This guide is for people living in the UK who hold a 401(k), a Traditional IRA or a Roth IRA: American citizens who have moved to Britain, and Britons who built savings during a US career. In brief: the UK does not tax growth inside these accounts, taxes regular withdrawals as pension income, and exempts Roth distributions to the extent the US would; but HMRC changed its view of US lump sums in March 2025, US withholding rules apply regardless of where you live, and Roth conversions carry a US tax cost with UK treatment that has never been formally confirmed.
How does the UK tax a 401(k) or IRA if you live in Britain?
The UK does not tax the dividends, interest or gains earned inside a 401(k), 403(b) or IRA while you are resident here; it taxes you when money is paid out. Regular withdrawals are taxed in the UK as foreign pension income at your normal income tax rates.
Two parts of the 2001 US–UK income tax treaty produce this result. Article 18(1) says that where a UK resident is a member of a pension scheme established in the US, income earned by the scheme may be taxed as that person’s income “only when, and … to the extent that, it is paid” to them.[1] Article 17(1)(a) gives the country of residence the right to tax pensions paid in respect of past employment.[1] The Exchange of Notes signed with the treaty confirms which US arrangements count as pension schemes: 401(a) qualified plans (which include 401(k)s), individual retirement accounts and annuities, SEP and SIMPLE IRAs, Roth IRAs, 403(a) annuity plans and 403(b) plans.[2]
Since 2017/18 the UK has taxed 100% of foreign pension income; the old 10% deduction was removed by the Finance Act 2017.[5][6] In 2026/27, outside Scotland, that means 20% on income between £12,571 and £50,270, 40% up to £125,140 and 45% above. One exception: people who arrive in the UK after at least ten years of non-residence can claim the four-year foreign income and gains regime, and foreign pensions arising from 6 April 2025 may be exempt from UK tax for that period if a claim is made.[5] A US citizen who claims it still pays US tax on the same withdrawals.
| Account | Growth while UK resident | Regular withdrawals: UK | Regular withdrawals: US |
|---|---|---|---|
| 401(k), 403(b), Traditional IRA | Not taxed in the UK until paid out | Taxable as pension income, 100% of the amount | US citizens: taxable, with credit for UK tax. Non-US persons: exempt under Article 17(1)(a), claimed on Form W-8BEN |
| Traditional IRA with non-deductible (after-tax) contributions | Not taxed until paid out | The part that is a US-tax-free return of basis is also exempt in the UK | Basis returned tax-free; the rest taxable as above |
| Roth IRA, Roth 401(k) | Not taxed until paid out | Qualified distributions exempt, mirroring US treatment | Qualified distributions tax-free |
| Lump sums from any of the above | n/a | Taxable since HMRC’s March 2025 guidance, with credit for US tax | Taxable in the US (Roth: if not qualified) |
Sources: treaty Articles 17 and 18, HMRC DT19853 and INTM163160.[1][3][4] For US citizens, the treaty’s saving clause lets the US tax as if the treaty did not exist, apart from listed exceptions; the broader picture is in Americans living in the UK: how both tax systems apply.
Are lump sums from a US account taxable in the UK?
Yes, according to HMRC’s current guidance. Since March 2025 HMRC’s International Manual says both the US and the UK may tax a US pension lump sum paid to a UK resident, with the UK giving credit for US tax.[4]
Article 17(2) of the treaty says a lump sum from a pension scheme established in one country and paid to a resident of the other “shall be taxable only in the first-mentioned State”, the country where the scheme is based.[1] For years this was widely read as making a lump sum from a 401(k) or IRA exempt from UK tax. HMRC’s updated guidance at INTM163160 takes a different view: it states that the US regards Article 17(2) as an anti-avoidance rule, and that the saving clause in Article 1(4), which lets each country tax its own residents, means the UK can also tax.[4] Professional commentators dated the change to 12 March 2025 and described it as a reversal of long-standing practice.[21]
HMRC also set out what it regards as a lump sum for treaty purposes: “any non-periodic, irregular or abnormal payment of a pension”. A payment of 50% or more of the fund will generally be one, and a payment of 20% or more is likely to be, with regularity of dates and amounts and the purpose of the payment also relevant.[4]
For a UK-resident taxpayer in the higher or additional rate band, UK tax on a large US lump sum can exceed the US tax credited against it. The guidance does not say whether HMRC will revisit earlier years, and practitioners continue to debate the reading of the treaty. Anyone considering a large withdrawal from a US account should take advice on both countries before acting.
