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Thanks HMRC Admin 2.
401(k) income is taxable in the USA based on your general income taxation level, due to the contributions made by the employee & employer being pre-tax. The UK/USA DTA definitions assumes all pension income is tax free but this is not the case, hence the issue.
Last year I discussed this scenario with HMRC by phone and the advice was to ensure I obtained a HMRC Certificate of Residence from my UK arrival date to give to the IRS. I did this. Any 401(k) income from my arrival date would be subject to UK tax as per Article 4 and my tax rate would be based on my overall income. I therefore did not pay IRS tax on that income on my US Tax return and incidentally I am revoking my USA Green Card so will not file US tax returns in future).
The Pension policy holder still withheld a small portion for tax (as it was not sure what to do) and I was advised to inform HMRC how much was withheld and they would deduct that from my UK taxable amount.
So under which income source on my Self Assessment should I declare this income?
I recently returned to being UK based (UK citizen) after many years in the USA and receive regular income from my USA 401k Retirement Savings Plan, that I need to declare on my UK Self Assessment. Is this income source simply defined as Foreign Income? It is not a State Pension and nothing else seemed to fit the description. In the SA summary it classes the income as from Savings.