It is not uncommon for individuals to hold a position in company stock within their 401k plans. These shares are often held alongside broader fund investments usually until an individual either leaves employment with the company or retires.
After much anticipation, last week Republicans released their roadmap for revamping the US tax code. Passage of large scale tax reform will almost certainly be met with resistance and this is only the first step in the process but it provides some important insight into the intended direction of the upcoming debate that will take place over the next few months.
Since the American Civil War onwards, and without interruption from 1913 up until the present day, Americans have been taxed on their worldwide income and gains regardless of where they live or where the income or gain arises. This is called Citizen Based Taxation (CBT) and the United States is one of only two countries that tax in this manner, the other being Eritrea. The original intention of this system was to catch out individuals who dodged the draft by moving away and did not contribute to the Treasury and thus the Union. In 2017 approximately 9 million Americans live overseas and they clamour for a “normal” Residency Based Taxation (RBT) that is familiar to the rest of the world. Such a transition in the US tax system would not be overly complex to implement but is there a political will and can the US actually afford to adopt RBT?
Historically UK pensions have been a good way to achieve UK tax relief and it is also an opportunity for US persons living in the UK to efficiently use their excess foreign tax credits on their US tax returns. However, with the introduction of the tapered allowance for new pension contributions from tax year 2016/17, high earners are now restricted in their ability to make sizeable contributions and have fewer opportunities to seek tax relief.
There are many different considerations that come into play regarding trusts, depending on the type of trust you own and the tax status of the individuals who settle the trust and retain an ongoing benefit from the trust. As such, it is often important to review some of the basic rules associated with what makes a trust a US trust as opposed to a non-US ‘foreign’ trust.
When it comes to planning for a home purchase in the UK, there are many factors and aspects of your financial life to consider. First there are the traditional things to consider:
Clearly defining your personal wealth goals and objectives is the first step towards determining an appropriate investment strategy and asset allocation to suit your needs. The additional value add comes with giving proper consideration as to how to meet your goals in the most tax-efficient and optimal manner. As a US person living in the UK, you want to make sure that you avoid the tax traps that are littered within the investment world to mitigate any overall costs of investing.
Financial planning is often an area that takes a back seat in busy lives. When there is no specific deadline to make a financial decision, it is very easy to say that you will address it in the future when life becomes less hectic. Taking the time to review your financial position, your personal wealth goals and objectives and consider the implications of whether your strategy will appropriately meet those goals can be an important exercise. Ensuring that you have an effective and appropriate strategy will likely afford you future flexibility and peace of mind. Below we discuss the areas that are beneficial to consider and review. A few easy steps can ensure optimal wealth planning strategies.
Many Americans living in the UK are considered to be non-domiciled for UK inheritance tax purposes. Under new rules set to take effect in April this year, a non-domiciled individual becomes deemed domicile for inheritance tax purposes when they have been resident in the UK for more than 15 out of the last 20 years. When an individual is deemed domicile for UK inheritance tax purposes, the UK will generally apply its inheritance tax rules on an individual’s worldwide assets.
As you plan for year-end, one of the important things for US persons living overseas to pay attention to is matching their foreign taxes paid to when the income will be recognised as taxable in the US. This is especially important for those living in the UK as the tax years differ which can result in a timing difference in when taxes are paid. As many already know, the US tax year is based on the calendar year and the UK tax year runs from 6 April to 5 April with taxes due by 31 January of the following year.