# Moving back to the UK



## smlsmith

I am a Brit and have worked in the US for 20 years. I have a 401K and eligible for SS benefits. I am currently green card holder which I will renounce on returning as I will retire in the UK.
I would like advice on how to get payments to the UK and minimize tax.


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## Bevdeforges

SS benefits should be easy. When you enroll for SS benefits, you should arrange for your payments to be made directly to your UK bank account. The consulate handles the transfer and gets the best exchange rates available, due to the large sum they are transferring.

The 401K depends on who is holding the funds, but if they can make the transfer directly to the UK, chances are they'll take 30% withholding tax on all withdrawals. As a NR, 30% is the tax rate you'll pay, so it may be just as easy to let them do that. (Oh, and there will most likely be the same 30% withholding on your SS benefits.)
Cheers,
Bev


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## smlsmith

Thanks Bev that's really helpful. How easy/ difficult is it to do this?


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## Bevdeforges

For claiming US SS benefits, you just go to the US SS website https://www.ssa.gov/ and follow the links to where you can apply for social security benefits online. (You can't sign up for a "My Social Security" account unless you have a US mailing address - but you can enroll for Social Security benefits. The exact site seems to change every few months.) Currently this is the page you need: https://www.ssa.gov/forms/apply-for-benefits.html 

For the 401K benefits, you need to contact the plan administrator (usually an investment company - information should be available on your quarterly or annual fund statement). If you have Internet access to your fund information (online statements and/or the ability to shift your fund investments around), you should be able to apply online to receive payments. 
Cheers,
Bev


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## JustLurking

Bevdeforges said:


> ... chances are they'll take 30% withholding tax on all withdrawals. As a NR, 30% is the tax rate you'll pay, ...


For the OP here, not at all.

Under the US/UK tax treaty, the US withholding rate and US tax liability for a UK resident non-US citizen on pension and annuity payments is 0%. Pensions are solely taxable to the country of residence, in this case the UK. See article 17 paragraph 1 and article 18 paragraph 1 for detail.

If you provide the 401k administrator with a completed W-8BEN they should set US tax withholding to 0%, as required by treaty. You then handle UK tax on this income as you would any other UK pension or annuity.


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## FreddyBee

Why would you renounce your Green Card? You don't need to and it may come in useful. I receive full US Social Security, having worked 30 years in the USA. It is paid net of tax promptly into my UK bank account on the same day every month. As another respondent wrote, you declare it in the UK and pay UK taxes on it. I don't think you can avoid having it taxed where you reside. If you also paid a number of years into the UK system, you will also get a (diminished) British pension.


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## Bevdeforges

JustLurking said:


> For the OP here, not at all.
> 
> Under the US/UK tax treaty, the US withholding rate and US tax liability for a UK resident non-US citizen on pension and annuity payments is 0%. Pensions are solely taxable to the country of residence, in this case the UK. See article 17 paragraph 1 and article 18 paragraph 1 for detail.
> 
> If you provide the 401k administrator with a completed W-8BEN they should set US tax withholding to 0%, as required by treaty. You then handle UK tax on this income as you would any other UK pension or annuity.


I happened to have fallen onto that thing about UK residents paying taxes only in the UK on US Social Security - but I know in dealing with the company that holds my IRA, they can be pretty bloody minded about their 30% withholding rule. If the W-8 will do the trick, then definitely give them that or give them a call. 
Cheers,
Bev


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## JustLurking

FreddyBee said:


> Why would you renounce your Green Card? You don't need to and it may come in useful.


Because until you do surrender a green card, you remain a 'US taxable person', and the US will therefore want an annual 1040 and tax on everything you earn, all your interest, capital gains, etc. You face the distinct possibility that your non-US bank or broker may not want to accept you as a customer, due to FATCA. Moreover, the green card becomes invalid _for immigration purposes_ -- but _not_ for tax purposes -- if you cease to live in the US.

Overall, an unwanted or unused/unusable green card is a huge burden, with no balancing upside.

The only counter-example I can think of is someone so deep into section 877A exit tax territory that they cannot extricate themselves even after giving away a lot of assets. For these people, the only viable choice is to become full US citizens. In a very real sense they are trapped forever in the grip of the IRS.



FreddyBee said:


> I receive full US Social Security, having worked 30 years in the USA.


This is true whether or not someone retains a green card, or whether or not they are or become a US citizen. Being an NRA does not disqualify anyone from receiving full US social security payments.

If you personally still hold a green card, even an expired one, you will want to look closely into your own situation here.


