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Title: Tax Accountant Addresses HMRC Nudge Letters Over US Pension Foreign Tax Credits

Birmingham, West Midlands, United Kingdom, 24th Jan 2025 – Tax Accountant, a leading advisory firm specializing in cross-border taxation, today raised concerns about the recent wave of “Nudge Letters” issued by HM Revenue & Customs (HMRC) to US citizens residing in the United Kingdom. These letters—sent as part of HMRC’s ongoing compliance efforts—question the foreign tax credits some taxpayers claim for US taxes paid on various pension distributions.The firm warns that many individuals could face unexpected tax bills or double taxation if their claims for relief are denied. Under the UK-US Double Taxation Treaty, US citizens living in the UK may be entitled to offset UK tax on foreign income with credit for taxes already paid in the United States. However, confusion surrounding the classification and tax treatment of different US pension types seems to be driving the recent scrutiny.Common Types of US Pensions401(k) Plans – Employer-sponsored retirement accounts that typically require distributions to be taxed in the US; UK residents may also owe UK tax on these amounts and claim credits to avoid double taxation.Traditional IRAs – Similar to 401(k) in tax treatment, withdrawals are generally taxable in both the US and the UK, subject to available treaty reliefs.Roth IRAs—Qualified distributions (if certain conditions are met) are not taxed in the US, but in some cases, they may still be subject to UK tax.US Social Security – Under the US-UK treaty, the UK, not the US, generally has the right to tax social security benefits if you are a UK resident, although specific circumstances can vary.While some pensions (e.g., qualifying Roth IRA distributions) may not incur a US tax charge, HMRC may still assess UK tax on those amounts, leading to complications in claiming fo...

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