Is a Roth IRA tax-free in the UK?
Qualified Roth IRA distributions are generally tax-free in the UK as well as the US. Roth IRAs are named as pension schemes in the treaty’s Exchange of Notes, and Article 17(1)(b) requires the UK to exempt any pension payment that would be exempt in the US if you lived there.[1][2] HMRC’s manual confirms that an IRA distribution to a UK resident is exempt in the UK to the same extent it would be in the US.[3]
Because Article 17(1)(b) is listed among the exceptions to the saving clause, the exemption is available to US citizens as well.[1] It mirrors US rules, so it matters whether a distribution is “qualified”. A qualified Roth IRA distribution is one made after a five-year period, beginning with the first year a Roth contribution was made, and after age 59½, disability or death (or up to $10,000 for a first home).[12] Non-qualified distributions come out in a fixed order: contributions first, then converted amounts, then earnings. Contributions come back free of US tax and so, on the mirror principle, free of UK tax; earnings withdrawn early are taxable in the US and, by the same logic, not protected in the UK.
Two points remain uncertain. First, HMRC has not published guidance on Roth contributions made while you are UK resident, and advisers are divided on whether growth on those contributions is protected in the same way; many prefer not to add new money while UK resident. Second, contributing requires US-taxable compensation: amounts excluded under the foreign earned income exclusion do not count.[11] For 2026 the IRA limit is $7,500 ($8,600 from age 50), and direct Roth contributions phase out between $153,000 and $168,000 of modified adjusted gross income for single filers and $242,000 to $252,000 for joint filers.[10]
Can you do a Roth conversion while living in the UK?
Yes. A US citizen can convert a Traditional IRA or 401(k) balance to a Roth IRA from the UK. The converted amount is taxable income in the US in the year of conversion; the prevailing professional view is that the conversion itself is not a UK taxable event, but HMRC has issued no specific guidance.
On the US side, the converted pre-tax amount is added to income for the year, the 10% additional tax on early distributions does not apply to the conversion itself, and conversions made in 2018 or later cannot be reversed.[11] Each conversion starts its own five-year clock: withdrawing a converted amount within five years and before 59½ triggers the 10% additional tax unless an exception applies.[12]
On the UK side, the usual reasoning is that no money is paid to you: value moves from one US pension scheme to another, so there is no UK receipt to tax, and the qualified distributions that follow are exempt under Article 17(1)(b). HMRC has not confirmed this, and its March 2025 approach to lump sums, which looks at the proportion of the fund withdrawn, has led some practitioners to advise extra caution.
The cross-border point that most often decides whether a conversion makes sense is this: the conversion is US-source income that the UK does not tax, so there is no UK tax to credit against the US tax on it, and foreign tax credits from UK-taxed income cannot generally shelter US-source income. The US tax is a real cost. The benefit is that future growth and withdrawals leave the reach of UK income tax, which at 40% or 45% is often higher than the US rate paid on conversion. Conversions tend to be most efficient in years when US taxable income is otherwise low, such as the years between stopping work and drawing pensions.
Illustration: the arithmetic of a conversion (simple calculation from official 2026 rates, not a planner output)
Fictional US citizen, single, living in the UK, with no other US-taxable income in 2026 (for example, living on savings in a year off work). Uses the 2026 US standard deduction of $16,100 and 2026 single-filer brackets; ignores state tax, growth and exchange-rate movements, and assumes the UK does not tax the conversion. Illustrative only; your figures will differ and the outcome is not guaranteed.
| Amount converted | US federal tax on conversion | Share of amount converted | UK tax if drawn later at 20% | UK tax if drawn later at 40% |
|---|---|---|---|---|
| $60,000 | $5,020 | 8.4% | $12,000 | $24,000 |
| $100,000 | $13,170 | 13.2% | $20,000 | $40,000 |
For the $60,000 conversion, taxable income after the standard deduction is $43,900: $12,400 at 10% ($1,240) and $31,500 at 12% ($3,780).[15] For $100,000, taxable income is $83,900: $12,400 at 10% ($1,240), $38,000 at 12% ($4,560) and $33,500 at 22% ($7,370). If the same money were instead drawn later as UK-taxed pension income, the UK would tax it at the recipient’s marginal rate, and the US tax on it would usually be covered by foreign tax credits.
