of scope, although may be mentioned where relevant.

This is necessarily a summary and outline - the devil is in the details! Every option here has lots of caveats, situation-dependent situations, etc., and needs further research before making any decisions. Seek professional advice if you need it.

Assumptions

Your basic personal finances are already under control:

  • You spend less than you earn and want to save/invest some of what is left over

  • You have a sufficient emergency fund in some kind of safe place (probably a bank account, Premium Bonds, maybe some cash, etc.)

  • Your debt is under control: credit cards are paid off every month, maybe a mortgage and/or low-rate car loan outstanding, no high-rate debt (payday loans, Klarna, etc.)

  • You’re eligible for the NHS, so health insurance isn’t a concern. You might be paying for private insurance if you want, too.

  • You’re paying UK taxes and filing US taxes, although likely not owing much if anything due to Foreign Tax Credits (from your higher UK taxes). The Foreign Earned Income Exclusion also works, but limits some of the options below and is likely to be a suboptimal result for US citizens in the UK (can’t invest in an IRA, can’t get the refundable child tax credit in the US, etc.).

  • Essentially, you’re already at the “Do you have long term goals?” diamond of the UK Personal Finance Flowchart https://flowchart.ukpersonal.finance/

Background

US citizens living in the UK face a bewildering array of options for savings and investment, including both US and UK accounts. Because the US taxes its citizens regardless of where they live, and the UK taxes its residents, both US and UK tax planning must be considered. Furthermore, the US imposes a variety of potentially restrictive and punitive requirements, especially on non-US accounts held by US citizens.

A good overview of these US tax issues for American abroad is on the Bogleheads wiki here: https://www.bogleheads.org/wiki/Taxation_as_a_US_person_living_abroad and https://www.bogleheads.org/wiki/US_tax_pitfalls_for_a_US_person_living_abroad Reading this first is strongly recommended. It’s also worth being familiar with the US/UK Tax Treaty, although it’s not exactly light reading: https://www.gov.uk/government/publications/usa-tax-treaties. For a summary, see the “Notes on the US/UK Tax Treaty” section later in this document.

The UK also imposes some restrictions on foreign investments and income, although not nearly as onerous as the US. In general, the UK taxes its residents on their worldwide income (earned income, capital gains, etc.), there’s an overview here: https://www.gov.uk/tax-foreign-income

The one caveat that can catch US citizens without proper planning (ideally before moving to the UK) are HMRC reporting funds. If non-UK investments held outside a 401k, IRA, or similar do not report to the HMRC, the gains on these investments are taxed at the higher income rate (up to 45%), rather than capital gains (up to 20%). There’s a lot of potential complexity here, but for most people, if you hold US/non-UK investments outside of a retirement “wrapper”, you’ll want to make sure they’re on the HMRC reporting funds list: https://www.gov.uk/government/publications/offshore-funds-list-of-reporting-funds Fortunately, there are a large number of high quality funds available, so making a balanced portfolio is very feasible.

With the exception of the UK New State Pension, every UK account (along with any other foreign accounts) will require annual reporting on the FBAR (Report of Foreign Bank and Financial Accounts), FinCEN Form 1114, if the total value of your non-US accounts was over $10,000 at any point in the year. This requirement is all about financial crimes investigation, not taxes. It’s free to file and usually doesn’t take that long, but the penalties for not filing are potentially severe (up to $100,000 or 50% of the value of the account). File here: https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html Use the official exchange rates here to convert the value of your non-US accounts: https://www.fiscal.treasury.gov/reports-statements/treasury-reporting-rates-exchange/current.html

Many of the “More Info” links below go to generic pages mostly designed for UK citizens resident in the UK. The info should be good, but there are often nuances for US citizens. More research is likely required. A good place to start on the basics of UK retirement is here: https://www.gov.uk/plan-for-retirement

Overview of Investment Options

In rough priority with very high level descriptions - see each link for more details

    1. Typically Recommended Retirement Accounts

  1. UK Employer Pension - US & UK tax advantaged, free money, relatively high limits (probably $18k/yr from you), can get index funds

  2. US Roth IRA - US & UK tax advantaged, up to $6k/yr, can get index funds

  3. UK Individual Self-Invested Personal Pension - US? & UK tax advantaged, relatively high limit (probably $18k/yr), maybe can get index funds without PFIC headaches but stocks are pretty clearly ok

  4. UK Stocks & Shares ISA - UK tax advantaged, shared £20k/yr limit with other ISAs, individual stocks only due to PFIC

  5. UK Lifetime ISA - UK tax advantaged, 25% bonus but locked away until 60 except for first house purchase. £4k/yr limit (counts against ISA limit). Individual stocks.

  6. US Taxable Brokerage - no limit, no tax advantages, can get index funds

  7. UK Taxable Brokerage - no limit, no tax advantages, individual stocks

    1. Social Security/State Pension

  1. UK New State Pension - no choice - you have to contribute, £175.20 a week max benefit

  2. US Social Security - may have a choice to contribute, $3,895 a month max benefit

    1. Other Accounts - Specific Applications

  1. UK Cash ISA - glorified savings account with UK tax advantage

  2. UK Innovative Finance ISA - P2P loans with UK tax advantage

  3. UK Junior ISA - Cash or S&S ISA for kids, same idea as adult ones

  4. UK and US Savings Accounts - low interest but safe, US & UK taxable

  5. UK Premium Bonds - low interest with the chance of winning big, UK tax free, US taxable

  6. US HSA - no UK tax advantages, careful of HMRC reporting funds

  7. US Traditional IRA - big question as to whether contributions are UK tax deductible. If they aren’t, definitely better with a Roth IRA.

    1. US Employer Accounts

  1. US 401k/403b/TSP/SIMPLE/SEP/etc. - keep them if you have them (or roll into an IRA), US and UK tax advantages

    1. Typically Not Recommended

  1. US 529 College Savings - UK doesn’t recognize tax advantages and probably has tax penalties, avoid

Typically Recommended Retirement Accounts

UK Employer Pension

    • Synopsis

  • You’ll be auto-enrolled in one if you’re an employee anyway, and it turns out to be the best first option - free money from the match, plus no PFIC concerns.

    • Priority

  • #1 up to the match (free money!). Near the top of the priority list up to the max employer contribution percentage, at least.

    • Eligibility

  • UK employers are required to offer a pension and auto-enroll you. Won't help if you're self-employed, though. Can't contribute after age 75.

    • Investment Options

  • Depends on the provider and the exact plan that your employer selects, but usually you’re looking at a variety of funds - stock, bonds, UK, world, etc. Hopefully options for low-cost index funds, possibly target date funds.

  • PFIC rules don’t apply, because it’s a pension and covered under the tax treaty

    • Risk & Return

  • Depends on what you invest in - capital at risk, no guarantees

    • Withdrawal Options

  • No withdrawals before age 55 (57 from 2028, although existing pensions may be grandfathered in, TBC). Very limited exceptions (e.g. terminal illness with less than a year to live), otherwise punitive taxation at 55%.

  • Don’t have to withdraw at 55, and can keep contributing until 75

  • When you want to withdraw, three main options (not all may be available in your plan, but you can move to a provider that offers the one you want) - you can mix and match to some extent:

    • Purchase an annuity - lifetime guaranteed income in exchange for your money now

    • Cash - then you can do what you want with the cash (spend it, put it in a bank account, invest in another account, etc.)

    • Flexi-access drawdown - keep the funds invested (maybe change the investments to focus on income, if desired) and take cash from the investments

    • Contribution Limit

  • UK limit of £40,000/year, lifetime cap (contributions & growth) of £1,073,100 - exceeding this results in punitive tax at 55%. Shared with any individual SIPPs.

  • For high incomes above £240,000, the £40,000 allowance tapers down - details here: https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance

  • US also limits contributions to the same limits as a 401k - $19,500 for individual contributions in 2021 (plus $6,500 for 50 and older), $58,000 combined for employer and employee contributions.

  • Your employer will offer some kind of match (minimum of 5% from them if you contribute 3%, but many employers offer better than this).

  • Investing more than the employer match may make the part greater than your employer contributions treated as a "foreign grantor trust", which is subject to PFIC punitive taxation and additional tax forms.To avoid that, keep to contributing no more than your employer is (e.g. if they contribute 8% for a 5% contribution from you, it's safe to go to 8% from you and get the 8% from you. Going above 8% from you might be a pain). This is up for interpretation - if you are comfortable that it isn’t a trust, you can go up to the UK or US limit, whichever is lower in your case.

    • Fees

  • Depends on the provider. Some are low cost at <0.3% a year plus any fees on the underlying investments, others can be much, much higher. Unfortunately, you’re somewhat limited by what your employer offers. If their options aren’t great, you can move your money after you leave the company and possibly while employed (a “partial transfer”)

    • UK Tax Treatment - Contributions

  • Reduces your taxable pay (e.g. if you make £50k but contribute £10k to your pension, you only pay income tax on £40k). Especially useful if you’re near the transition from 20% basic rate to 40% higher rate tax (£50,270 for tax year 2021/22).

  • If your employer offers “salary sacrifice”, it also saves on NI (National Insurance) taxes, typically another 12%.

    • UK Tax Treatment - Withdrawals

  • Generally, the first 25% of withdrawals are tax free, the remaining 75% count as taxable income.

