A British Passport in America
Here at Tanager we specialize in helping US and UK citizens navigate trans-atlantic financial lives, which can mean different things for different people. One thing is for sure though, a lot of the buzz in our business tends to revolve around Americans living in the UK which may be for a few reasons. The first and foremost being that since the United States is one of two nations that currently taxes worldwide income based on citizenship (Fun Fact: the other is Eritrea), US citizens living abroad are exposed to a plethora of unique tax issues resulting from having to pay taxes in both their country of residence and the US each year. Another reason may result from the fact that Americans living in the UK generally tend to be concentrated in and around London, which has created a large community to voice their issues and needs in one place. UK citizens in the US, on the other hand, tend to be spread out around different states, which can make it difficult for the scope of people in that demographic to be realized.
We have seen estimates putting the number of UK nationals in the United States as high as one million, so it is quite obvious there is a large group of individuals that have unique financial needs in the US as well. Some of you reading this right now may be one of these UK nationals in the US and not even realize that you have unique financial needs. Maybe because it is true that UK nationals can break their UK tax domicile by living abroad so many think there is nothing to worry about, but there is still a host of things to consider when planning out your financial life as an expat, dual-citizen, or multi-citizenship household in the US.
Let’s take a look at some of the more common issues a British national may face when living in the US with regard to their financial planning and investments:
- Managing a UK based pension while living in the United States. This could be consolidating pensions, changing the underlying investments, taking benefits, or staying up to speed on pension rules like the lifetime allowance.
- Managing currency exposure when income, expenses, assets, and liabilities may exist in both the US and UK simultaneously.
- Proper financial planning when uncertainty about what the future looks like. Saving and investing for retirement when retirement could be in the US or UK. Also saving for things like children’s education when they could attend university in the US or UK.
- Moving to the US while still holding UK-based accounts or assets that are taxed punitively in the US. You could become a US taxpayer when you still have an ISA in the UK, or investments the US would consider to be a Passive Foreign Investment Companies (PFICs).
- Efficiently planning for gifting, inheritance, and estate planning issues when family and assets extend across both countries.
Unfortunately, many of the above issues are too often addressed after they have already become a problem. The lack of awareness around these pitfalls makes it hard for many people to come across them until they encounter them firsthand. Taking this into consideration, it’s hard to overstate the value of proactive financial planning and a financial advisor that understands how to manage these complex issues, even when some future plans may still be riddled with uncertainties.
This may seem a daunting task, as a comprehensive financial plan should look at your life holistically and cover tax strategy, insurance, and estate planning alongside achieving financial independence. However, when dealing with multiple nationalities, the costs of inaction can greatly exceed the benefits of proper planning.
Further articles on Investing
Secure your financial future
Our team of experts are ready to discuss your financial future.