Do I have to pay tax on Retirement cash distribution from America?

2bwithdwp

Hello,

I recently cashed in a retirement account from my old USA employer - in the USA. I paid all the relevant US taxes. I have now deposited these funds into my UK account. I am a UK citizen now residing in the UK.

My question is, do I also have to pay UK taxes on my cash distribution of my USA retirement account (seeing that I have already paid US taxes on it)?

Thanks!

Cook_County

From a US tax perspective you owe income tax plus a 10% penalty (unless you are aged over 59 1/2). You will need to file for 2009 Forms 1040NR and 5329.

From a UK perspective you'd report the lump-sum distribution on your UK tax return and elect to claim treaty exemption if this election is the lowest answer.

2bwithdwp

Great, thanks.

Im covered as far as the US tax return and will/have paid all us taxes.

However, for the UK, what would I do if I normally dont file a UK tax return?

And excuse my ignorance, what do you mean by "if this election is the lowest answer"

When it comes to UK taxes, I have no clue - especially seeing that I dont file a return as I have my taxes taken out throughout the UK tax year,

Thanks!!

Debt_Free_Chick

Contact your UK tax office. If you're employed, your employer will confirm your tax office.

You are liable to pay tax on this amount. However, the tax you've paid in the US will offset your UK tax liability. If the UK liability is less than what you've paid, there will be no further UK tax to pay.

Cook_County

As I said before complete exemption from UK tax can be claimed if (and only if) a UK return is filed claiming exemption under the treaty.

You'd only elect to use the treaty if it was cheaper (in terms of UK tax) than not claiming.

Without numbers and dates and knowing what kind of US plan this was and if there was basis and indeed what investments were wrapped in it, it is impossible to be 100% certain if the treaty option is the lowest answer. It would be helpful to see previous US tax return as well.