  • The exact way this works out depends on which withdrawal option you choose, gets complicated - short story is that you get a UK tax break on about 25% of the value of the fund, but how that plays out year to year is situation-dependent.

    • US Tax Treatment - Contributions

  • Two options:

    •  Default: Your contributions and your employers contributions are US-taxable pay. Likely, you pay enough UK tax that you won't actually owe any US tax, and now that this has been taxed, withdrawals won't be taxed (same idea as a Roth 401k in the US).

    •  Treaty: You can elect to exclude your and/or your employers contributions from US-taxable pay, but would then owe US tax on the withdrawals (same idea as a Traditional 401k in the US). You must declare this option specifically in your tax return (Form 8833).

    • US Tax Treatment - Withdrawals

  • Depends on which option you picked for the contributions:

    • If you paid taxes on your and your employers contributions, no tax due on withdrawal (like a Roth 401k).

    • If you excluded the contributions from your taxable income, you'll pay tax on the withdrawals (both the contributions and any growth), like a Traditional 401k. You may be able to take the same 25% tax free as the UK allows, depending on your reading of the tax treaty (this one seems to have lots of different interpretations).

  • Earnings are tax-deferred, if not tax-exempt.

US Roth IRA

    • Synopsis

  • As long as you’re eligible and already have a Roth IRA established, this has tax benefits in both countries and no limits on what you can invest in.

  • For awareness, there is an alternative interpretation of the US/UK tax treaty where contributions to a Roth IRA after becoming resident in the UK are not tax advantaged in the UK. The notes below are based on what seems to be the prevailing interpretation, that contributions to an existing Roth IRA from a US citizen resident in the UK are both UK and US advantaged.

    • Priority

  • #2 after UK employer pension match (arguably after maxing out UK employer pension - it’s a tossup, depends on the options and fees in the pension)

  • If Traditional IRA contributions are UK tax deductible and you’re eligible, they’re worth considering instead - which is better depends on your personal situation.

    • Eligibility

  • Earned income - foreign earned income is fine, as long as it’s not excluded via the Foreign Earned Income Exclusion (the Foreign Tax Credit is usually better for US citizens in the UK anyway, due to the higher tax rates in the UK).

  • Income limits - for 2021, starts to phase out at $125k (single), $10k (married filing separately - big drawback if your spouse can and wants to stay out of the US tax system), $198k (married filing jointly)

  • Backdoor Roth (contribute to Traditional and then convert to Roth) may be an option

  • US citizens abroad may find it challenging to manage an account without a US address. Charles Schwab and Interactive Brokers are known to work with people in this situation.

  • Based on the US/UK tax treaty, you are likely not eligible to start contributing to a Roth IRA from the UK if you didn’t already have one open before you moved to the UK. Probably best to consult a professional if you’re in this boat (it’s figuring out how Articles 17 and 18 of the treaty apply - multiple different possible interpretations).

    • There are some interpretations that even if the Roth IRA is already open, once you move to the UK any new contributions are not tax advantaged in the UK. This seems to be an unusual interpretation, potentially based on a clause in the US/Canada tax treaty (Article XVIII Paragraph 3b from the 2007 protocol) that does not have an equivalent in the US/UK tax treaty. It obviously has significant drawbacks if it’s true - you need to decide for yourself, and if you have any concerns, seek professional advice.

    • Investment Options

  • Anything under the sun - no HMRC reporting limits, whatever you want. Technically shouldn’t hold PFICs here either, but there’s not much reason why you’d want to when you have the universe of US-based funds open to you.

  • Ideal place for any weird, high-risk investments. Put your GME options here so you don’t pay taxes on them 🙂

  • If the provider knows you are in the UK, may be limited to UK-compliant (MiFID) options - rules out most US-based mutual funds (not necessarily ETFs - interpretations vary). Not clear how much this is enforced, and may be legal ways around it, such as having an advisor involved.

    • Risk & Return

  • Depends on what you invest in - capital at risk, no guarantees

    • Withdrawal Options

  • Contributions can be withdrawn at any time, no taxes or penalties

  • Earnings can be withdrawn at 59 ½ or older and you’ve held the account 5 years with no taxes or penalties

  • Under 59 ½ is generally subject to both US tax and penalties, although some exceptions apply (first-time home purchases, education, medical, disability, death). Need to check carefully how the UK will treat these withdrawals.

    • Contribution Limit

  • $6,000 per year, per person (2021 - goes up over time)

  • $7,000 if over age 50

  • Shared with Traditional IRA

    • Fees

  • Depends on the provider, but the account should be free/near-free.

  • Fees on underlying investments vary - typically you should try to keep these low, ideally under 0.1% for an index fund.

    • UK Tax Treatment - Contributions

  • UK recognizes the US tax advantages - contributions come from after-tax income, no impact.

    • UK Tax Treatment - Withdrawals

  • UK recognizes the US tax advantages - no tax on contributions or earnings after 59 ½. Early withdrawals of earnings would be taxable like in the US, and probably gets complicated - do your due diligence if you need to take this option.

    • US Tax Treatment - Contributions

  • Contributions come from after-tax income, no tax benefits right away

    • US Tax Treatment - Withdrawals

  • Provided you are 59 ½ and have the account for 5 years, no tax on any withdrawals (earnings or contributions)

    • Roth Conversions (from a Traditional IRA)

    • There are again a few different interpretations - need to do your own research to be confident. It’s clear that converting from a Traditional to Roth IRA is a taxable event in the US - the contributions that are from pre-tax money will be taxable as income in the year of conversion.

      • Favorable Interpretations:

  • Article 17 Paragraph 2 says that a lump-sum payment from a pension in one state (the US here) and owned by a resident of another state (UK) is only taxable in the first state (US). If a Traditional to Roth conversion is a lump-sum payment, there’s no UK tax. This seems to be the prevailing interpretation.

  • Or the conversion is simply an inter-fund pension transfer, which is not taxable under Article 18 Paragraph 1 (which is specifically excluded from the Savings Clause, so it applies to UK taxation of UK residents)

      • Unfavorable Interpretations:

  • A Traditional to Roth conversion is not a lump-sum payment

  • Even if a Traditional to Roth conversion is a lump-sum payment, Article 17 Paragraph 2 isn’t excluded from the Savings Clause (Article 1 Paragraph 4), so the UK can tax a UK resident as if the treaty doesn’t exist. The UK taxes its residents on worldwide income, so this income is taxable.

    • You may be able to use excess foreign tax credits to offset the US tax due. There’s a good discussion here: https://www.ukustax.com/wp-content/uploads/2012/03/Roth-Article-28-Oct-10.pdf

    • If the conversions are not UK taxable, there is an opportunity for quite a large reduction in taxes:

      • Savings into Traditional 401k and/or IRA, all consolidated into an Traditional IRA (not a taxable event in US or UK)

      • Convert Traditional IRA to Roth IRA - either all at once, or spread over a few years (far enough apart that they’re clearly lump sums, not periodic payments)

  • Offset US tax using Foreign Tax Credits - need to plan carefully, to ensure the conversion are at a favorable tax rate for anything not offset with FTCs

  • No UK tax due

    • Withdraw from Roth IRA after 59 ½, tax free in both the US and UK.

UK Individual Self-Invested Personal Pension (SIPP)

    • Synopsis

  • Basically the same as an employer pension, usually without the employer contributions. Some UK employers use a SIPP instead of a traditional employer pension and contribute directly to the SIPP.

  • CAVEAT: Some tax professionals consider a SIPP a pension, which is what the below discussion is based on. Others consider it a foreign grantor trust, which has much more complicated US tax filing requirements (forms 3520 and 3520A) and PFIC limitations. You must be satisfied it is a pension rather than a foreign grantor trust, or be willing to deal with the pain of the trust requirements (they probably don’t make sense to deal with except in very specific circumstances).

    • Priority

  • If your employer pension has high fees, it is probably better to use a SIPP after you maximize the match (and max out a Roth IRA, if eligible, possibly using a back door contribution to a Traditional IRA).

    • Your employer pension and SIPP share the same maximum contribution limit and lifetime limit, so take that into account

  • A SIPP probably doesn’t make sense if you’ve fully matched your employer pension (e.g. their max contribution is 8% and you’re contributing 8%) - the reason that advice is in place is because the additional contributions may be treated as a foreign grantor trust. By the same logic, a SIPP would also be a foreign grantor trust, and probably not something you want to get involved in.

    • Eligibility

  • All UK residents under age 75

  • Many UK providers don’t want to deal with US citizens, and many specialist expat providers have high fees. Hargreaves Lansdown is known to work with US citizens and has generally reasonable fees, although not the lowest. There are likely others.

    • Investment Options

  • Up to the provider, but typically a range of funds, including index funds, target date funds, etc.

  • Can also hold individual shares - there might be an option here to use individual shares even if a SIPP is a foreign grantor trust, and avoid the PFIC penalties (although still have some fun extra tax forms to fill out). Further research would be required.

  • PFIC rules don’t apply, because it’s a pension and covered under the tax treaty (unless the caveat above applies and you aren’t convinced it’s a pension - in which case you’re safest with individual shares).

    • Risk & Return

  • Depends on what you invest in - capital at risk, no guarantees

    • Withdrawal Options

  • No withdrawals before age 55 (57 from 2028, although existing pensions may be grandfathered in, TBC). Very limited exceptions (e.g. terminal illness with less than a year to live), otherwise punitive taxation at 55%.

