Tax liability on foreign pension income

[Ukoldie]

As a U.K. Citizen who worked in the USA but living now permanently in the U.K. I will soon become eligible to collect pension payments from a former employer in the USA. The UK Self Assessment return asks for information on foreign pension income. I have maintained a financial identity in both countries and file tax returns in both. What is my tax liability on the foreign pension income. I don't want to have to pay tax twice by managing it incorrectly.
Thanks for any advice.

[AmanSood]

As a UK tax resident you would be taxable on your pension income in the UK. The treaty should exempt you from paying tax on the pension in the US. If however for whatever reason you are being taxed on your US pension income, then you should be able to get a tax credit in the UK (Capped at the UK tax rate) to minimise double taxation.

[bd6759]

The double taxation treaty generally states that a pension is taxable only in the country of residence. In that case the UK has taxing rights and will not give credit for any USA tax paid. Your remedy is seek refund of the USA tax paid from the IRS.

[maths]

UK/US DTA provides for no US tax to be levied on a US source pension. However, to avoid any possible 30% withholding tax an appropriate form needs to be filed with the US IRS.

As such tax is reduced to nil under the DTA, were any US tax to be applied (eg due to absence of relevant from being filed) then no credit in the UK would be given (as per bd's comment above) and a reclaim with the US would be necessary.

[Ukoldie]

Thank you for your helpful responses. Does the same apply to annuity income and Social Security? I think annuity income is taxed the same as pension income but wonder if there is an exemption for Social Security payments.

[maths]

Yes.

[bd6759]

Pensions paid for Government service are taxable only in the country where it arises.

Social security pensions aee taxable only on the country of residence.

[maths]

Pensions paid for Government service are taxable only in the country where it arises

Whilst generally correct, under the UK/US DTA the Government pension is subject to tax only in the UK (not US) if the recipient is UK resident and a UK national.

[DavidTreitel]

UK/US DTA provides for no US tax to be levied on a US source pension. However, to avoid any possible 30% withholding tax an appropriate form needs to be filed with the US IRS.

As such tax is reduced to nil under the DTA, were any US tax to be applied (eg due to absence of relevant from being filed) then no credit in the UK would be given (as per bd's comment above) and a reclaim with the US would be necessary.

A W-8BEN is given to the payor, rather than the IRS.

[darthblingbling]

Do note that for green card holders and US citizens, most of the dta will not apply. If you have previously worked in the USA, make sure you you properly renounced your green card, assuming you had one.