Client moving from the UK to the US
A move from the UK to the US can create one of the more technically demanding cross-border planning situations.
The client may arrive with UK pensions, ISAs, general investment accounts, property, share plans and other assets that were straightforward in the UK but need to be reviewed once US tax residence begins.
Josh Clancey works alongside US tax advisers, UK tax advisers, lawyers and other professionals where a client's move to the US creates wider financial-planning decisions around investments, pensions, retirement and long-term wealth.
Pre-move planning matters
The timing of a UK-to-US move can affect how existing assets should be reviewed.
Before US residence begins, the client may need to consider:
- UK pensions
- ISAs
- general investment accounts
- collective investment funds
- property
- employee share schemes
- cash
- life assurance
- beneficiary arrangements
- retirement planning
- future US employer benefits
- long-term residence intentions
US tax advice should establish the client's filing and reporting position.
Financial planning can then focus on whether the client's existing assets and future savings strategy remain appropriate.
Common planning areas when a client moves from the UK to the US
UK pensions
UK pension arrangements can remain important long-term retirement assets after a move to the US.
The client may need to understand how the pension fits alongside future US retirement accounts and retirement income.
ISAs
A UK ISA retains its UK tax treatment, but US tax treatment is a separate issue.
The underlying investments may also create US reporting or tax complications.
Non-US investment funds
Some UK or European collective investments may fall within the US Passive Foreign Investment Company regime.
That can make pre-move review particularly important.
US retirement accounts
After the move, the client may begin accumulating assets through a 401(k), IRA or other US retirement arrangement.
These need to be coordinated with existing UK pensions.
Employee compensation
A senior employee may arrive in the US with existing RSUs, share options or deferred compensation while also receiving new US-based awards.
Estate and beneficiary planning
The move may create a new need to coordinate beneficiaries, pensions and estate planning across the UK and US.
Questions to ask before the move
When will US tax residence begin?
The appropriate US tax adviser should establish the client's filing status and effective tax position.
What UK investments does the client currently hold?
Funds and wrappers that worked well for a UK resident may create different tax or reporting outcomes in the US.
Are any holdings likely to be PFICs?
This is particularly relevant for non-US collective investments.
What UK pensions will remain in place?
The client may later hold both UK pensions and US retirement accounts.
Does the client expect the US move to be permanent?
A temporary assignment and permanent relocation can require very different planning.
Will the client receive US employer benefits?
401(k) plans, equity awards and health benefits should be incorporated into the wider financial plan.
Does the family include both US and non-US persons?
Different citizenships and tax statuses can materially affect investment and estate planning.
Useful resources for advisers working with UK-to-US clients
The Professional Adviser's Guide to UK Clients Moving to the US
A broad guide to the main financial-planning issues that may need review before and after a client becomes US resident.
PFIC Exposure: What Professional Advisers Need to Recognise
A focused technical brief covering the potential US consequences of holding non-US collective investments.
US Citizens Holding Non-US Investments
A professional resource covering wider US tax and financial-planning issues around non-US assets.
US-Connected Clients With UK Pensions
A technical brief covering the interaction between UK pension arrangements and US-connected clients.
Client Moving Country Checklist
A practical checklist covering financial arrangements that may need review around an international move.
US-Connected Client Red Flag Checklist
A practical checklist for identifying common US tax, investment and retirement-account issues.
PFIC exposure can make pre-arrival planning particularly important
One of the most common investment problems for clients moving from the UK to the US is the US treatment of non-US collective investments.
A client may hold UK unit trusts, OEICs or other non-US pooled investments that were entirely normal while UK resident.
For US tax purposes, some of those investments may be treated as Passive Foreign Investment Companies.
That can create:
- additional reporting
- potentially punitive tax treatment
- complex annual calculations
- a need for specialist US tax input
The tax adviser should determine whether a holding is a PFIC and advise on the US tax consequences.
The financial-planning role is to make sure the investment strategy reflects that advice before and after the move.
Coordinating UK pensions with the new US financial system
The move may leave the client with retirement assets in two systems.
For example:
- UK defined contribution pensions
- UK defined benefit pensions
- future US 401(k) assets
- IRAs
- Social Security entitlement
- personal investments
The objective should be to view these collectively rather than as unrelated accounts.
A UK pension should not automatically be transferred simply because the client has moved to the US.
Equally, future US retirement contributions should be considered in the context of the client's existing UK retirement wealth.
The relevant tax advisers should establish cross-border tax treatment, while the financial plan coordinates the assets around retirement objectives, risk and future spending.
When should the referral happen?
Ideally, before the client becomes US resident.
That allows time to identify:
potentially problematic investments
PFIC exposure
UK pensions
ISAs
employer share plans
future US retirement accounts
estate and beneficiary issues
Some restructuring decisions may become more complex after US tax residence begins.