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Posted Mon, 23 May 2022 08:51:48 GMT by C W Chow
I have a question about distributions from a US IRA plan. Is 25% of this distribution tax free? And if so, would I report 75% of the distribution as taxable foreign sourced pension income? Thanks in advance for your help on this question.
Posted Wed, 25 May 2022 14:00:48 GMT by HMRC Admin 19
Hi,

You can see guidance on IRA's and how they are taxed here:

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

If the 25% is taxed in the US then it will also be taxable here in the UK. 

Thank you.
Posted Wed, 25 May 2022 14:13:18 GMT by C W Chow
Hi - thanks for your response. In the UK, wouldn't IRA distributions be considered pension income (albeit from a foreign source)? And isn't pension income 25% tax free?
Posted Thu, 26 May 2022 11:02:21 GMT by HMRC Admin 2
Hi,

UK pension income has 25% tax free.

As this is not from a UK pension, the 25% tax free element does not apply.

Thank you.
Posted Thu, 26 May 2022 12:44:49 GMT by C W Chow
Hi - thanks for the clarification. Just to follow up then, would IRA distributions (if taken via periodic payments) be outside the scope of the Lifetime Allowance for pensions given its overseas status and considering that it doesn't benefit from the 25% tax free status?
Posted Fri, 27 May 2022 11:06:26 GMT by HMRC Admin 10
Hi
Please see the following guidance, specifically the section regarding Lifetime Allowance :
Pension Tax for overseas pensions Updated 3 January 2017
Thankyou.
Regards.

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