Your pension pot does not change. Who taxes it does

Figures relate to tax year 2025-26 (UK) · 2025 (US)

The money does not move. The accounts stay where they are, with the same providers and the same balances.

What changes on landing is which country has first claim on the withdrawals. Retiring to the UK puts a second tax authority between you and your own savings.

So the planning is mostly about sequence and timing, and almost all of it works better before the flight than after.

Key takeaways

• Retiring to the UK gives Britain the first claim on pension withdrawals.
• America still taxes its citizens, with relief flowing by credit.
• Social security is usually taxable only in the country you live in.
• A Roth may not be respected the way you expect.
• New arrivals have a four year window worth understanding.
• Required minimum distributions continue regardless of where you live.
• An inheritance tax clock starts when you become UK resident.
• Lump sums and periodic payments are treated differently.

Who taxes an IRA withdrawal once you live here?

Britain, in most cases. According to the treaty, periodic pension payments generally belong to the country of residence. America then taxes the same money as it taxes all its citizens, and you claim a credit for the British tax. The result is usually one bill at the higher of the two rates rather than two bills.

Our guide to US retirement accounts in the UK covers the mechanics.

Residence drives the first claim.

Are lump sums treated differently?

They are, and this catches people badly. The treaty treats a lump sum differently from a series of periodic payments, and a large one-off withdrawal can land with America rather than Britain. Taking your pot in one go is therefore a very different transaction from drawing it down.

Our guide to pension lump sums on a US return covers the charge.

So never take a lump sum casually.

What about social security?

Generally taxable only where you live, which is one of the cleaner outcomes in the whole treaty. An American retiring to the UK usually finds their social security taxed by Britain alone. That is simpler than most of what follows, and it is worth knowing early.

Our guide to social security and the state pension covers both.

One country, not two.

Can you still claim a UK state pension?

If you have enough qualifying years, yes, and buying extra years is often outstanding value. Americans who worked here earlier may have a partial record worth topping up. The totalisation agreement can also help where neither country alone gives you enough years.

Our guide to voluntary National Insurance covers topping up.

Check your record before you arrive.

A worked example

Take an illustrative example. A couple retire from Boston to Shropshire with a $1.2 million individual retirement account between them.

They draw $60,000 a year. Britain taxes it as pension income, and the American return claims a credit for that British tax.

Because British rates on that band exceed the American ones, the credit covers the American charge entirely.

Had they taken a single large lump sum in the first year instead, the treaty analysis changes and the outcome is materially worse.

Before and after the flight

Is a Roth still tax free?

Often but not always, and it deserves real attention. Britain may respect the American character of a Roth withdrawal in the right circumstances, but the analysis depends on the scheme and the treaty article. Assuming it carries across untouched is a common and expensive error.

Our guide to UK pensions and US tax covers the treaty position.

Check it before you rely on it.

Should you convert to a Roth before moving?

Sometimes, and the year before departure is the window. A conversion while you are still American resident is taxed on American rules alone, with no British claim on it. Done after arrival, Britain may want its share of the same conversion.

Our guide to moving to the US tax planning covers the mirror move.

The timing is the whole decision.

What is the new arrivals regime?

A four year window for people who have not been UK resident recently. Per GOV.UK guidance on the regime, certain foreign income and gains can escape British tax within it. It replaced the older non-domicile rules and it is time limited rather than open ended. For a retiree with substantial American income it can be genuinely valuable.

Our guide to the FIG regime for arriving Americans covers the detail.

Four years, then it stops.

Do required withdrawals still apply?

Yes, and living abroad changes nothing about them. The American rules force a minimum withdrawal once you reach the starting age, whatever country you are in. Providers rarely chase people overseas, which is how the deadline gets missed.

Our guide to missed required minimum distributions covers the fix.

December is the date that matters.

What happens to your brokerage account?

It keeps running, though some firms restrict overseas residents. Dividends and gains become taxable in Britain as well as America, with credits bridging the two. Several American brokers will not accept a British address at all, so check before you give notice on the house.

Our guide to exchange rates on a US return covers the conversion.

Ask the broker before you move.

Should you sell investments before arriving?

Often yes, because gains realised before residence begins fall outside the British charge. Rebasing a portfolio in the final American year can remove a large latent gain from British reach. It costs American tax now to avoid a British charge later.

Our guide to the statutory residence test covers when residence starts.

Model it rather than assuming.

What about American mutual funds?

They are fine for America and awkward for Britain, which is the reverse of the usual problem. Some British reporting rules treat foreign funds unfavourably, so a portfolio of American funds can produce poor UK outcomes. Reviewing holdings before arrival avoids rebuilding them afterwards.

Our guide to UK reporting fund status covers the rules.

The problem runs both ways.

When does inheritance tax start to matter?

Sooner than most people expect, because long residence now drives British exposure. After enough years here, worldwide assets come within the British charge rather than just the British ones. For a retiree arriving in their sixties, that threshold can arrive well within their lifetime.

Our guide to long-term residence and inheritance tax covers the rule.

The clock starts on arrival.

Do you need a new will?

Almost certainly, and signing a British one carelessly can revoke your American one. A cross-border estate usually wants either one carefully drafted worldwide will or two that are limited to their own countries. Getting this wrong is discovered by your executor rather than by you.

Our guide to wills for Americans in the UK covers the drafting.

Review it in the first year, not the fifth.

