Pensions that cross the Atlantic without losing their tax shelter.
A pension built in one country and drawn in the other is where the two systems disagree most. The 25% tax-free lump sum, employer contributions, Roth conversions, each is treated differently depending on which side is asking.
Two rulebooks, one retirement
The treaty's pension article protects growth inside UK schemes from annual US tax, properly claimed. But the UK tax-free lump sum is not automatically tax-free to the IRS, employer contributions can be currently taxable, and SIPP investments can raise PFIC questions of their own.
In the other direction, 401(k) and IRA withdrawals land in HMRC's net once you are UK-resident, and Roth treatment needs a treaty position, not an assumption.
- Treaty claims for pension growth, and contributions where the claimant is not a US citizen
- US treatment of SIPPs, workplace schemes and transfers
- UK treatment of 401(k), IRA and Roth withdrawals
Timing is most of the tax
The same withdrawal can be taxed very differently depending on residence, timing and the order it is taken in. We report each withdrawal on both returns with the treatment it actually qualifies for.
Transfers and rollovers, reported correctly
Consolidating scattered pots feels tidy, but across a border it is a minefield: a UK-to-UK transfer is usually fine, a US 401(k) rollover to an IRA is routine, while moving money across the Atlantic in either direction can trigger tax on the whole pot.
When a transfer or rollover happens, we report it on both returns with the treaty treatment it qualifies for, and work from the figures your IFA or US adviser provides so the two sides agree.
- Transfers reported under both systems
- Rollovers and consolidations reported in the right year
- Coordination with your existing financial advisers
US-UK double taxation and the treaty
How the treaty, foreign tax credits and the earned income exclusion stop the same income being taxed twice.
Questions we are asked most
The ones that come up in almost every first conversation about pensions & retirement.
Frequently yes. Many foreign pensions are reportable even where the income inside them is not currently taxed.
The reporting question and the taxation question are separate, and people often assume treaty protection covers both.
A transfer that is entirely neutral in the UK can be a taxable event to the IRS depending on the schemes involved.
Overseas transfers in particular are worth checking before initiating rather than after.
Usually, but the relief may not follow you. Contributions that reduce UK tax do not automatically reduce US tax, and vice versa.
The treaty's contribution relief sits in Article 18(2), and the saving clause carve-out for it reaches only non-citizens - so it does not help a US passport holder against the IRS. Where it is available, it still has to be claimed.
Generally not. The treaty does real work here, and growth inside a recognised scheme is usually not taxed by the US as it accrues.
That is not something to take for granted with foreign retirement accounts in general - it is specific to how the treaty handles pensions.
Not reliably. That relief is a feature of UK law rather than the treaty, and the US does not simply follow it.
Taking a lump sum while US-resident without modelling it first is one of the more expensive unforced errors in this area.
Employer and personal contributions are looked at differently, and relief on the US side does not automatically mirror the UK treatment.
Getting this wrong quietly builds a mismatch that only surfaces years later.
The same question runs in reverse: HMRC has its own view of contributions, growth and withdrawals, and it is not identical to the US one.
Timing withdrawals relative to a change of residence can change the outcome substantially.
Related services
Most positions touch more than one of these. We prepare them from the same file.
Thinking about drawing on a pension?
Model it before you take it. A lump sum that is tax-free on one side can be fully taxable on the other.