UK tax on US pension fund

As a UK citizen and resident, I have a US pension fund that I could cash-in or take as regular payments. On looking at other community threads my understanding is: 1) If I take it all as a lump sum it will be taxed at 30% in the US. However, I do not have to enter the residual amount into any part of my self-assessment form - except for a note under foreign income that this payment has been made. This will avoid it from getting added to my taxable income. 2) If I take it as a regular income (every 3 months say) then the tax agreement with the US is that there will be no tax deduction in the US but it will be treated as normal income in the UK? Many Thanks

Hi,
 

Article 17(2) with reference to Article 1 (4) if you receive a Lump Sum Pension and you will not receive any further payments from that pension scheme then this will be classed as a one off lump sum payment and will be taxable only in the country that the payment arises. If paid from a USA company then remains taxable in the USA even if you are a resident of the UK and vice versa. Where the lump sum is solely taxable in the USA, then it is not taxable in the UK and would not need to be declared.  If you take the pension in regular payments then it is taxable in the UK and should be declared on a self assessment tax return. Thank you.

very helpful thanks

Greetings: I have a follow-on query from the above. I took a lump sum pension withdrawal from the US in 2019/20 and paid 30% US Federal Tax on the amount. I was then approached by HMRC and asked to consider whether I needed to submit a Worldwide Disclosure for overseas income or gains. Am I correct in saying that completion of that process is unnecessary due to the Double Tax agreement in Article 17, Section 2 as outlined above? Thank you.

Hi,

As lump sum payments derived by a resident of the UK from a pension scheme established in the United States are, per Article 17(2) of the UK/USA DTA, taxable only in the US, you are not required to declare the lump sum to HMRC. You can see guidance here:                                              

DT19853 - Double Taxation Relief Manual: Guidance by country: United States of America: Notes

Thank you.