  • Don’t have to withdraw at 55, and can keep contributing until 75

  • When you want to withdraw, three main options (not all may be available in your plan, but you can move to a provider that offers the one you want) - you can mix and match to some extent:

    • Purchase an annuity - lifetime guaranteed income in exchange for your money now

    • Cash - then you can do what you want with the cash (spend it, put it in a bank account, invest in another account, etc.)

    • Flexi-access drawdown - keep the funds invested (maybe change the investments to focus on income, if desired) and take cash from the investments

    • Contribution Limit

  • UK limit of £40,000/year, lifetime cap (contributions & growth) of £1,073,100 - exceeding this results in punitive tax at 55%. Shared with any employer pensions.

  • For high incomes above £240,000, the £40,000 allowance tapers down - details here: https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance

  • US also limits contributions to the same limits as a 401k - $19,500 for individual contributions in 2021 (plus $6,500 for 50 and older), $58,000 combined for employer and employee contributions.

    • Fees

  • You should be able to pick a low-ish cost provider, provided they’ll deal with Americans.

  • Also need to consider the fees on the underlying investment, but should be able to find low cost index funds and similar, or individual shares won’t have a fee aside from transactions.

    • UK Tax Treatment - Contributions

  • Reduces your taxable pay (e.g. if you make £50k but contribute £10k to your pension, you only pay income tax on £40k). Especially useful if you’re near the transition from 20% basic rate to 40% higher rate tax (£50,270 for tax year 2021/22).

    • UK Tax Treatment - Withdrawals

  • Generally, the first 25% of withdrawals are tax free, the remaining 75% count as taxable income (this includes both contributions and earnings).

  • The exact way this works out depends on which withdrawal option you choose, gets complicated - short story is that you get a UK tax break on about 25% of the value of the fund, but how that plays out year to year is situation-dependent.

    • US Tax Treatment - Contributions

  • Two options:

    •  Default: Your contributions and your employers contributions are US-taxable pay. Likely, you pay enough UK tax that you won't actually owe any US tax, and now that this has been taxed, withdrawals won't be taxed (same idea as a Roth 401k in the US).

    •  Treaty: You can elect to exclude your and/or your employers contributions from US-taxable pay, but would then owe US tax on the withdrawals (same idea as a Traditional 401k in the US). You must declare this option specifically in your tax return (Form 8833).

    • US Tax Treatment - Withdrawals

  • Depends on which option you picked for the contributions:

    • If you paid taxes on your contributions, no tax due on withdrawal (like a Roth 401k).

    • If you excluded the contributions from your taxable income, you'll pay tax on the withdrawals (both the contributions and any growth), like a Traditional 401k. You may be able to take the same 25% tax free as the UK allows, depending on your reading of the tax treaty (this one seems have lots of different interpretations).

  • Earnings are tax-deferred (if not non-taxable).

UK Stocks & Shares ISA

    • Synopsis

  • Strong UK tax advantages, but you’ll need to manage a portfolio of individual stocks to avoid PFICs. To the IRS, it’s just a taxable brokerage account.

    • Priority

  • After UK pensions and US IRA

  • Skip if you aren’t comfortable with individual stocks

  • Could prefer a Lifetime ISA first (you get a 25% bonus from the government, but can’t get to the money until 60 except for a first house)

    • Eligibility

  • All UK residents over 18

    • Investment Options

  • The account will let you hold pretty much whatever you want

  • However, ISAs are not good places to hold PFICs - the IRS treats them like any other brokerage account, so you face unpleasant filing requirements and adverse taxation

  • Therefore, the main option for long-term investing is in the stocks of individual companies (US, UK, or elsewhere).

    • Individual bonds are also acceptable from a PFIC perspective, although the reporting may be burdensome, depending on the information provided by the brokerage.

    • This isn’t the place for high risk/high return shares either, since a 10,000% return would be US taxable (although not UK). You’re probably looking at boring companies in a way that roughly mimics an index fund (but due to transaction costs, you probably don’t want many more than 20 or so individual stocks).

    • Risk & Return

  • Individual stocks are higher risk than an index fund

  • You can make a DIY index fund, but it’s uneconomical to fully replicate something like the S&P 500 or FTSE 100, much less a larger index. Your best bet is probably something like 10 to 30 individual stocks, across a variety of sectors and countries.

  • Probably not the best place for picking really risky stocks, because it’s still US taxable - if you have massive gains, you’ll be paying for them. Keep those in an IRA

    • Withdrawal Options

  • Contributions and earnings can be withdrawn at any time, no penalties and UK tax free. LIkely a US taxable event by realizing capital gains.

    • Contribution Limit

  • £20,000/year per person, pooled with all other ISAs.

    • Fees

  • Typically a combination of a platform/management fee (a % or £ per month/year) and transaction fees (£ per trade and/or transfer).

  • Can be relatively high, especially for frequent trading. May be cheaper on a monthly direct deposit arrangement instead of ad hoc.

    • UK Tax Treatment - Contributions

  • Contributions are after tax - no savings.

    • UK Tax Treatment - Withdrawals

  • Withdrawals of both contributions and earnings are tax free when eligible. No income tax, no capital gains tax, no tax on dividends or interest.

    • US Tax Treatment - Contributions

  • Contributions are after tax - no savings.

    • US Tax Treatment - Earnings & Withdrawals

  • The US treats a S&S ISA as a taxable brokerage account. You’ll be liable for tax on capital gains, interest, dividends, etc.

  • This includes the distinction between short vs long term capital gains, and qualified vs ordinary dividends. In general, it’s more tax efficient to save for the long term, and saves you on fees.

  • May be options for tax loss harvesting.

UK Lifetime ISA

    • Synopsis

  • Strong UK tax advantages, but you’ll need to manage a portfolio of individual stocks to avoid PFICs.

    • Priority

  • After UK pensions and Roth IRA

  • Skip if you aren’t comfortable with individual stocks

  • Could prefer a S&S ISA first (no bonus, but you can get the money at any time)

    • Eligibility

  • All UK residents over 18 and under 39 (can contribute from 40 to 50, but not open a new account)

    • Investment Options

  • The account will let you hold pretty much whatever you want

  • However, ISAs are not good places to hold PFICs - the IRS treats them like any other brokerage account, so you face unpleasant filing requirements and adverse taxation

  • Therefore, the main option for long-term investing is in the stocks of individual companies (US, UK, or elsewhere).

    • Individual bonds are also acceptable from a PFIC perspective, although the reporting may be burdensome, depending on the information provided by the brokerage.

  • Cash is also an option, especially if using for a first house

    • Risk & Return

  • Individual stocks are higher risk than an index fund

  • You can make a DIY index fund, but it’s uneconomical to fully replicate something like the S&P 500 or FTSE 100, much less a larger index. Your best bet is probably something like 10 to 30 individual stocks, across a variety of sectors and countries.

  • Probably not the best place for picking really risky stocks, because it’s still US taxable - if you have massive gains, you’ll be paying for them. Keep those in an IRA.

  • 25% return guaranteed (bonus paid by the UK government, although it’s US taxable)

    • Withdrawal Options

  • Contributions and earnings can be withdrawn only for the purchase of a first house or after age 60. Note that the first house restriction is worldwide, not limited to the UK - if you already purchased a house in the US, you’re not eligible.

  • 25% penalty applies for early withdrawals - knocks off the 25% bonus plus another 5% (might be a small enough penalty to be worth paying in some situations). Was temporarily reduced to 20% for COVID, only removing the bonus.

    • Contribution Limit

  • £4,000 per tax year per person, pooled with all other ISAs (e.g. if you contribute £4k to a Lifetime ISA, you can only contribute £16k to any other ISA or combination of ISAs).

    • Fees

  • Typically a combination of a platform/management fee (a % or £ per month/year) and transaction fees (£ per trade and/or transfer).

  • Can be relatively high, especially for frequent trading. May be cheaper on a monthly direct deposit arrangement instead of ad hoc.

    • UK Tax Treatment - Contributions

  • Contributions are after tax - no savings.

  • 25% bonus from the government - mimics the effect of being tax advantaged in the 20% tax bracket.

    • UK Tax Treatment - Withdrawals

  • Withdrawals of both contributions and earnings are tax free when eligible. No income tax, no capital gains tax, no tax on dividends or interest.

    • US Tax Treatment - Contributions

  • Contributions are after tax - no savings.

  • 25% bonus is also US taxable income.

    • US Tax Treatment - Earnings & Withdrawals

  • The US treats a Lifetime ISA as a taxable brokerage account. You’ll be liable for tax on capital gains, interest, dividends, etc.

  • This includes the distinction between short vs long term capital gains, and qualified vs ordinary dividends. In general, it’s more tax efficient to save for the long term, and saves you on fees.

  • May be options for tax loss harvesting.

US Taxable Brokerage

    • Synopsis

  • No tax advantages, no limits on contributions. Need to be a little careful what you hold.

    • Priority

  • Once you’ve used up the contribution limits on a pension, IRA, and ISA, this is pretty much what’s left for typical savings.

  • Typically preferred over a UK Taxable Brokerage because it’s easier to build a broad, low-cost index portfolio.

    • Eligibility

  • Pretty much anybody

  • US citizens abroad may find it challenging to open a new account without a US address. Charles Schwab and Interactive Brokers are known to work with people in this situation.

