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EIS investment for the US person in the UK

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.

When is a trust classified as a US Trust versus a Non-US trust?

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.

Look to have a tax overlay to your saving plan to help save more money

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.

The importance of financial planning

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.

How an Excluded Property Trust can help a US person living in the UK plan for UK IHT

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.

US Year End Planning: Pay your UK taxes before 31 December

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.

US Year End Planning: Estimating Capital Gain Distributions and Assessing the Benefits of Tax Loss Harvesting

Over the last few weeks mutual fund companies have begun publishing their estimates of year end distributions that will be made, mostly in December.  As you review income realised to-date throughout the year (either through realised capital gains, dividends or interest), it can be beneficial for a number of reasons to factor in the anticipated distributions for the remainder of the year.

First, if distributions are projected to be quite high and depending on individual circumstances it may make sense to hold off on investing new cash going into a particular fund or to time rebalancing of a portfolio to minimise exposure to the distributions.

Net Investment Income Tax (NIIT) And The US Taxpayer Living Abroad

The Net Investment Income Tax (NIIT) officially went into effect for the 2013 tax year. So, by now many individuals have had time to become acquainted with it. However, since the statutory threshold amounts by which NIIT applies is not adjusted for inflation, it is likely that with each passing tax year, more and more taxpayers will fall into the NIIT net.

Individual taxpayers are subject to a 3.8% NIIT on the lesser of their net investment income, or the amount by which their Modified Adjusted Gross Income (MAGI) exceeds a certain threshold determined by filing status as outlined below:

Did you know your IRA offers you protection?

Evidence based investment approach.

Most people are unaware that typically assets held within their Individual Retirement Accounts (IRAs) are protected from creditors, including being shielded from US federal bankruptcy proceedings. Every three years, the level of protection increases with inflation.  For 2016, the number is $1,283,02511.

It would be very difficult for the average investor to breach this limit. Why?  Because even if the investor has been contributing since IRAs have been available, they would’ve had to maximize funding and had stellar investment performance…both unlikely scenarios.  The cap applies not only to IRA, but also to Roth IRA tax-year contributions and earnings on those contributions.