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Thinking about drawing from a US retirement plan while living in the UK—or timing US Social Security alongside a UK State Pension? This guide provides you with the current rules, the most effective strategies, and the exact administrative steps to prevent money from being lost to unnecessary tax or withholding.
What Changed—and Why It Matters
Two points drive most planning in 2025. First, the UK–US treaty taxes periodic US private pension payments in the UK when you’re a UK resident and not a US person. Second, lump-sum withdrawals from a US plan are treated differently: the US can tax them at source, and the UK taxes them as your country of residence, with relief to avoid double taxation on the UK return. Separately, the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) have been repealed for benefits payable starting in 2024, which will change Social Security outcomes for many public-service retirees.
Periodic US Pension Payments: Where They’re Taxed and How to Get 0% US Withholding
If you’re a UK resident and not a US citizen or green-card holder, regular distributions from a US 401(k), 403(b), or traditional IRA are taxed in the UK. To stop the US payer from defaulting to 30% non-resident withholding, submit a current Form W-8BEN to each provider (TIAA-CREF, Fidelity, etc.) before any payment is made. With the form in place, the provider can apply 0% US withholding on periodic payments, so you pay UK tax through Self Assessment.
If US tax is deducted on a monthly payment, HMRC typically will not grant a UK foreign tax credit because the treaty grants taxing rights to the UK for periodic payments. The fix is administrative: correct the W-8BEN position with the payer and seek a refund on the US side if necessary.
Lump-Sum Withdrawals: Why They’re Different
A lump sum from a US plan (for example, cashing out a big portion of a 401(k) or 403(b) in one go) can be taxed by both countries—the US as the source, and the UK as your country of residence. You can then claim Foreign Tax Credit Relief on the UK return to avoid double taxation; however, the combined effect is often more expensive than receiving the money as a series of periodic payments. UK domestic rules since 2017 also mean most foreign-scheme lump sums are taxable in full in the UK unless very specific conditions are met (rare for standard US employer plans and IRAs).
When might a lump sum still make sense? Only if the economic benefit is compelling—for example, a one-off payment that clearly outperforms the extra tax cost. Always model the after-tax numbers in sterling before you act.
How the UK Taxes US Pension Income in Practice
Amounts you receive are foreign pension income taxed at your UK marginal rates in the tax year of receipt. Report them on SA106 (Foreign pages). Convert each payment to sterling using the exchange rate on the date it arises (or apply a consistent recognised average for the period if appropriate and you stick to it). Keep the 1099-R and custodian statements as evidence of your transactions.
TIAA-CREF vs Fidelity: Does the Provider Change the Result?
No. The rules apply by account type, not brand. A university 403(b) at TIAA-CREF, a 401(k), or a traditional IRA at Fidelity all follow the same pattern: periodic payments can be paid with 0% US withholding when a valid W-8BEN is on file and are then taxed in the UK; lump sums can be exposed to both countries with relief claimed on the UK return.
US Social Security for UK Residents (2025 Position)
US Social Security paid to a UK resident is taxed in the UK, not in the US. The repeal of WEP/GPO increases benefits for many affected claimants from benefits payable in 2024 onward. You can still increase your Social Security by deferring up to age 70; there’s no increase after 70, so the decision is a straight trade-off between a higher monthly amount and getting cash sooner.
UK Pensions (Aviva and Others): What Happens When You Draw
Under current UK rules, you can take up to 25% of your total UK pension benefits tax-free, subject to your available lump-sum allowance across all schemes. The balance is taxed as income when drawn via flexi-access drawdown or an annuity. If you hold transitional protections, your tax-free entitlement may be higher and should be verified before access.
The Strategy That Tends to Win
For most UK-resident clients with US pensions, steady, periodic withdrawals are the preferred option in terms of tax efficiency and administrative simplicity. Shape annual withdrawals to fit your preferred UK tax band so you avoid pushing other income—especially dividends—into higher rates. Keep your W-8BEN current with every US custodian before payments start, retain payment evidence, and record your GBP conversion method consistently.
Required Minimum Distributions (RMDs)
Traditional IRAs and most employer plans require RMDs from age 73. You can delay the first RMD until April 1 of the following year, but doing so often results in two withdrawals being combined into one UK tax year. Mark the dates early and plan elective withdrawals around them.
Common Mistakes (and How to Avoid Them)
- Missing or expired W-8BEN, leading to avoidable US withholding on periodic payments.
- Treating lump sums as if they were exempt in both countries, resulting in surprise US withholding and higher overall tax.
- Converting USD to GBP at inconsistent rates without keeping records to support Self Assessment.
What You Should Do Next
- Confirm each account type with your US provider (e.g., 401(k), 403(b), IRA) and file a current W-8BEN with each one before withdrawing any funds.
- Decide whether you want a steady annual withdrawal plan or have a clear economic case for a lump sum.
- Prepare a simple year-by-year projection in GBP showing periodic withdrawals at different levels and the effect on your UK tax bands and other income.
- If you’re considering US Social Security, compare “claim now” versus “defer to 70” after UK tax, and include the latest benefit figures in sterling.
Why Work With Us
Cross-border pensions are unforgiving: a ten-minute form can save months of reclaiming; a one-time decision can lock in avoidable tax for years to come. Our team combines UK Self Assessment expertise with hands-on US custodian experience, ensuring your UK return is flawless.
Book a consultation and receive a fixed-fee plan covering complete UK filing support (SA106, FX, and, if needed, foreign tax credit). We can tailor the same framework for different income mixes, ages, and provider types (TIAA-CREF, Fidelity, Vanguard, Schwab, and others).