    • Investment Options

  • Anything under the sun, but be careful of UK tax considerations

  • Generally, it’s best to stick to UK Reporting Funds (or individual stocks, if you’re comfortable with that style of investing): https://www.gov.uk/government/publications/offshore-funds-list-of-reporting-funds

    • Using funds that don’t report to HMRC results in the gains being treated as income (up to 45% tax) instead of capital gains (up to 20% tax).

    • Risk & Return

  • Depends on what you invest in - capital at risk, no guarantees

    • Withdrawal Options

  • Withdraw contributions or earnings at any time. No penalties, but realizing capital gains is typically taxable.

    • Contribution Limit

  • None.

    • Fees

  • Typically a combination of account fees and transaction fees, depending on the broker.

  • Also fees on the underlying investments, such as index funds.

    • UK Tax Treatment - Contributions

  • Contributions are from post-tax money, no advantages

    • UK Tax Treatment - Withdrawals

  • Earnings are fully taxable as capital gains.

  • Also face tax on dividends or interest while you hold investments

  • Opportunities for capital gains harvesting, staying under the UK capital gains allowance (£12,300 per person per year in 2020/21)

    • US Tax Treatment - Contributions

  • Contributions are from post-tax money, no advantages

    • US Tax Treatment - Earnings & Withdrawals

  • Earnings are fully taxable as capital gains.

  • Also face tax on dividends or interest while you hold investments

  • Opportunities for tax loss harvesting.

UK Taxable Brokerage

    • Synopsis

  • No tax advantages, no limits on contributions. Need to be very careful what you hold.

    • Priority

  • Typically better to use a US taxable brokerage, because you can use index funds without dealing with PFIC concerns.

  • May be situations where you can’t find a US brokerage to work with you, which leaves this as the last option.

    • Eligibility

  • Pretty much anybody

  • US citizens abroad may find it challenging to find a provider who wants to work with US citizens.

    • Investment Options

  • Almost anything under the sun, but be very careful of US tax considerations

  • Unless you really know what you’re doing, you won’t want to have any mutual funds, investment trusts, index funds, etc.

    • Non-US funds are essentially all PFICs - onerous reporting, tax disadvantaged

    • US funds are difficult to purchase as a UK resident, because they don’t/can’t comply with an EU regulation (now part of UK law even after Brexit) called MiFID and don’t supply a Key Information Document (KID)

  • In practice, that means you’re probably buying individual stocks and bonds.

    • Risk & Return

  • Depends on what you invest in - capital at risk, no guarantees

  • Individual stocks are higher risk than an index fund

  • You can make a DIY index fund, but it’s uneconomical to fully replicate something like the S&P 500 or FTSE 100, much less a larger index. Your best bet is probably something like 10 to 30 individual stocks, across a variety of sectors and countries.

  • Depends on what you invest in - capital at risk, no guarantees

    • Withdrawal Options

  • Withdraw contributions or earnings at any time. No penalties, but realizing capital gains is typically taxable.

    • Contribution Limit

  • None.

    • Fees

  • Typically a combination of account/management fees and transaction fees, depending on the broker.

  • May also be fees on the underlying investments, such as index funds - but you probably don’t want to invest in these anyway.

    • UK Tax Treatment - Contributions

  • Contributions are from post-tax money, no advantages

    • UK Tax Treatment - Withdrawals

  • Earnings are fully taxable as capital gains.

  • Also face tax on dividends or interest while you hold investments

  • Opportunities for capital gains harvesting, staying under the UK capital gains allowance (£12,300 per person per year in 2020/21)

    • US Tax Treatment - Contributions

  • Contributions are from post-tax money, no advantages

    • US Tax Treatment - Earnings & Withdrawals

  • Earnings are fully taxable as capital gains.

  • Also face tax on dividends or interest while you hold investments

  • Opportunities for tax loss harvesting.

Social Security/State Pension

UK New State Pension

    • Synopsis

  • Mostly don’t have a choice, but it's worth being aware of

    • Priority

  • N/A - you have to pay National Insurance contributions, and the amount of contributions doesn’t make any difference to what you get back (it’s based on number of years, not amount of contributions)

    • Eligibility

  • Need at least 10 qualifying years - typically by paying National Insurance contributions, with a few other options (unemployed, ill, parenting, carer)

  • At or above State Pension age - typically 68 years old

  • If you don’t have enough years, you may be able to use some US Social Security years - see the totalization agreements: https://www.ssa.gov/pubs/EN-05-10199.pdf

    • Investment Options

  • N/A

    • Risk & Return

  • Minimal risk, although eligibility and/or benefits could be reduced by future laws

    • Withdrawal Options

  • You are allowed to claim the pension and stop paying National Insurance contributions at State Pension age.

  • You can defer claiming the pension, which increases it by about 1% for every 9 weeks you delay (5.8% for every 52 weeks you delay)

  • Example: current full State Pension is £175.20 a week. Deferring for a year would add an extra £10.16 a week

    • Contribution Rates

  • 0% tax under the £9,500/year income, 12% tax up to £50,000/year, 2% tax above that (2020/21 numbers)

    • Fees

  • None

    • UK Tax Treatment - Contributions

  • Contributions are a tax

    • UK Tax Treatment - Payments

  • State Pension is part of taxable income.

    • US Tax Treatment - Contributions

  • UK National Insurance contributions are not eligible for the Foreign Tax Credit.

    • US Tax Treatment - Payments

  • UK State Pension is US taxable income

US Social Security

    • Synopsis

  • You typically won’t need or be able to to pay US Social Security if you’re paying UK National Insurance.

  • If self-employed, temporarily in the UK and/or working for a US employer, special rules apply - more research required (not addressed below)

    • Priority

  • N/A - you won’t be contributing in the UK, but may have already contributed in the US

    • Eligibility

  • Need 40 lifetime credits. Earn a max of 4 credits per year, 1 for each $1,470 (2021) earned and subject to Social Security tax.

  • Working in the UK won’t build credits, but if you’re already eligible based on work in the US, you stay eligible.

    • Investment Options

  • N/A

    • Risk & Return

  • Minimal risk, although eligibility and/or benefits could be reduced by future laws

  • The Windfall Elimination Provision can reduce the amount you get if you’re also getting another social security payment, such as UK State Pension. See https://www.ssa.gov/pubs/EN-05-10045.pdf

    • Withdrawal Options

  • Can start getting payments anytime between age 62 and 70 - the longer you wait, the more you get, but the shorter the time you’ll get paid before you die.

    • Contribution Rates

  • Typically no contributions while working in the UK.

    • Fees

  • None

    • UK Tax Treatment - Contributions

  • N/A, won’t be contributing while in the UK

    • UK Tax Treatment - Payments

  • Social Security is taxable income

    • US Tax Treatment - Contributions

  • N/A, won’t be contributing while in the UK

    • US Tax Treatment - Payments

  • Social Security is partially taxable. More details: https://www.irs.gov/faqs/social-security-income

  • However, the US/UK tax treaty means that if you’re a UK resident receiving US social security, only the UK can tax you on it. Will have to claim this treaty exemption on your taxes (Form 8833 - often means you can’t e-file)

Other Accounts - Specific Applications

UK Cash ISA

    • Synopsis

  • Glorified savings account that’s UK tax free (but most people don’t pay UK tax on savings anyway).

    • Priority

  • N/A - good for shorter term goals, but low returns make it unsuitable for long term savings.

    • Eligibility

  • All UK residents age 16+

    • Investment Options

  • Cash only

    • Risk & Return

  • Interest rates can vary with the interest rate environment - typically slightly worse than the best non-ISA savings accounts

  • No risk to capital - FSCS guarantee up to £85k in case the bank fails.

    • Withdrawal Options

  • Withdraw anytime, unless you select a “fix” (basically a CD, where the interest rate is locked but you can’t access the money for a certain amount of time). Fixs usually have slightly higher interest rates than “easy access”

    • Contribution Limit

  • £20k/yr per person, shared among all ISAs

  • Unless it’s “flexible”, withdrawals in a year don’t reduce the amount towards the cap (e.g. if you deposit £10k then withdraw £5k, you can only contribute a further £10k, not £15k)

    • Fees

  • Typically none (maybe a penalty for withdrawing early for a fix)

    • UK Tax Treatment - Contributions

  • Post-tax money, no benefit

    • UK Tax Treatment - Withdrawals

  • No UK tax on the interest. However, due to the Personal Savings Allowance (PSA), UK taxpayers only pay tax on interest above:

    • 20% tax bracket: above £1,000

    • 40% tax bracket: above £500

    • 45% tax bracket: all savings

  • Unless you are paying tax on savings, there’s no reason to go for a cash ISA over a cash savings account.

    • US Tax Treatment - Contributions

  • Post-tax money, no benefit

    • UK Tax Treatment - Interest

  • Interest is fully taxable in the US, and the US doesn’t have an equivalent to the PSA.

UK Innovative Finance ISA

    • Synopsis

  • Peer-to-peer lending that’s UK tax free

  • US tax implications are unclear - reporting is likely a pain (since you won’t get the 1099s that you would for US peer to peer lending offerings).

