john2938

Current US tax legislation requires the owner of an IRA to take a distribution (that is, take a withdrawal) every year after the owner reaches age 72. The amount of the required distribution is fixed and depends on the value of the account and the life expectancy of the owner. Therefore the owner cannot select the years in which he/she takes a distribution or the amount of the distribution. Specifically, he/she cannot take one distribution in year 1, one in year 5 and one in year 7, and no others. If I take my required distributions every year and take an additional distribution (that is, in addition to the amount of the required distribution) in year 5, but in no other year, is that additional distribution considered by HMRC to be a lump sum?

I am a dual US/UK citizen resident in UK and I have an IRA with a US institution. I am required to take regular annual distributions from my IRA based on my life expectancy. I consider that these annual required minimum distributions, currently about $20,000 per year, are periodic payments. If, in year 5, I take an extra voluntary distribution of $40,000, is that considered a lump sum under Article 17, paragraph 2? I can easily show that distributions that I've previously taken, although not on the same date each year, comply with an IRS requirement to pay out the entire amount of the IRA in periodic payments over my lifetime. Does the fact that I have to take the required minimum distribution every year mean that my voluntary distribution will not qualify as a lump sum?

Thank you for this advice regarding the way to proceed for US income and foreign tax credit. Not being aware of this advice when I completed my UK self assessment return for 2022-23 I declared the US income that I received during the period 6 April 2022 to 5 April 2023, that is during the entire UK tax year 2022-23. I plan to follow this advice when completing my UK tax return for 2023-24. But what US income should I declare in my UK return for 2023-24? I've already declared my US income for 1 January 2023 to 5 April 2023 in my UK return for 2022-23 and I don't want to declare it again, and be taxed on it again. Can I omit my US income received from 1 January 2023 to 5 April 2023 and provide an explanation?

I infer from HMRC Admin 5's post in this string that if I had £1000 US income each month in calendar year 2022 and £2000 US income each month in calendar year 2023, I would declare £12000 foreign income in the 2022-23 UK tax year and £24000 foreign income in the 2023-24 UK tax year. I spoke to an accountant who is dubious about this, so can you refer me to the relevant provision in the self-assessment manuals?

Thank you for this clarification. But what about the supplementary question regarding foreign tax credit relief? If I pay US tax on US income of $20000 received from 1 January 2023 to 31 December 2023 and I wish to declare that income and claim foreign tax credit relief, is that all done in my self-assessment return for 2023-24, regardless of when the US tax is actually paid?

6 March 2024 has come and gone and still no reply. Can you provide an update?

I am a US citizen living in UK and therefore subject to both US and UK tax. I receive various items of US income such as dividends and IRA distributions. The US tax year is the calendar. Thus, the US tax year 2023, for example, spans the UK tax years 2022-23 and 2023-24. I understand from various posts on this Customer Forum that when reporting my US income for US tax year 2023 to HMRC I do not need to allocate the income proportionally to the UK tax years 2022-23 and 2023-24 but I can use the same income amounts as in my 2023 US tax return (converted to GBP) and report it all in my 2023-24 UK tax return. Is this correct? Please correct me if it is wrong. Assuming that the practice described in the previous paragraph is acceptable, does the same principle apply to a claim for foreign tax credit relief? Specifically, if I receive dividend income of $X in 2023 and am assessed US tax of $Y for that income, can I use these amounts (converted to GBP) in a claim for foreign tax relief included in my 2023-24 UK tax return, instead of allocating them proportionally to my 2022-23 and 2023-24 tax returns?

Tax year 2020 (covering 2019-20) ended on 5 April 2020. The four year deadline for filing an amended return and claiming a refund is 5 April 2024. I sent my amended return and claim for refund on 25 October 2023 to Self Assessment, HM Revenue and Customs, BX9 1AS, United Kingdom and the Royal Mail tracking service says that the envelope arrived at North West Midlands MC on 27 October, but I have not received a reply or even an acknowledgement. When should I expect to receive a reply? If it's not until after 5 April 2024, will I be prevented from correcting any errors?

You say that a distribution from a US IRA is treated as UK interest for UK tax purposes, and that this interest would attract the starting rate of £5000.00. Does this mean that even if my other income exceeds the personal allowance (£12570 for the current year) and I have no other interest income, the first £5000 of the distribution would be free of UK tax? Second, I infer from the statement by Admin 5 in response to Bodhi that if I close my IRA and take all the cash out as a single lump sum, there's no UK tax to be paid. What would the UK tax consequence be if I took my required distribution (which I have been doing annually for the last several years) and then took a voluntary distribution of, say, one third of the remainder, would that also be treated as a lump sum with no UK tax payable?

Don't cash out the IRAs without talking to a US tax advisor. I'm a retired US citizen resident in UK with a US IRA and taking annual distributions but if I took the cash out of the IRA as a lump sum I would probably have to pay US income tax on the entire balance in the year that I took the cash. This could be an unpleasant surprise for you if the amount in your IRAs is substantial.