The comparison flatters the conversion if the money would later be drawn within the UK personal allowance, if UK residence ends before withdrawal, or if HMRC were to take a different view of Roth accounts. It understates it if the account grows substantially, because growth is also sheltered. The answer turns on future tax rates in two countries, which is why Edale’s planner models conversions year by year rather than relying on a single comparison.
When do required minimum distributions start?
For people born between 1951 and 1959, required minimum distributions (RMDs) from Traditional IRAs and 401(k)s start at 73; for those born in 1960 or later, at 75. The first must be taken by 1 April of the year after you reach that age, and each later one by 31 December.[7][8]
The SECURE 2.0 Act raised the ages, and the final regulations published in July 2024 apply from 2025.[8] A drafting overlap in the statute left the age unclear for people born in 1959; the proposed regulations issued alongside state that the applicable age for someone born in 1959 is 73.[9] Roth IRAs, and designated Roth accounts in 401(k) and 403(b) plans, have no RMDs during the owner’s lifetime. A missed RMD attracts a 25% excise tax, reduced to 10% if corrected within two years.[7]
For a UK resident, an RMD is a regular pension payment taxed in the UK at marginal rates. The practical risk is that RMDs arrive on top of a UK State Pension and UK private pensions, pushing income into the 40% band or into the £100,000 to £125,140 range where the personal allowance is withdrawn. Drawing more in earlier, lower-income years can reduce later RMDs. Inherited accounts follow different rules; see inheriting a US IRA while living in the UK.
Can you take money out before 59½?
You can, but withdrawals before 59½ generally carry a US 10% additional tax on top of income tax, unless an exception applies. Two exceptions matter most to people retiring early in the UK: separation from service in or after the year you turn 55 (for employer plans, not IRAs), and substantially equal periodic payments under section 72(t).[14]
A 72(t) plan, known as a series of substantially equal periodic payments (SEPP), lets you draw a calculated amount each year from an IRA without the 10% charge. The IRS allows three methods: the RMD method, recalculated each year, and the fixed amortisation and fixed annuitisation methods, which produce a level payment. The interest rate may not exceed the greater of 5% and 120% of the federal mid-term rate for either of the two months before the first payment. Payments must continue until the later of five years and age 59½; changing them triggers recapture of the 10% on all earlier payments plus interest, although a one-time switch from a fixed method to the RMD method is allowed.[13]
SEPP payments are regular and periodic, which fits well with HMRC’s lump-sum test: they are taxed in the UK as pension income rather than risking lump-sum treatment. The 10% additional tax itself is a US charge only, relevant to US citizens and to non-US persons whose payments remain within US taxing rights.
Can you move a 401(k) or IRA into a UK pension?
Not without a US tax charge. A transfer from a US plan to a UK pension scheme is treated by the US as a taxable distribution, because a UK scheme is not an “eligible retirement plan” for US rollover purposes.
An IRS Chief Counsel memorandum considered a UK resident who moved a 403(b) balance to a UK scheme and concluded that the transfer was taxable in the US as a lump-sum distribution and that Article 18(1) did not provide rollover relief.[20] Such memoranda are not precedent, but the reasoning follows the statute. Rollovers within the US system, such as a direct rollover from a former employer’s 401(k) to an IRA or a trustee-to-trustee IRA transfer, remain available while you live abroad. Some US providers restrict accounts for clients with non-US addresses, which is a practical reason people sometimes consolidate before or after a move; the tax rules do not require it.
How does US withholding work when you live abroad?