  • Unless you’re really keen on peer-to-peer lending, it’s probably not worth the headache - you should do more research on the US tax implications before investing

    • Priority

  • None, unless you’re keen on peer-to-peer lending

    • Eligibility

  • All UK residents age 18+

    • Investment Options

  • Peer-to-peer lending only

    • Risk & Return

  • Savings are not guaranteed - the people you lend to may not pay you back

  • Typically better interest rates than a cash ISA, but not guaranteed to get your money back

    • Withdrawal Options

  • Withdraw anytime, unless there are specific terms on the account

    • Contribution Limit

  • £20k/yr per person, shared among all ISAs.

  • Unless it’s “flexible”, withdrawals in a year don’t reduce the amount towards the cap (e.g. if you deposit £10k then withdraw £5k, you can only contribute a further £10k, not £15k)

    • Fees

  • Depends on the account

    • UK Tax Treatment - Contributions

  • Post-tax money, no benefit

    • UK Tax Treatment - Withdrawals

  • No UK tax on the interest. Same comment about the Personal Savings Allowance as for a cash ISA - in short, you likely don’t pay tax on interest anyway unless you earn a lot of interest and/or a lot of income.

    • US Tax Treatment - Contributions

  • Post-tax money, no benefits

    • US Tax Treatment - Interest & Withdrawals

  • Interest is fully taxable in the US, and the US doesn’t have an equivalent to the PSA.

  • Won’t get 1099 forms for your tax filing - likely complicated reporting.

  • Some reports it could be considered a PFIC

UK Junior ISA

    • Synopsis

  • Child version of a cash or S&S ISA.

    • Priority

  • Worth considering to save for children, more S&S

  • Cash probably isn’t a useful option except in very specific circumstances - kids won’t pay any tax until they exceed the personal allowance (£12,500) plus starting savings allowance (£5,000) plus Personal Savings Allowance (£1,000) - if your kid has £18,500 in income, you may need more specific advice than this guide. Can also be taxable if they’re earning more than £100/year in just interest.

    • Eligibility

  • UK residents age 0 to 17 (note: kids age 16 and 17 can also have an adult cash ISA)

    • Investment Options

  • Same as a S&S ISA or cash ISA

    • Risk & Return

  • Same as a S&S ISA or cash ISA

    • Withdrawal Options

  • Can’t withdraw until the child turns 18

  • When they turn 18, it’s their money to do with as they please - can be withdrawn without any UK tax (likely US taxable if there’s any gain).

  • Turns into a normal ISA when they turn 18.

    • Contribution Limit

  • £9,000/year per child - can be split between cash and S&S or all in one.

    • Fees

  • Similar to S&S ISA or cash ISA

    • UK Tax Treatment - Contributions

  • After tax money, no benefit.

    • UK Tax Treatment - Withdrawals

  • Contributions and earnings are tax free.

    • US Tax Treatment - Contributions

  • After tax money, no benefit.

    • US Tax Treatment - Withdrawals

  • Any gains are taxable (interest, dividends, capital gains, etc.)

UK & US Savings Accounts

    • Synopsis

  • Short term savings - typically low interest rates that struggle to keep pace with inflation, although some deals may be out there.

    • Priority

  • Short term savings only, you’ll lose money to inflation.

    • Eligibility

  • Typically UK residents 16+, with specific accounts available for kids.

    • Investment Options

  • Cash

    • Risk & Return

  • Safe (insured up to £85k by FSCS), but typically low interest rates.

    • Withdrawal Options

  • Withdraw any time, unless it’s a fix or limited access account.

    • Contribution Limit

  • Unlimited.

    • Fees

  • Typically none

    • UK Tax Treatment - Contributions

  • Post-tax money, no benefit

    • UK Tax Treatment - Withdrawals

  • Taxable, although most people are under the Personal Savings Allowance. UK taxpayers only pay tax on interest above:

    • 20% tax bracket: above £1,000

    • 40% tax bracket: above £500

    • 45% tax bracket: all savings

    • US Tax Treatment - Contributions

  • Post-tax money, no benefit

    • US Tax Treatment - Interest

  • Interest is taxable.

    • More Info:

UK Premium Bonds

    • Synopsis

  • Unique UK savings product (nothing similar in the US). Your capital is safe (guaranteed by the UK government), and each £1 is entered into a monthly drawing to win prizes ranging from £25 to £1 million. The “prize rate” is typically similar to a savings account, although as of March 2021 is somewhat better than most (1% compared to savings of 0.5% and under). UK tax free, but US taxable.

    • Priority

  • Short term savings only - often used for emergency funds. Due to the low interest rate, it’s not suitable as a long term investment.

  • Might be a responsible substitute for lottery tickets.

    • Eligibility

  • UK residents 16+, can be bought for children

    • Investment Options

  • Premium Bonds are the only option (NS&I, the government body that sells premium bonds, also offers some other savings products that are generally similar to savings accounts offered by banks)

    • Risk & Return

  • No risk to capital. Significant risk that inflation will be higher than the prize rate or the actual winnings. Some risk that you will be unluckier than average and win less than the prize rate - you’re more likely to be closer to the prize rate with larger investments.

    • Withdrawal Options

  • Withdraw anytime (NS&I takes a couple of days to move money, slower than most UK banks).

  • Winnings can either be reinvested or paid out.

    • Contribution Limit

  • Max of £50,000 total holdings in Premium Bonds per person. Any winnings that bring the total above £50k will be paid out.

    • Fees

  • None

    • UK Tax Treatment - Contributions

  • Post-tax money, no benefit

    • UK Tax Treatment - Withdrawals

  • UK tax free, even if you win £1 million

    • US Tax Treatment - Contributions

  • Post-tax money

    • US Tax Treatment - Winnings

  • Taxable like interest on a savings account - a big hit if you win £1 million, since you won’t get any Foreign Tax Credits to offset it.

US Health Savings Account (HSA)

    • Synopsis

  • You may have one from the US, but won’t contribute from the UK (won’t have a high deductible health plan, because you have the NHS).

    • Priority

  • N/A, can’t contribute

    • Eligibility

  • N/A, you either already have it or you don’t

  • Won’t qualify from the UK, as there aren’t any high deductible health care plans (NHS is “free”, don’t think private insurance would qualify).

  • Might be eligibile if you maintain health insurance in the US?

    • Investment Options

    • Risk & Return

  • Depends on what you invest in - capital at risk, no guarantees

    • Withdrawal Options

  • Withdrawals for health expenses (although you can take the withdrawal anytime after the health expense - pay for a $100 procedure today and withdraw $100 tax free 30 years later). Keep receipts!

  • Fully accessible after age 65

    • Contribution Limit

  • Won’t be contributing from the UK

    • Fees

  • Depends on the HSA

    • UK Tax Treatment - Contributions

  • N/A, not contributing from the UK

    • UK Tax Treatment - Withdrawals

  • Treated as a taxable brokerage account without any special tax treatment.

  • Earnings are fully taxable as capital gains.

  • Also face tax on dividends or interest while you hold investments

  • Possibly opportunities for capital gains harvesting, staying under the UK capital gains allowance (£12,300 per person per year in 2020/21)

    • US Tax Treatment - Contributions

  • N/A, not contributing from the UK

    • US Tax Treatment - Earnings & Withdrawals

  • Tax-free, as long as they’re for health expenses (even in the past).

  • Taxable, for withdrawals after age 65 that aren’t for health expenses (same as a Traditional IRA).

US Traditional IRA

    • Synopsis

  • US tax deductions (if you’re eligible), but whether or not it’s UK deductible is up for debate

    • Big question: if it’s not UK deductible, a Traditional IRA is relatively useless for most people.

  • At the least, tax deferral until withdrawal

    • Priority

  • Situation-dependent. If you’re convinced that contributions can be deducted from UK taxes and you’re eligible, this may be a preferred option to a Roth IRA. Or an option as a backdoor Roth.

    • Eligibility

  • Earned income - foreign earned income is fine, as long as it’s not excluded via the Foreign Earned Income Exclusion (the Foreign Tax Credit is usually better for US citizens in the UK anyway, due to the higher tax rates in the UK).

  • Income limits for deductibility - for 2021, starts to phase out at $66k (single), $0k (married filing separately - big drawback if your spouse can and wants to stay out of the US tax system), $105k (married filing jointly) - this assumes you’re covered by a retirement plan at work. Given that the UK requires you be covered, you probably are (maybe something to consider if you’re self-employed)

  • Backdoor Roth (contribute to Traditional and then convert to Roth) may be an option

  • US citizens abroad may find it challenging to open a new account without a US address. Charles Schwab and Interactive Brokers are known to work with people in this situation.

  • Based on the US/UK tax treaty, you are probably not eligible to start contributing to a Traditional IRA from the UK if you didn’t already have one open before you moved to the UK. Probably best to consult a professional if you’re in this boat (it’s figuring out how Articles 17 and 18 of the treaty apply - multiple different possible interpretations).

    • Investment Options

  • Anything under the sun - no HMRC reporting limits, whatever you want. Technically shouldn’t hold PFICs here either, but there’s not much reason why you’d want to when you have the universe of US-based options open to you.

  • Almost as good as a Roth IRA for any weird, high-risk investments. You’ll pay taxes on them eventually when you withdraw, but it’s deferred until then.

  • If the provider knows you are in the UK, may be limited to UK-compliant (MiFID) options - rules out most US-based mutual funds (not necessarily ETFs - interpretations vary). Not clear how much this is enforced, and may be legal ways around it.