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## Moulard

FreddyBee said:


> Why would you renounce your Green Card? You don't need to and it may come in useful.


Well for starters once you have been outside the US for two years you cannot actually return on it anyways. From the INS perspective, you are no longer a US permanent resident. Failing to return it (via I-407) means from the perspective of the IRS you are still treated as a US Person and give the US rights to tax you on your global income thus at risk of dual taxation on your income. 

While not relevant in the OP case, returning the card quickly can mean that you won't be treated as a long term permanent resident and this potentially subject to the exit tax.

Once you can no longer use it for INS purposes, it serves no value except for the IRS. Why would you want to keep it? Whether you return it within that two year re-entry period is a judgement call I guess.


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## HomeBound

smlsmith said:


> I am a Brit and have worked in the US for 20 years. I have a 401K and eligible for SS benefits. I am currently green card holder which I will renounce on returning as I will retire in the UK.
> I would like advice on how to get payments to the UK and minimize tax.


You might want to have a talk with SS before making your plans. I was told by them, personally, that they will only pay SS out of the country to US citizens. If that is true, you might have to consider becoming a dual citizen.


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## Bevdeforges

HomeBound said:


> You might want to have a talk with SS before making your plans. I was told by them, personally, that they will only pay SS out of the country to US citizens. If that is true, you might have to consider becoming a dual citizen.


It's a bit more complicated than that - however, if you are a citizen of certain countries, or resident in certain countries, they will pay your social security benefits to you. (Survivor or dependent benefits may require other circumstances and conditions.)

https://www.ssa.gov/pubs/EN-05-10137.pdf
Cheers,
Bev


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## JustLurking

Bevdeforges said:


> ... if you are a citizen of certain countries, or resident in certain countries, they will pay your social security benefits to you.


...and to save the OP a possible heart-stopping moment and frantic search, "citizen of certain countries" includes Brits.


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## Pacifica

HomeBound said:


> You might want to have a talk with SS before making your plans. I was told by them, personally, that they will only pay SS out of the country to US citizens. If that is true, you might have to consider becoming a dual citizen.


That SS person was mistaken. Non-citizens can and do get Social Security. The rules can vary a bit depending on what country the person is in (in most it’s not a problem). The eligibility itself, however, is not dependant on citizenship status. 

A non-citizen living more than six months outside the US has to meet 1 of 5 criteria as outlined in the SSA booklet “Your Payments While You are Outside the United States” https://www.ssa.gov/pubs/EN-05-10137.pdf 
For example, if you’re a citizen of 1 of about 100 countries listed in the booklet (which covers a lot of people) or if you are a resident, though not a citizen, of a country that has a Social Security Agreement with the US. Note: in some headings, this booklet refers to “continuing” payments, but it seems to apply to “starting” payments as well, as people have signed up for and begun receiving benefits after renunciation.

The SSA won’t send payments to anyone, including US citizens, in 2 countries (and there’s about 10 others, where they will but with some restrictions); and they may or may not withhold federal tax, depending on the country’s tax treaty with the US; but these restrictions would affect current citizens as well as non-citizens.

A person who’s paid into SS should of course check out their own personal fact set vis-à-vis Social Security, but for most people non-citizenship/non-residency won’t cause problems with it.


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## iota2014

Be aware though that if you're entitled to receive both a US SS pension and a UK State pension, the US pension may be subject to what the US laughingly describes as the Windfall Elimination Provision.

https://www.ssa.gov/pubs/EN-05-10045.pdf

Totalisation benefits are not subject to WEP; not sure if there are any other applicable escape clauses.


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## iota2014

Also of course though a US SS pension paid to a UK resident is not taxed by the US, it _is_ taxed by the UK, which means you have to file a UK self-assessment return, appending the Foreign Pages in order to report the US income. They'll put this on your tax code if you ask nicely but you still have to file to report, which is a pain in the neck if you otherwise wouldn't need to.

Also, an easy way to apply is to ring the Federal Benefits Unit at Grimsnor Square. They were very helpful when I applied - didn't turn a hair when I explained I was in the process of renouncing citizenship. Of course since then there's been a change of ownership so who knows.


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## Bevdeforges

There is another escape clause for the WEP - something that involves having 30 years or more of credits in the US. But the other thing to remember is that they can't WEP you for more than half the amount of any foreign pension you are receiving.
Cheers,
Bev


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## iota2014

Bevdeforges said:


> There is another escape clause for the WEP - something that involves having 30 years or more of credits in the US. But the other thing to remember is that they can't WEP you for more than half the amount of any foreign pension you are receiving.