It depends on whether you are a US person. US citizens receive Form 1099-R and are subject to the normal US withholding rules, with a minimum of 10% on non-periodic payments sent abroad; non-US persons receive Form 1042-S and face 30% withholding unless they claim a treaty rate on Form W-8BEN.[16][17]
| Recipient | Payment | Default withholding | Can it be reduced? |
|---|---|---|---|
| US citizen or green card holder | Non-periodic IRA withdrawal | 10% (Form W-4R) | Can be increased; generally not below 10% if paid outside the US |
| US citizen or green card holder | Eligible rollover distribution from an employer plan paid to you | 20% mandatory | Avoided only by a direct rollover |
| Non-US person resident in the UK | Periodic pension payments | 30% | Yes, with Form W-8BEN claiming treaty exemption (Article 17(1)(a)) |
| Non-US person resident in the UK | Lump sum | 30% | Remains taxable in the US under Article 17(2) |
Withholding is a payment on account, not the final tax. A US citizen who has too much withheld recovers it on Form 1040. A non-US person who has had US tax withheld on a lump sum claims UK credit for it, subject to HMRC’s current view that the UK may also tax the payment.
How is US Social Security taxed in the UK?
US Social Security paid to someone resident in the UK is taxable only in the UK, and the IRS confirms that this exemption from US tax applies to US citizens resident in the UK as well as to non-citizens.[18] Article 17(3) is one of the saving clause exceptions, so the US gives up its citizenship-based right to tax these benefits.[1]
Two other changes are relevant to anyone with both US and UK working lives. The Social Security Fairness Act, signed on 5 January 2025, ended the Windfall Elimination Provision and the Government Pension Offset, which had reduced benefits for some people also receiving pensions from work not covered by US Social Security; December 2023 was the last month they applied.[19] And under the US–UK totalisation agreement, UK coverage can count towards US benefits where you have at least six US credits.[22] Claiming ages, survivor benefits and the UK State Pension are covered in Social Security and the UK State Pension.
How the Edale Wealth Hub helps
Holding US retirement accounts while living in the UK turns routine choices into cross-border ones: which account to draw first, whether to convert, and how large each withdrawal should be. Edale’s planner, used by an adviser with a client and by clients themselves, holds 401(k), Roth 401(k), 403(b), 457(b), SEP-IRA, Traditional IRA, Roth IRA and inherited accounts alongside UK pensions, ISAs and Social Security, and applies UK tax, US federal tax and the foreign tax credit interaction year by year.
- Roth conversion modelling. Year-by-year conversions can be added to a plan so the adviser and client see the US tax in each conversion year against the effect on later UK tax and on what the household keeps.
- 72(t) planning. The SEPP tool calculates payments under all three IRS methods for early retirees who need income before 59½.
- Withdrawal order. Alternative orders of drawing US accounts, UK pensions and ISAs can be compared to see which leaves the household more after tax in both countries.
- Currency and risk. Dollar accounts funding sterling spending can be tested against historic GBP/USD episodes, Monte Carlo simulations and sequence-of-returns risk.
- Tax Records. Advisers record US Roth conversions and US pension withdrawals; clients see them in the portal.
- My Investments. For accounts linked by the adviser (currently Interactive Brokers UK and US), the US tax summary shows retirement-account withdrawals separately in a 1099-R style, with gross amount, tax withheld and amount paid out.
These outputs are planning estimates and summaries to share with an accountant or US tax preparer. They are not tax returns or IRS forms, and Edale does not prepare US tax returns. Whether a conversion or a particular withdrawal pattern suits you depends on your circumstances. See the cashflow planner or arrange a conversation.
Frequently asked questions
Do I pay UK tax on the growth inside my 401(k) or IRA?
No, not while the money stays in the account. Article 18(1) of the US–UK treaty means income earned inside a US pension scheme is taxed only when it is paid out to a UK resident. Withdrawals are then taxed in the UK as pension income, apart from amounts that would be tax-free in the US, such as qualified Roth distributions.
Is my Roth IRA tax-free if I live in the UK?
Qualified Roth IRA distributions are generally tax-free in both countries. Roth IRAs are named in the treaty’s Exchange of Notes, and Article 17(1)(b) requires the UK to exempt amounts the US would exempt. HMRC has not published guidance on Roth contributions made while UK resident, so many advisers take a cautious approach to adding new money after moving.