    • Risk & Return

  • Depends on what you invest in - capital at risk, no guarantees

    • Withdrawal Options

  • Earnings can be withdrawn at 59 ½ or older and you’ve held the account 5 years with no taxes or penalties

  • Under 59 ½ is generally subject to both US tax and penalties, although some exceptions apply (first-time home purchases, education, medical, disability, death). Need to check carefully how the UK will treat these withdrawals.

    • Contribution Limit

  • $6,000 per year, per person (2021 - goes up over time)

  • $7,000 if over age 50

  • Shared with Rotha IRA

    • Fees

  • Depends on the provider, but the account should be free/near-free.

  • Fees on underlying investments vary - typically you should try to keep these low, ideally under 0.1% for an index fund.

    • UK Tax Treatment - Contributions

  • Up for debate whether the contributions can be deducted on your UK Self Assessment, based on the US/UK Tax Treaty

    • Argument for Deduction: Paragraph 2 of Article 18 says that for a person with a pension in one state (here, the US) but works in the other state (UK), contributions to the US pension while working in the UK are deductible in the UK.

    • Arguments against Deduction: Paragraph 2 of Article 18 is not exempted from the Savings Clause (Article 1 Paragraph 4). The UK can tax its residents as if Paragraph 2 of Article 18 didn’t exist. In addition, the UK doesn’t have a comparable “pension” to a Traditional IRA.

  • Up to you to decide whether you think you can deduct Traditional IRA contributions from your UK income. If you can’t, there’s not a lot of point to using it (you get tax deferral but not deductions on your UK taxes, and you probably won’t owe US taxes anyway, so the deduction is wasted - better off using a Roth IRA).

    • UK Tax Treatment - Withdrawals

  • UK recognizes the US tax advantages - taxes are deferred until withdrawal, but the full value is treated as income upon withdrawal.

  • Early withdrawals would be taxable like in the US, and probably gets complicated - do your due diligence if you need to take this option.

    • US Tax Treatment - Contributions

  • Contributions are deductible on your US taxes, subject to the eligibility limits.

    • US Tax Treatment - Withdrawals

  • Withdrawals after 59 ½ are treated as normal income (taxable), both contributions and gains.

  • Required Minimum Distributions after age 72 - must withdraw or get penalized.

US Employer Accounts

US 401k/403b/Thrift Savings Plan/401a/SEP IRA/SIMPLE IRA

    • Synopsis

  • You can keep them after you move to the UK, and even roll them into each other or into an IRA (the best moves get complicated).

  • There’s a lot of plans covered here - they’re all relatively similar for our limited purposes, but have their nuances. They’re all treated as a “pension scheme” under the US/UK tax treaty.

    • Priority

  • N/A, can’t contribute in the UK. Possible exception if you’re still working for a US employer - those details are beyond the scope of this guide.

    • Investment Options

  • Depends on the provider and the exact plan that your employer selects, but usually you’re looking at a variety of funds - stock, bonds, UK, world, etc. Hopefully options for low-cost index funds, possibly target date funds.

  • PFIC rules don’t apply, because it’s a pension and covered under the tax treaty

    • Risk & Return

  • Depends on what you invest in - capital at risk, no guarantees

    • Withdrawal Options

  • Typically from 59 ½; earlier withdrawals with penalties (and some exceptions).

  • For a 401(k), if you’re still employed by a US company, may be able to leave employment at 55 and start withdrawals (probably rare for US citizens in the UK, there are some specific rules to look into)

  • Typically required to start taking Required Minimum Distributions from age 72

    • Contribution Limit

  • N/A, not contributing from the UK

    • Fees

  • Depends on the plan - can be very low to quite high

    • UK Tax Treatment - Contributions

  • N/A, not contributing from the UK

    • UK Tax Treatment - Withdrawals

  • This is a fairly complicated area with multiple interpretations of the US/UK tax treaty. Best source was HMRC here.

  • If it’s recurring payments, the UK will tax them. Any US tax withheld should be claimed as a UK foreign tax credit

  • If it’s a lump sum payment, the US will tax it, no tax in the UK.

    • US Tax Treatment - Contributions

  • N/A, not contributing from the UK

    • US Tax Treatment - Withdrawals

  • If it’s recurring payments, US tax might be withheld but should be claimed as a UK foreign tax credit.

  • If it’s a lump sum payment, it’s US taxable (no UK tax).

Typically Not Recommended

UK 529 College Savings Account

    • Why doesn’t it make sense?

  • No UK tax advantages - same as a taxable brokerage account

  • Question as to whether it’s a trust from HMRC’s perspective - if it is, more complex.

  • Even if it’s not a trust, typically not possible to invest in HMRC reporting funds, so gains will be taxed as income rather than capital gains (45% top rate instead of 20%).

  • UK college expenses aren’t that high anyway! And student loans are much friendlier than the US. Probably better off with just a plain taxable brokerage account, maybe a Junior ISA, SIPP, or a child savings account.

  • It may even be worth closing the account before moving the UK and taking the 10% penalty plus capital gains tax (or doing so soon after realizing the issues, even if you’re in the UK) - this is probably worth professional advice if you have a significant amount in a 529.

    • When might it make sense?

  • Maybe: if you’re only in the UK temporarily and will go back to the US (would need more research as to how it’s taxed while you’re in the UK, whether you can make contributions, etc.)

UK Real Estate

This is a quick guide on purchasing a primary residence in the UK, focusing on the issues that are specific to US citizens in the UK. It doesn’t cover second homes, buy-to-let, US properties, etc. It also doesn’t cover the basics that apply to UK citizens buying in the UK- that’s done well elsewhere. A couple good places to start that research:

Topics specific to UK citizens in the UK:

    • Getting a mortgage - credit history

  • Example: You take out a loan for £600 at 0%, but you don’t actually get the money (they hold on to it as collateral, so they know you’ll pay it back). You pay that back at £50 per month, which then gets built up as savings.

  • They make their money at the end when you transfer the money out, as you need to either open a new bank account with one of their partners (which they get some kind of payment from, but you can then transfer onward and close, if you donj’t like the account) or you pay £30 to transfer to your existing account.

      • You can’t register to vote unless you’re eligible to vote in the UK. Instead of being on the “electoral roll”, you can send the credit reporting agencies proof of residency. There are some people who recommend this, but also anecdotes of it backfiring. Up to you.

  • You might be eligible to vote:

    • Scotland & Wales: if you’ve got an appropriate visa, you should be able to register to vote

    • England & Northern Ireland: if you’re a dual UK, EU, or Commonwealth citizen, you should be able to register to vote

    • https://www.gov.uk/register-to-vote

    • Getting a mortgage - immigration status

  • Some UK lenders are less willing to work with immigrants compared to UK citizens, and the specifics of your immigration status can matter. They’re concerned about your ability to stay in the UK, and maybe the possibility of you skipping the country and abandoning the mortgage, with the hassles that would entail for them.

  • It’s probably best to use a mortgage broker (or more than one) to help search the breadth of the UK mortgage marketplace, and narrow down to lenders that will work with you, given your specific immigration status. A list of recommended brokers is here: https://www.moneysavingexpert.com/mortgages/best-mortgages-cashback/

    • US Tax Implications - Capital Gains

    • Capital gains on the sale of a primary residence are taxable in the US. However, you can exclude $250,000 ($500,000 if married filing jointly) from your taxes. In many cases, that will reduce the tax to zero, although if you’ve lived in a house for a long time and/or house prices have gone up significantly, you may be above this. More details here: https://www.irs.gov/publications/p523

      • The US calculations will be done in US dollars, at the exchange rate at the time of purchase and the time of sale. It’s possible to have a gain in dollars that is larger than in British pounds (or even a dollar gain and pound loss). Hypothetical example:

  • Buy a house for £100,000 while the exchange rate is $1.25 to the pound (bought for $125,000).

  • Sell the same house for £100,000 while the exchange rate is $1.50 to the pound (sold for $150,000)

  • The US sees a $25,000 gain, even though you didn’t make any money in pounds (and will have lost some through stamp duty, fees, etc.). This example is under the $250,000/$500,000 exemption, but you could imagine one that exceeds it even where you don’t have any more pounds at the end.

    • US Tax Implications - Foreign Currency Gains

    • The IRS considers all transactions as if they were in US dollars, regardless of the currency. In this case, that includes the transaction when you take out a mortgage, and transactions when you repay it - these are separate transactions to actually buying and selling the house. If you have a US dollar gain, despite no gain (or a loss) in pounds, you may owe US tax. Internal Revenue Code 988, if you want some light reading.

    • Example 1: Mortgage Refinancing

      • Mortgages in the UK are commonly on a 2 or 5 year fixed rate, after which they change to a “standard variable rate”, which is typically much higher. So it’s very common to get a new mortgage every 2 or 5 years.

      • You take out a mortgage for £100,000 while the exchange rate is $1.50 to the pound. Call it interest only for the sake of simple calculations (principle applies if it’s paying down the principle, too).

  • The IRS sees this as taking out a mortgage for $150,000

      • You then refinance that mortgage 2 years later for £100,000. However, the exchange rate has dropped to $1.25 to the pound

  • The IRS sees this as you now only owing $125,000, instead of the original $150,000. The $25,000 difference is an exchange rate gain and is taxable by the US as foreign passive income, even though your financial situation in pounds hasn’t changed.

  • It is typically taxed at income rates, and could be offset by Foreign Tax Credits in the passive bucket (not the “general” one for income tax on salary, but “passive” includes UK taxes you might have paid on interest, dividends, capital gains, etc.).