What about healthcare and the surcharge?

Access depends on your visa and your residence status rather than on tax. Many routes carry an immigration health surcharge paid up front, and that is a cost rather than a tax relief. It is worth budgeting alongside the tax, because the figures are not trivial.

Our guide to health insurance for US expats covers cover abroad.

Budget it as part of the move.

Does your state still want anything?

Possibly, and some states are reluctant to let go. California and New York in particular look at ties rather than at your new address. Cutting those ties properly in the year you leave is as important as anything you do on the British side.

Our guide to state tax after you leave covers the risk.

The federal exit is not the whole exit.

What happens in the year you arrive?

The year splits, and British split year treatment can apply so you are only taxed here from arrival. That relief is not automatic and it depends on meeting one of the statutory cases. Getting the arrival date right matters more than people realise.

Our guide to split year treatment covers the cases.

Arrival dates have consequences.

Do you have to file in both countries?

Yes, every year. Per the IRS, citizens file wherever they live, and retirement changes none of that. America taxes citizens wherever they live, and Britain taxes residents on what they bring in. Two returns, one set of income, with credits joining them up.

Our guide to US tax deadlines for expats covers the dates.

Retirement does not end the filing.

What records should you bring?

Account statements as at the date of arrival, cost basis for every holding, and your National Insurance record if you have one. Those three things are needed later and become hard to obtain once you are abroad. Gather them in the final American months.

In our practice basis records are what go missing.

Brokers purge old data quietly.

What makes retiring to the UK different from working here?

Your income stops being employment and starts being investment and pension, which moves it into the parts of the treaty people never read. A salary is simple, taxed where you work with a credit the other way. Pensions, annuities, social security and lump sums each have their own article and their own answer.

So the familiar rules stop applying on arrival.

Because every income type is handled separately.

Does retiring to the UK suit everyone financially?

Not automatically, and it is fair to test the assumption. British rates on pension income can exceed American ones across the middle bands, and the credit only removes double taxation rather than giving you the lower of the two. Somebody moving from a state with no income tax may feel the change sharply.

So compare the total, not the headline rate.

Because the credit equalises upwards, not downwards.

What order should you draw your accounts in?

That depends on which pots Britain can reach and when. A sensible sequence usually uses whatever falls inside the new arrivals window first, leaves the most heavily taxed pot until the rates suit, and keeps required withdrawals on schedule throughout. The order is worth setting once and reviewing annually.

So drawdown is a plan, not a habit.

Because the sequence changes the lifetime bill.

What if you keep a home in America?

Keeping property is perfectly possible but it complicates both sides. It can hold a state tax tie open, it counts for American estate tax, and letting it out creates rental reporting in two countries. Many retirees sell before leaving purely to simplify the next twenty years.

Our guide to US property for UK residents covers the letting.

So decide about the house early.

How long before the move should you start?

Two full tax years is comfortable and one is workable. The decisions worth money, rebasing investments, Roth conversions and cutting state ties, all have to happen while you are still American resident. Arriving first and asking afterwards closes most of those doors permanently.

Our guide to the moving to the UK checklist covers the wider list.

Because almost nothing can be fixed from this side.

What about annuities bought in America?

They sit awkwardly, because the two systems split an annuity payment in different proportions. America separates each payment into a return of your own capital and a taxable element, while Britain may treat the whole amount as income depending on the product. A holding that looked simple in Ohio can become the most complicated line on your British return.

So review annuities before you draw on them.

Because the split rarely matches across the two systems.

Does currency risk matter in retirement?

A great deal, and it is not really a tax question. Your costs are in pounds while your savings sit in dollars, so a weak dollar cuts your real income regardless of what either tax authority does. Retirees often underestimate this next to the tax, when it moves more money over twenty years.

So think about the currency alongside the tax.

Because exchange rates outlast any planning.

What if you change your mind and go home?

Returning is possible but it is its own tax event rather than a simple reversal. Leaving Britain can trigger charges on gains in certain cases, and temporary non-residence rules can reach back at you if the absence was short. Planning a return needs the same care the arrival did.

Our guide to moving back to the US covers the return.

So a trial year is harder than it sounds.

How to plan a retirement move to Britain

1. Fix the arrival date for retiring to the UK and test it against the residence rules.
2. Review whether a Roth conversion makes sense in the final US year.
3. Consider rebasing taxable investments before residence begins.
4. Check which American brokers will keep you as a UK resident.
5. Check your National Insurance record and the cost of topping it up.
6. Decide between lump sum and drawdown with the treaty in view.
7. Rewrite the wills on both sides before signing anything.
8. Cut state tax ties deliberately in the year you leave.

Mistakes and penalties we see when retiring to the UK

The first is taking a large lump sum after arrival, when the treaty treats it quite differently.

The second is assuming a Roth carries across untouched without checking.

The third is signing a British will that quietly revokes the American one.

The fourth is missing a required withdrawal because the provider writes to an old address.

How US UK Tax Accountants helps

We work backwards from the arrival date, because almost everything worth doing happens in the months before it rather than afterwards.

Then we set the drawdown order so the treaty works for you. Our pensions service covers the retirement side.

If a move is planned for the next couple of years, get in touch while the useful decisions are still open.

Last reviewed 23 October 2026. This article is general information and not personal tax advice, and treaty outcomes depend on your own facts.

For the neighbouring question, What they can actually take when you live here walks through it in detail.