Investing from USA

Crispy_Ambulance

My son is keen to start investing but it's a bit complicated (I think). He is about to start a 2 year masters in the USA on a non immigrant visa. He will have a US bank account and receive his scholarship in US dollars. 

Any thoughts on the best way for him to pay into a S&S ISA or LISA without incurring conversion fees?

ColdIron

You must be a UK resident to open and pay into an ISA and it must be in sterling not dollars. You can retain a previously opened ISA, though not pay into it, but the USA doesn't recognise the tax free nature of ISAs so would need to be declared

Voyager2002

Crispy_Ambulance said:

My son is keen to start investing but it's a bit complicated (I think). He is about to start a 2 year masters in the USA on a non immigrant visa. He will have a US bank account and receive his scholarship in US dollars. 

Any thoughts on the best way for him to pay into a S&S ISA or LISA without incurring conversion fees?

He should invest in his education and in the experience of being there. The scholarship will reflect the cost of living, without enough left over to justify investing. If he has a few dollars spare, the ROI if he uses them to finance a bit of relevant work experience there or even attending a great concert is likely to be higher than sticking them into the markets. 

Crispy_Ambulance

ColdIron said:

You must be a UK resident to open and pay into an ISA and it must be in sterling not dollars. You can retain a previously opened ISA, though not pay into it, but the USA doesn't recognise the tax free nature of ISAs so would need to be declared

Thank you. As we understand it, he will still be considered a UK resident but we can't see how he can convert from dollars to sterling without fees. We did wonder about us paying into it for him but still can't see how to easily move money between his account and ours. Plus there is the tax liability in the US which we hadn't realised. I don't think he can open anything US based either.

wmb194

Crispy_Ambulance said:

ColdIron said:

You must be a UK resident to open and pay into an ISA and it must be in sterling not dollars. You can retain a previously opened ISA, though not pay into it, but the USA doesn't recognise the tax free nature of ISAs so would need to be declared

Thank you. As we understand it, he will still be considered a UK resident but we can't see how he can convert from dollars to sterling without fees. We did wonder about us paying into it for him but still can't see how to easily move money between his account and ours. Plus there is the tax liability in the US which we hadn't realised. I don't think he can open anything US based either.

Why would you expect to eliminate fees? The best you can do is to minimise them: Wise and HSBC's Global Money account might be good options.

mebu60

Wise is often recommended on here for international currency transfers. I use them myself. Other providers are available. 

ColdIron

Crispy_Ambulance said:

ColdIron said:

You must be a UK resident to open and pay into an ISA and it must be in sterling not dollars. You can retain a previously opened ISA, though not pay into it, but the USA doesn't recognise the tax free nature of ISAs so would need to be declared

Thank you. As we understand it, he will still be considered a UK resident but we can't see how he can convert from dollars to sterling without fees. We did wonder about us paying into it for him but still can't see how to easily move money between his account and ours. Plus there is the tax liability in the US which we hadn't realised. I don't think he can open anything US based either.

What makes you think he will be a UK resident for tax purposes if he resides in the US?
This might be worth a read

https://www.litrg.org.uk/international/residence-and-domicile/uk-tax-residence

If he moves he will need to inform his ISA provider, not all allow US residents due to the regulatory requirements and burdens placed on them

Bostonerimus1

Be very careful with your son's US tax residency status as it will depend on the specific visa he has and how long he is in the US. If his circumstances mean that he is not US tax resident the he can avoid paying the US equivalent of NI which are Medicare and SocialSecurity taxes. He should also be able to invest in an ISA, without any nasty US tax consequences, as long as he follows the UK rules. You should ask your questions to the HR/Student office where your son will be studying - they will have been asked the same questions many times over. 

Make sure your son applies to pay Voluntary UK NI while he is outside the UK.

EdSwippet

Bostonerimus1 said:

... He should also be able to invest in an ISA, without any nasty US tax consequences, as long as he follows the UK rules.

Not entirely - after all, this is the US.

Even though F and J visa holders avoid becoming full US 'tax residents' (exempt from the 'substantial presence test'), the US still has some nasty tax traps in place for them. The one most likely to bite is a flat 30% tax on all realised capital gains; which would of course include any sales inside a UK ISA that generate a capital gain, because the US doesn't recognise ISAs as any form of tax shelter.

US tax for nonresidents is a total minefield.

Crispy_Ambulance

Thanks everyone, lots of food for thought here and thanks for the tip about Wise - I hadn't realised that the fees were so low with them so that will be very helpful.

mebu60

Crispy_Ambulance said:

Thanks everyone, lots of food for thought here and thanks for the tip about Wise - I hadn't realised that the fees were so low with them so that will be very helpful.

You're most welcome.