    • The reverse example doesn’t help you - if the exchange rates were swapped and you “lost” $25,000, you can’t deduct that on your taxes.

    • There’s not a lot you can do to mitigate this - if you have a non-US spouse and are married filing separately or head of household, you only need to report your half of the gain. When you buy the property, you may be able to structure it so the non-US spouse owns most/all of it - seek professional advice on this if you want to pursue it.

  • Example 2: Mortgage Payments

    • This tax can apply even on your normal monthly payments. There’s an exception of $200 per transaction that may help avoid this concern on smaller mortgages, but with big exchange rate changes and/or large mortgages, each mortgage payment could exceed this.

    • You are repaying a mortgage where your monthly payments are £1,000 of interest and £1,000 of principal. You started the mortgage with an exchange rate of $1.5 to the pound, so each month you were paying off $1,500 of principal (nothing to worry about on the interest side).

    • The exchange rate has now dropped to $1 to the pound, so you’re now repaying $1,500 of debt with only $1,000 per month (despite paying £1,000 to repay £1,000 of debt in pounds). That $500 gain every month is US taxable.

Inheritance Tax

A brief summary of how inheritance tax applies for each country - this also gets really complicated!

    • At a super high level, as a US citizen living in the UK:

  • If your estate is over £325k, you should worry about UK inheritance tax - this is fairly common, but still worth seeking professional advice along with estate planning, will writing, etc.

  • If your estate is over $11.7 million, you should worry about US and UK inheritance tax. Talk to a professional who understands both systems.

    • In General:

    • Receiving Gifts & Inheritances:

      • Don’t stress about receiving inheritances, whether from the US or UK. Any taxes due will be paid by the estate.

      • Any gifts received that are taxable (rare) are paid by the giver, with the exception of UK inheritance tax on gifts given within the 7 years prior to death (the receiver may have to pay taxes after the fact if you received a gift above the typically £3,000 exemption and then the giver passed away within 7 years). Also a possible US election to have the receiver pay - talk to a professional if you consider this.

    • Giving Gifts & Inheritances:

      • The UK inheritance tax exemption of £325k (£500k with a home) is relatively low - most of the people reading this document are hoping to exceed that net worth. This is worth discussing with a professional as part of general estate planning, will writing, etc.

  • Same with gifts above the typical £3,000 per recipient per year exemption

      • The US lifetime exemption of $11.7 million is high. If your estate is or likely will be above this value, definitely seek professional advice. Same with gifts exceeding the $15k per recipient per year annual exemption.

    • There is a US/UK Estate Tax Treaty of 1979: https://www.legislation.gov.uk/uksi/1979/1454/made

      • Rules on whether you are treated as US or UK domiciled - mostly you’ll be UK domiciled if you’ve lived in the UK permanently, even if you’re a US citizen

      • The country of domicile is the only one that gets to tax the person who dies, with the exception of Real Property (real estate, generally taxed in the country where the property is) and fixed Business Property (generally taxed wherever the business is permanently established) - but this doesn’t apply if you’re a citizen of the other country  (i.e. if you’re a US citizen domiciled in the UK, the US and UK both get to tax your estate)

  • In that situation, the US must grant a credit for the UK tax paid - still avoids double taxation, and in practice, with the much higher US exemption, there may not be any US tax payable. If you are above the US exemption and also subject to UK capital gains, talk to a professional.

UK Inheritance Tax

    • Based on the deceased being domiciled in the UK - since taxes are paid by the estate of the deceased, this doesn’t apply to US citizens in the UK who are inheriting from the US (or other countries)

  • If you’ve been in the UK long term (15 of the prior 20 years), you’ll be deemed to have a UK domicile. Even if you’ve been in the UK a shorter time, you might have a UK domicile - determining this gets complicated.

    • Nothing to pay if estate is below £325,000 - can increase to £500,000 if you give your home to your kids or grandchildren

    • No tax if everything above £325k is passed to your spouse/civil partner, charity, or a community amateur sports club!

    • Unused threshold can be passed to your spouse/civil partner, so their threshold can be as much as £1 million

    • Standard rate of 40% for everything above the threshold - reduced rate of 36% on some assets if 10% or more of the net value is left to charity

    • Gifts

  • No Inheritance Tax on small gifts out of normal income, like Christmas and birthday presents

  • No Inheritance tax between spouses/civil partners, as long as they live in the UK permanently (regardless of citizenship)

  • No tax on gifts given more than 7 years before you die, regardless of amount

  • For gifts given within 7 years before you die, gifts count as part of your estate, and recipients will be charged Inheritence tax if you give away more than £325,000 in the 7 years before death

  • Tapered inheritance tax on gifts given less than 7 years before death, from 8% in year 6 to 7 to 40% less than 3 years.

  • £3,000 exemption each year, can carry forward by one year only. Special exemptions for weddings (£1,000 for most people, £2,500 for grandchild, £5,000 for child), payments to help with living costs, and gifts to charities and political parties. Also as many gifts up to £250 per person as you want as long as another exemption wasn’t used.

    • Homes

  • Passing to your spouse/civil partner does not incur Inheritence Tax

  • Passing to anybody else counts towards the value of your estate

  • Passing to your children or grandchildren increases the tax-free threshold to £500k, as long as your total estate is worth less than £2 million

  • Can also give it away more than 7 years before you die as long as you pay market rent and bills to the new owner, then it’s tax free.

  • Inheritance tax is usually paid by the estate, not the recipient - unless it was a gift before death but within 7 years of death, or if it’s in a trust and the trust can’t/won’t pay.

  • Inheritance generally resets the basis for Capital Gains tax to the value of the asset at death (so it was taxed as inheritance tax based on the value in the estate, don’t get double taxed on capital gains)

  • Pensions are generally protected from inheritance tax, although income tax is usually owed by the recipient (main exception is if the owner dies before age 75, then there’s usually no tax): https://www.gov.uk/tax-on-pension-death-benefits

  • More info: https://www.gov.uk/inheritance-tax

US Estate & Gift Tax

  • Estate tax applies above $11.7 million for an individual estate. If you have a large enough estate to worry, you should seek professional advice instead of relying on this document.

  • If your non-US citizen spouse has more than $60,000 in US assets, it may apply

  • Tax is paid by the estate - if you inherit, you don’t have to pay tax directly.

  • Same with gifts - gifts you receive may count against the giver’s $11.7 million life exemption, if they’re above the $15,000 annual exemption, but the receiver doesn’t pay.

  • Gifts you give that are under $15,000 per year, per recipient are not taxable by anybody. Going above the $15,000 per year limit generally counts against your lifetime exclusion, but won’t be taxable until the exclusion is exceeded. Again, if you are giving more than $11.7 million in gifts, you should talk to a professional.

  • Applies to US citizens, other people living in the US, as well as non-US citizens outside the US but with US assets - subject to treaty clauses

  • For 2021, the personal federal estate tax exemption amount is $11.7 million - anything under this is exempt from estate tax

  • Progressive tax rates from 18% to 40% of the estate value above $11.7 million (40% applies from $12.7 million and up)

  • Transfers between US citizen spouses don’t count - if one spouse is not a US citizen, there is an annual limit ($159,000 in 2021)

  • The second spouse (if both are US citizens) can use the combined lifetime allowances - does not apply if the second spouse is not a US citizen

US Citizens Who Haven’t Moved to the UK Yet

There are a few steps you can take before you move that will make your life easier and possibly save you money. These could include:

    • Transfer any investments outside of a retirement wrapper (i.e. in a taxable brokerage account) into HMRC reporting funds. You can build a diverse, low-cost portfolio with just Vanguard index funds like VTI, VEU, BND, and BNDX. If you have any capital gains, this is likely a taxable event, but you can deal with just US taxes instead of getting the UK involved.

  • Specifically, if you happen to already have mutual fund versions of investments where the ETF is HMRC reporting but the mutual fund isn’t, you may be able to convert them without it being a taxable event. Vanguard info here, may apply at other brokers: https://investor.vanguard.com/etf/faqs “Can I convert my conventional Vanguard mutual fund shares to Vanguard ETF shares?”

    • Consider if you’ll have a US address that you’re comfortable using for your US financial accounts, like a family member, friend, or a paid service. Some US financial providers will freeze or close your account if you change to a UK address - it’s up to you whether you’re comfortable a mailing address different from your residence in the UK (generally not considered illegal, but can have practical problems if your family/friends get sick of getting your mail).

    • Ensure you’ve got a US phone number you can use to receive log-in text confirmation as part of two-factor authentication. Some options:

  • Port your existing number or create a new one on Google Voice (you may need an additional number that Google can use for confirmation - a paid Skype number works for this, there are other options). Some banks and brokers don’t work with Google Voice, though.

  • Keep a US cell phone and use it in the UK - want something with reasonable international rates. You don’t have to use it as your primary phone (you’ll want a UK phone number), but just to receive these kinds of texts.

  • Use the phone number of a friend or family member. Will definitely work, but can have practical issues if you’re trying to log in at 10am UK time but it’s 4am East Coast. And they might get sick of you.

    • You don’t have to do anything with IRAs, 401k, 403b, TSP, etc., but you may want to simplify if you have a lot of accounts scattered around. This tends to be easier while you’re still in the US - otherwise you may have some rather large checks going back and forth across the Atlantic, although it still works.