Will HMRC tax a lump sum from my 401(k)?
Under HMRC’s guidance updated in March 2025, yes: both countries may tax a US pension lump sum paid to a UK resident, with UK credit for US tax. HMRC treats a payment of 50% or more of the fund as generally a lump sum, and 20% or more as likely to be one. Regular, periodic withdrawals are taxed as ordinary pension income instead.
Is a Roth conversion taxed in the UK?
The prevailing professional view is no, because no money is paid out to you and the later qualified distributions are exempt under the treaty. HMRC has not issued specific guidance. The conversion is taxable in the US, and because the UK does not tax it, there is usually no UK tax to credit against that US bill.
At what age must I start taking RMDs?
At 73 if you were born between 1951 and 1959, and at 75 if you were born in 1960 or later. The first RMD is due by 1 April of the following year, and later ones by 31 December each year. Roth IRAs and Roth 401(k)s have no lifetime RMDs. A missed RMD carries a 25% excise tax, or 10% if corrected within two years.
Can I transfer my 401(k) to a UK pension?
Not without US tax. A UK scheme is not an eligible retirement plan for US rollover purposes, so the US treats a transfer to it as a taxable distribution, as an IRS Chief Counsel memorandum concluded. You can usually still roll a 401(k) into a US IRA while living abroad, although some US providers limit accounts for non-US addresses.
Why was 10% withheld from my IRA withdrawal?
For US citizens and green card holders, the default federal withholding on a non-periodic IRA payment is 10%, and you generally cannot choose less than 10% when the payment is delivered outside the US. It is a prepayment, not the final tax: any excess is recovered through your US return, and your actual liability depends on your income and foreign tax credits.
Is my US Social Security taxed in the US if I live in the UK?
No. Under Article 17(3) of the treaty, US Social Security paid to a UK resident is taxable only in the UK, and the IRS confirms this applies to US citizens living in the UK as well as non-citizens. The benefit is reported on your UK tax return as foreign pension income.
Sources
- US Treasury — Convention between the United States and the United Kingdom for the avoidance of double taxation (2001), Articles 1, 17, 18 (accessed September 2026)
- US Treasury — US–UK Exchange of Notes (2001), definition of pension schemes (accessed September 2026)
- HMRC — Double Taxation Relief Manual DT19853: United States of America, notes (accessed September 2026)
- HMRC — International Manual INTM163160: pensions, lump sums (accessed September 2026)
- Low Incomes Tax Reform Group — UK tax on overseas pensions (accessed September 2026)
- legislation.gov.uk — Income Tax (Earnings and Pensions) Act 2003, section 575 (accessed September 2026)
- IRS — Retirement topics: required minimum distributions (accessed September 2026)
- Federal Register — Required Minimum Distributions, final regulations (19 July 2024) (accessed September 2026)
- Federal Register — Required Minimum Distributions, proposed regulations (19 July 2024) (accessed September 2026)
- IRS — 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 (accessed September 2026)
- IRS — Publication 590-A, Contributions to Individual Retirement Arrangements (accessed September 2026)
- IRS — Publication 590-B, Distributions from Individual Retirement Arrangements (accessed September 2026)
- IRS — Substantially equal periodic payments (accessed September 2026)
- IRS — Significant ages for retirement plan participants (accessed September 2026)
- IRS — Tax inflation adjustments for tax year 2026 (accessed September 2026)
- IRS — Form W-4R (2026), Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions (accessed September 2026)
- IRS — Plan distributions to foreign persons require withholding (accessed September 2026)
- IRS — Publication 915, Social Security and Equivalent Railroad Retirement Benefits (accessed September 2026)
- Social Security Administration — Social Security Fairness Act (accessed September 2026)
- IRS Office of Chief Counsel — Memorandum on the US–UK treaty and a transfer from a US plan to a UK scheme (accessed September 2026)
- Tax Adviser magazine — US pension lump sums: navigating the saving clause (accessed September 2026)
- Social Security Administration — Agreement between the United States and the United Kingdom (accessed September 2026)