# UK taxes on social security pension



## Pasadena

US citizen living in England filling out UK Self Assesment tax return
UK - Resident, Domicile and Ordinary Resident
I receive US Social Security pension payments with Medicare deductions taken at source and only receive the net amount each month.
Can I claim back the Medicare payments as a Foreign Tax Exclusion from my UK taxes, effectively only paying UK taxes on the net amount?


----------



## theOAP

Good question. I wish I knew the correct answer.

Intuitively, I would say no, you can not deduct the Medicare payments on your UK SA. You are automatically entitled to Medicare A, as paultry as that is. Medicare B, etc., is not a tax, it is supplemental insurance you have elected to have for visits to the US. (I'm also aware of the higher cost if you move back to the US and haven't elected B prior to the return.) Travel insurance can not be deducted, and private insurance in the UK (BUPA,AXA, etc.) can not be deducted. There is no mention of Medicare in the Tax Treaty. There is nothing on the DirectGov site, and the only reference on HMRC.gov is a report on international benchmarking. 

You seem to be indicating you pay UK tax on the 'arising basis' and taxed on worldwide income. If so, the US SS is only taxed by the UK on the first 90% (arising basis only).

But, I could be wrong.


----------



## Pasadena

theOAP said:


> Good question. I wish I knew the correct answer.
> 
> Intuitively, I would say no, you can not deduct the Medicare payments on your UK SA. But, I could be wrong.


theOAP you are correct, checked with HMRC and talked to knowledgeable supervisor. Not allowed as deduction as Medicare is considered insurance not a tax, and it is elective. Spot on, your comments have been very helpful.
N.B. As my total world wide income is less than $25,000 I am exempt from paying income tax on SSA pension income in the US. Under dual taxation treaty and HMRC DT19939G income exempt in US is also exempt in UK and therefore no tax due on my US SSA pension income. Cannot find this in public knowledge domain but when brought to attention of HMRC tax advisor on SA help line, immediately agreed. Do not have to declare US pension income at all, only make note that exemption is being taken. Appears matter of help lines in all countries will only answer yes or no, but will not advise you of exemptions that you might be entitled.


----------



## theOAP

An interesting position, and not one I've come across before.



Pasadena said:


> N.B. As my total world wide income is less than $25,000 I am exempt from paying income tax on SSA pension income in the US.


I understand that under the treaty US SSA is exempt from US tax, and is taxable by the UK if you are resident for tax purposes in the UK. It appears you are not electing to use the treaty in this way. If I understand, you are saying that your level of income in the US allows you not to be taxed on the SSA income by the US even if you were resident in the US (it is not exempt, it just isn't taxable due to the level of income). Not to question the information you were given, but please tell me you have recorded all details of the call (identification of who you talked to and when), just in case the issue is ever raised in the future by a less helpfull employee of HMRC.

http://www.hmrc.gov.uk/manuals/dtmanual/DT19939G.htm


----------



## Bevdeforges

As theOAP mentions, your US SS benefits are not subject to US income tax, thanks to provisions in the US-UK social security treaty. Take a look at IRS Publication 915 Social Security and Equivalent Railroad Retirement Benefits or Pub 54 for overseas taxpayers for confirmation.

This only applies to SS recipients in a few specific countries. Otherwise, the $25,000 rule applies and for those married to non-resident aliens and filing separately, 85% of social security benefits are taxable right off the bat.
Cheers,
Bev


----------