  • If you don’t already have a Roth IRA and think you might want to have one (and it’s probably the most flexible option available), open one before you leave the US, even if it’s just with a small amount of money.

    • Get or maintain at least one US credit card with no foreign transaction fees. This is the easiest, fastest way to spend US dollars in the UK. Ideally with no annual fee. Even if you don’t need it much now, if you already have investments in the US, eventually you’ll need it when you start drawing on those (unless you want to be continually transferring USD to GBP). Keep it active in the UK - maybe put a small recurring bill (like cell phone) on it.

    • Open an American Express card - you can use it to get a UK Amex https://www.americanexpress.com/us/customer-service/global-card-relationship/

    • Maintain at least one US checking account, and probably a savings account, too. You will inevitably find things that require you to pay or receive money. COVID stimulus was a pain for expats who received a paper check in USD and had no US checking account - it was fast and easy for people who got it via direct deposit. Same if you ever do owe something to the IRS, when you want to collect Social Security, etc.

  • Ideally get one that has an ability to deposit paper checks via an app instead of mail or in-person. Comes in handy, even if it’s just $35 birthday money from your aunt.

  • Figure out an initial plan for a UK bank account. Monzo and Starling are known to be fairly quick and easy to open accounts with - some UK high street banks are a real pain, needing lots of paperwork that you may not have yet, lots of snail mail, etc. A Wise (formerly TransferWise) borderless account may also work at first - you can send and receive money, convert between USD and GBP, get a UK debit card, do direct debit and direct deposit, etc. It’s not a “real” bank, in that it doesn’t pay interest and the deposit protection is a little convoluted if Wise were to go bankrupt (you’d probably get your money back but it’d take a while) - so probably don’t keep large sums here.

  • If you have a 529, figure out what you want to do with it. It may be better to just close the account and pay the 10% US penalty (plus capital gains), rather than dealing with HMRC treatment of it as potentially a trust full of non-HMRC reporting funds.

Notes on the US/UK Tax Treaty

https://www.gov.uk/government/publications/usa-tax-treaties

https://www.treasury.gov/resource-center/tax-policy/treaties/Documents/teus-uk.pdf

https://www.gov.uk/hmrc-internal-manuals/double-taxation-relief/dt19850pp

Article 1, Paragraph 4 (the “savings clause”) says that most of the treaty doesn’t apply to taxation of US citizens by the US (and UK citizens by the UK) - they can tax their own citizens as if the treaty didn’t exist. Only a handful of exceptions are described in Paragraph 5 sub-paragraph a - the main bullet is the official technical summary (lots more detail in the second link above), sub-bullets are the author’s non-expert attempt to put them into plain English.

    • (1) Paragraph 2 of Article 9 (Associated Enterprises) grants the right to a correlative adjustment with respect to income tax due on profits reallocated under Article 9.

  • Only applies to businesses (and their managers/directors) that manage businesses in the other country - no relevance to “normal” US citizens in the UK.

    • (2) Subparagraph 1(b) and paragraphs 3 and 5 of Article 17 (Pensions, Social Security, Annuities, Alimony, and Child Support) provide exemptions from source or residence State taxation for certain pension distributions, social security payments and child support.

  • 1(b): Pensions and similar accounts established in the US by a UK resident that would be exempt from US taxation if the owner was resident in the US are exempt from UK taxation to the same extent they would be exempt from iUS taxation (and vice versa).

    • For example, a distribution from a US 401k or IRA to a UK resident would be exempt from UK tax to the same extent as would be exempt from US tax if distributed to a US resident (tax free for a Roth IRA, taxable for a Traditional 401k, etc.)

    • Potentially very useful - means that even though the UK doesn’t have a direct equivalent to an IRA, you can still use an IRA and get both US and UK tax benefits for it. Also means it’s useful to hold on to your 401k/403b/TSP/etc.

  • 3: US social security payments to a UK resident are only taxable in the UK (and vice versa - if you go back to the US and get a UK state pension, that’s only taxable in the US).

    • Doesn’t apply the other way around in terms of getting state pension/social security from your country of residence - if you’re a US citizen living in the UK and receiving a UK state pension, the UK state pension is taxable by both the UK and US (although Foreign Tax Credits will typically avoid any double taxation)

  • 5: Payments related to divorce (alimony, maintenance, child support, etc.) that are paid from a resident of either the US or UK to a resident of the other country are exempt from tax in both countries. Exception: if the payer is eligible for tax relief in the country they are resident in, the country of the recipient can tax it (if you can get a tax deduction for the payment in the UK, the US can tax the recipient and vice versa).

    • (don’t know enough about how tax works on these kinds of payments to comment intelligently)

    • (3) Paragraph 1 of Article 18 (Pension Scheme) provides an exemption for certain investment income of pension schemes located in the other State, while paragraph 5 provides benefits for certain contributions by or on behalf of a U.S. citizen to certain pension schemes established in the United Kingdom.

  • 1: A UK resident with a US pension (e.g. 401k, 403b, TSP, etc.) can only be taxed on the income from that pension when it is paid out from the pension (not if it’s transferred to another pension, and not on gains while it remains in the pension)

    • If you transfer your 401k from one provider to another or into an IRA, it’s not taxable (Traditional to Roth conversions would be taxable in the US, though - maybe also in the UK, complicated topic).

  • 5: When a US citizen is resident in the UK and works for a UK employer, and participates in a UK pension, the contributions (employer and employee) to that pension are deductible on US taxes (like a Traditional 401k). This only applies up to the US limits for a similar pension (401k).

    • This is potentially very useful, but also not always advantageous. Basically, it gives you the option to treat a UK pension similarly to either a Traditional or Roth 401k, up to the US 401k limits.

    • Because UK taxes are usually higher than US, even if you do include your pension contributions in your US income, you may not owe any taxes. Opting to use this treaty provision might not save you anything now (aside from building up excess foreign tax credits), and then your later withdrawals will be US taxable.

    • In many cases, it will be better to ignore this benefit, include pension contributions in your US income, pay no extra tax now, and then not pay any US tax once you start drawing from the pension.

    • This doesn’t apply the other way around, specific to this direction of US & UK.

    • (4) Article 24 (Relief from Double Taxation) confirms the benefit of a credit to citizens and residents of one Contracting State for income taxes paid to the other, even if such a credit may not be available under the Code.

  • Basically requires the US and UK to both offer their Foreign Tax Credits, to avoid double taxation.

  • Some special rules that will apply to US citizens in the UK but with some US source income (such as US investments, dividends, interest, etc.). This gets fairly complicated, but the two main elements are 1) No double taxation and 2) the state of residence (UK for our purposes) gets first dibs.

  • Lots of provisions for companies, trusts, etc. that won’t apply to most US citizens in the UK.

    • (5) Article 25 (Non-Discrimination) requires one Contracting State to grant national treatment to nationals of the other Contracting State in certain circumstances. Excepting this Article from the saving clause requires, for example, that the United States give such benefits to a national of the United Kingdom even if that person is a citizen of the United States.

  • The UK can’t tax US citizens resident in the UK any more severely than UK citizens resident in the UK (and vice versa). Taxes can be different, without being more “burdensome”.

  • Same with deductions, they can’t be any worse.

  • Lots of details here!

    • (6) Article 26 (Mutual Agreement Procedure) may confer benefits on residents or nationals of the Contracting States. For example, the statute of limitations may be waived for refunds and the competent authorities are permitted to use a definition of a term that differs from the internal law definition. As with the foreign tax credit, these benefits are intended to be granted by a Contracting State to its citizens and residents.

  • Mechanism for resolving issues and problems related to the treaty - probably nothing most people will ever need to worry about.

    • There is an exchange of notes (printed after the text of the treaty) that provides some explanation. Of particular interest is the note to sub-paragraph (o) of paragraph 1 of Article 3 (General Definitions), because it specifies what kind of schemes count as a “pension scheme”:

    • UK:

      • Employment-related arrangements (other than a social security scheme) approved as retirement benefit schemes for the purposes of Chapter I of Part XIV of the Income and Corporation Taxes Act 1988 and personal pension schemes approved under Chapter IV of Part XIV of that act

  • That act was repealed and replaced by the Finance Act 2004 - the treaty benefits will go to the successor, but confirming  which products are approved under these chapters is probably best left to a lawyer

    • US:

      • Qualified plans under section 401(a) of the Internal Revenue Code

  • These are governmental, educational, and non-profit plans, roughly similar in structure to a 401(k) from a for-profit company

  • The Federal Thrift Savings plan was established by a separate piece of legislation (the Federal Employees Retirement System Act of 1986), but is treated as a trust under 401(a). Not completely watertight that TSP is a 401(a) qualified plan, but have not heard any issues with it being treated as such by HMRC.

      • Individual retirement plans, including:

  • individual retirement plans that are part of a simplified employee pension plan that satisfies section 408(k)

    • SEP IRAs- smaller companies, but generally similar to 401k

  • Individual retirement accounts (IRAs)

  • Individual retirement annuities

  • Section 408(p) accounts

    • SIMPLE IRA

  • Roth IRAs under section 408(a)

      • Section 403(a) qualified annuity plans

  • Relatively rare now - kind of like a 401(k) but as an annuity

      • Section 403(b) plans

  • Similar to a 401(k), but for schools and tax-exempt organizations (hospitals, etc.)

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