UK Banking for expats in the US

[OffToTheWest]

Hi,

I'm currently a UK resident, moving to the US for the first time later in the year (as a green card holder) and am wondering what to do with my UK current account and ISA.

As far as banking is concerned, my bank offers an international account but they charge and I'm wondering if it's worthwhile. I'm concerned that when I tell them I'm moving they'll oblige me to change. I'd be interested to hear what other people did when they moved. Did you speak to your bank? Did you change accounts?

I know I can leave my ISA open (but not make any more contributions while I'm not a UK resident) but again I wonder if this is the best thing to do. I am concerned that I may become liable for tax by the IRS for savings interest.

I'd be very grateful to hear anyone else's experience with these things. My situation is fairly straightforward but it would be great to hear how other people have dealt with this.

With thanks!

[Bevdeforges]

When I moved back to the US from the UK, I just left my UK current account in place. Ten years later, I was very glad to have done this as I found myself back in Europe, with some payments coming in in sterling. I did notify my UK bank of all my address changes, and have continued to receive statements - though now with Internet access to the account, it's not absolutely necessary. I wouldn't bother with the "international account", especially if there are fees for it.

Don't know about the ISA account, though I have a US based IRA, which seems to be similar. Technically, yes, you'll have to declare the interest and pay US income tax on it. You can always decide later to close it out and transfer it elsewhere.
Cheers,
Bev

[Fatbrit]

Under no circumstances close all your UK bank accounts -- you'll find it nigh on impossible to reopen them. Easiest bet is to use a mailing address of relative or friend in the UK. Some banks seem to have no problem with you living overseas and will even mail your statements there; others baulk at the idea.

The ISA is transferable in theory but NOT in practice. Leave it where it is.

[Rachel_Heath]

The main issue you'll have is dealing with taxation; the UK bank will possibly deduct tax off any interest paid. However as a legal permanent alien you'll be required to inform the IRS of the interest accrued and, in the process, avoid paying a double taxation hit using the tax treaties in effect between the UK & the US.

I tried it a few years ago and was eventually hit by AMT (Alternative Minimum Tax) as a result of it (which raised my ire somewhat) so I eventually gave up. Whilst not having a pound sterling account has been somewhat of an inconvenience (paying for my British magazine subscriptions) by and large I've been able to work around it and have a more peaceful life as a result - however circumstances differ between folk so it's probably worth keeping it open for a while and see how you go.

As Fatbrit mentioned earlier though - it's a darned site harder to open a UK account as an expat so do think carefully before making that closure decision.

[OffToTheWest]

Thanks Bev, Fatbrit and Rachel, for your very helpful answers. I am going to speak with the bank. The idea of just leaving the ISA alone for now is a great one. I have enough to think about right now, and it will keep!

Thanks again for the help.

[synthia]

Is the ISA account a retirement account that is sheltered from tax in the US? Because I think that as long as you don't make contributions or withdraw any of the interest, you won't be subject to tax in the US. I can't tell you why I think this is true, but probably it was discussed somewhere/time in some long rambling discussion with some expats. Anyway, you could contact the IRS and ask if it will be taxable, or consult an international tax accountant or lawyer who will know what the situation is.

If it is a retirement account, that shelter should be honored on both sides of the pond.

[Fatbrit]

Originally Posted by synthia

Is the ISA account a retirement account that is sheltered from tax in the US? Because I think that as long as you don't make contributions or withdraw any of the interest, you won't be subject to tax in the US. I can't tell you why I think this is true, but probably it was discussed somewhere/time in some long rambling discussion with some expats. Anyway, you could contact the IRS and ask if it will be taxable, or consult an international tax accountant or lawyer who will know what the situation is.

If it is a retirement account, that shelter should be honored on both sides of the pond.

They're most probably taxable by the IRS, both interest and capital gains. That's if you care to let the IRS know you have them, that is.

The problem the OP has is that if he cashed in and brought the money over instead, he could not just transfer it to retirements accounts and thus it would be subject to the same taxation. So I don't really see any great gain for him.

[Bevdeforges]

Unfortunately, the US IRS doesn't honor retirement savings plans of other countries, but as Fatbrit said, letting it sit where it is without adding anything to it is probably the best approach for the moment. (It's somewhat similar for Americans abroad with IRAs or 401Ks.) I've also found that even "international" tax consultants don't seem to have any idea just how to deal with these retirement savings plans.
Cheers,
Bev

[Fatbrit]

Originally Posted by Bevdeforges

Unfortunately, the US IRS doesn't honor retirement savings plans of other countries, but as Fatbrit said, letting it sit where it is without adding anything to it is probably the best approach for the moment. (It's somewhat similar for Americans abroad with IRAs or 401Ks.) I've also found that even "international" tax consultants don't seem to have any idea just how to deal with these retirement savings plans.
Cheers,
Bev

It honors some retirement plans.......but not this one.

[synthia]

What I was trying to say was that if the OP left the money in the original accounts and didn´t take anything out, there would be no real income to report, as the OP wouldn´t have received any money. I´m assuming that interest in a retirement account that is protected would also be sheltered from US tax. And it would have to be a huge amount of interest for it to make much of a difference. If the account were kept largely in stock (shares to you guys), and nothing was bought or sold, there wouldn´t be any tax no matter what the status of the account.