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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.
Posted Tue, 13 Sep 2022 21:34:48 GMT by Norman D'Souza
I have an IRA and a Roth IRA. I want to know if I will pay tax on the IRA and if so how much. I want to take a lump sum that is below my personal allowance.
Posted Thu, 15 Sep 2022 10:37:20 GMT by HMRC Admin 19
Hi,

IRA's are treated differently from Roth IRA's, in that they are taxable in the UK under foreign interest. The gross interest would be declared in the Self Assessment tax return, using the supplementary page SA106. The interest would be treated in the same way as UK interest and attract the starting rate of £5000.00.  You can see information here:

Tax on savings interest 

DT19852 - Double Taxation Relief Manual: Guidance by country: United States of America: Treaty summary

DT19852 implies that tax is not payable in the USA on this interest. 

Roth Individual Retirement Accounts payments to a UK resident that are not taxable in the United States are not taxable in  the United Kingdom, see Note 2 in DT19852 above.

Thank you.

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