Half the amount of the US pension, or half the amount of the UK pension?


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## iota2014

WEP calculators:

https://www.ssa.gov/planners/retire/wep.html


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## smlsmith

HomeBound said:


> You might want to have a talk with SS before making your plans. I was told by them, personally, that they will only pay SS out of the country to US citizens. If that is true, you might have to consider becoming a dual citizen.


I was also told this by the local SS branch but then got a different message from SS central help line. This is why I am confused.


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## Bevdeforges

iota2014 said:


> Half the amount of the US pension, or half the amount of the UK pension?


The WEP reduction can be no more than half the foreign pension amount, so the UK pension. This is for those for whom US Social Security is one's primary government pension, with smaller amounts in foreign pensions. But when you get a SS pension estimate (which you can request at any time) they indicate the maximum WEP amount deductible from your estimated pension. (At least they always did on my estimate statements.)
Cheers,
Bev


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## iota2014

Thanks for the clarification, Bev. The terminology gets confusing for non-US-resident applicants, IMO, because for, say, a British resident, the US pension is foreign.

Looking at the SSA estimate sounds like a very sensible way to find out how much SS is going to be Wepped. 

But for those who want to know, a webpage at Social Security’s Windfall Elimination Provision: How to Quickly Calculate Your Penalty | The SS Choices Blog has a nice clear explanation of how the "number of years of substantial earnings" rule interacts with the "no more than 50% of the non-US pension" rule. No idea how reliable it is.


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## catea

*social security for how long?*

I have read and re-read this thread - THANK YOU everyone for posting.
My first time posting - I hope I have done it correctly and it gets added to this thread?

Unfortunately (feel a bit stupid here) I cant quite understand the longevity of my US social security (I am eligible to apply in Oct 2018) and if I need to return periodically to the US? I have read the pamphlet 'payments outside the US' several times but feel I am missing some 'rule'!
I am already in the UK waiting for my belongings to arrive..left my US apartment and have a new one in the UK! I have had a green card since 1991 & paid social security for 28 yrs. On this thread I read there will be no problem with SS payments, which can go into my UK bank account BUT I am trying to find out how long payments will occur and what steps, if any I need to take. It makes me nervous to tell anyone in the US I am in the UK - right now I am just taking University courses and trying to get re-established here (not easy). Have not set up a UK self - assessment return yet either. Complicated trying to keep my greencard (yes length of stay outside the US is a big factor) if not necessary for social security payments, dont want to give it up if I find later I need it for SS/permanent resident verification? Any help would be greatly welcomed and apologies if its in the thread and I dont quite get it?


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## Bevdeforges

Not to worry - if you are entitled to US SS benefits, they will be for life. You don't need to return to the US, nor do you need to hang onto your Green Card (and in fact you should surrender that on your move out of the US).

In your case, the UK-US tax treaty is in your favor. US social security benefits are taxable only by the UK if you're resident there.

About two months before you are eligible to receive your payments, contact the Federal Benefits unit at the Consulate in London https://uk.usembassy.gov/u-s-citizen-services/federal-benefits/

You can do your initial filing for benefits online, but unless you maintain a US mailing address, you won't be able to set up a MySocialSecurity online account. Generally speaking, it's usually pretty easy to work with the Federal Benefits folks at the Consulate - even if they are a bit overburdened. 
Cheers,
Bev


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## catea

*Wow!*

I have read your previous posts Bev - you are a gem!!! Thank you so much for the quick response and information...this helps me enormously - so happy I found this site!


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## Dunedin

I would like to comment on the situation that could arise if the green card is surrendered in respect with the 401k pension.

Normally benefits can be taken from a 401k either in the form of income or by withdrawing a lump sum. I have seen US pension providers require that the whole of the benefits are taken as a lump sum for non US citizens. Suppose that this is done.

The tax rights on the lump sum payment fall to the US. Normal US rates of tax would apply (with no account of UK income if the green card has been surrendered). This is subject to the additional tax that would be payable on taking the lump sum below the age of 59.5. The 30% withholding tax would be set against this liability, and further tax payable or (more likely) repayable.

The UK would not tax the lump sum. This would follow under UK domestic rules (following the changes made in the Finance Act 2017 and provided that no part of the lump sum related to contributions to the 401k after 5 April 2017). Further, if there was some residual liability under UK domestic rules, the double tax treaty denies any UK tax rights.


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