UK Lifetime ISA (Account Options)

Lifetime ISAs are a relatively new product, and are an interesting hybrid of a “normal” ISA and a pension, kind of like a Roth IRA. Your money is locked up until age 60 except for a first home purchase, but it’s tax advantaged. The low contribution limit means this won’t be a huge part of a FIRE portfolio, but it may be useful.

It’s probably best to read the Stocks & Shares ISA article first – most of the information there applies to a Lifetime ISA as well, and I’ve tried not to be too duplicative.


Strong UK tax advantages plus a 25% bonus from the government, but your money is (gently) locked away and you’ll need to manage individual stocks to avoid unpleasant PFIC constraints from the US.


Definitely after UK pensions and US IRA – the tax advantages aren’t as good.

It’s a tossup between a Stocks & Shares (S&S) ISA vs a Lifetime ISA. S&S ISAs don’t give you the 25% bonus but you can withdraw your money at any time for any reason. Pick whichever is more useful to you – you could easily have both, and use the full £4,000 of the annual Lifetime ISA allowance with the remaining £16,000 of the overall £20,000 ISA allowance going to a S&S ISA.

Skip if you aren’t comfortable with individual stocks, or another way of dealing with PFIC problems.


All UK residents between the ages of 18 and 39 can open an account. If you’re aged 40 to 50, you can contribute to an existing account but not open a new one.

Investment Options

Same as a S&S ISA – you can hold whatever you want, but you’ll most likely want to stick to individual stocks to avoid PFIC headaches. Cash is also an option, especially if you’re using the Lifetime ISA to save for a first house in just a couple of years and don’t want that money exposed to market risk.

Risk & Return

Depends what you invest in – compared to an index fund, individual stocks are riskier, you probably want to be picking big, boring companies with relatively stable finances. But that’s no guarantee – big companies go bust, too.

You do get a guaranteed 25% return based on the bonus from the UK government. Really, all this is doing is giving you back the 20% basic rate tax rate, since you’re contributing from after-tax money. This bonus is also taxable in the US.

Withdrawal Options

Lifetime ISAs are intended for two purposes:

  • Purchase of a first home. If you’re buying a house in the UK, priced at £450,000 or less, with a mortgage, and you’ve never bought a house anywhere else in the world, you can use your Lifetime ISA for this.
  • Retirement, after age 60. No special eligibility here, just turn 60.

There are two less preferred ways of withdrawing, as well

  • Terminal illness or death. Hopefully this doesn’t happen to you, but if you do, you or your heirs can withdraw without a penalty.
  • Early withdrawal. If you withdraw for any other reason, you’ll pay a 25% penalty. This takes out the 25% bonus, plus an extra 5% (percentage math – you contribute £1,000, government gives you £250. When you withdraw £1,250, you have to pay 25%, or £312.50, leaving you with £937.50, less than you put in).
    • This isn’t a huge penalty, compared to a 401(k) or UK pension, but it’s enough to make you think twice.
    • The government has reduced the charge to 20% as a COVID measure, but this expires 05 April 2021 (it might get extended). 20% just removes the government bonus but doesn’t charge any penalty.

Contribution Limit

£4,000 limit per year, per person. This is pooled with all other ISAs, against the total £20,000 allowance. Example: you could contribute £4,000 to a Lifetime ISA and £16,000 to a S&S ISA in one year.


Similar to a S&S ISA – combination of a platform fee, dealing (aka transaction) fees, and any fees on underlying investments. These can add up fast if you trade frequently – this isn’t a great place for that, and it will also complicate your US taxes to report all those trades.

UK Tax Treatment – Contributions

Contributions are after tax, so there’s no direct tax impact. The 25% bonus from the government mimics the effect of avoiding the 20% basic tax rate – but if you’re in the 40% higher or 45% additional tax bracket, it’s only about halfway there. The bonus is also US taxable, which might further reduce the help.

UK Tax Treatment – Withdrawals

Withdrawals of both contributions and earnings are tax free, when eligible. No income tax, no capital gains tax, no tax on dividends or interest.

If you withdraw early, there’s a 25% penalty – not directly a tax, but still money you have to give to the government.

US Tax Treatment – Contributions

Contributions are after tax, so there’s no savings there, plus you need to include the 25% UK government bonus as taxable income on your US taxes. You might be able to offset it with Foreign Tax Credits on other income – you’re looking at a maximum of £1,000 a year (25% of the £4,000 annual limit).

US Tax Treatment – Withdrawals

To the IRS, a Lifetime ISA is just a taxable brokerage account. You’ll need to pay tax on capital gains, interest, dividends, etc. whenever they occur, not just on withdrawal.

This will include the distinction between short and long term capital gains, and between qualified vs ordinary dividends. Bottom line, it’s better to buy and hold, instead of trading frequently – also saves you money on dealing fees. You may also have options for tax loss harvesting.

Further Reading

MoneySavingExpert on Lifetime ISAs.

UK Stocks & Shares ISA (Account Options)

ISAs are a really interesting kind of account – there’s nothing even close to them in the US, where you can invest, allow your investments to grow tax-deferred, and then withdraw them whenever you want. Sadly, that means the IRS doesn’t recognize them as anything special – but I think they still have a place in the FIRE arsenal for Americans in the UK. They come in a few different flavors, but the Stocks & Shares (S&S) ISA is the best fit for long-term investing.


Strong UK tax advantages, but you’ll need to manage a portfolio of individual stocks to avoid PFICs. To the IRS, it’s just a taxable brokerage account, but that’s not so bad.


After UK pensions and US IRA – those both have tax advantages in the US and the UK, now we’re getting into accounts with only limited tax advantages.

Skip S&S ISAs if you aren’t comfortable with individual stocks.

You might pick a Lifetime ISA first over a S&S ISA – you get a 25% bonus from the government, but the money is locked up until age 60 except for a first home purchase.


All UK residents over age 18 – there are also slightly different children’s ISAs.

Many UK brokers won’t work with US citizens. The one I know for sure is Hargreaves Lansdown, since I have my S&S ISA with them. If you know of others, please put them in the comments and I’ll start to compile a list.

Investment Options

You can hold almost anything you want in a S&S ISA – mutual funds, ETFs, etc. However, unless you want to deal with the IRS’s painful and punitive treatment of PFICs, you’ll want to avoid them here.

  • I’ll do a longer post on PFICs in the future, the quick and dirty is that essentially all non-US mutual funds and ETFs are considered PFICs.
  • PFICs require labor-intensive reporting as part of your tax return, and have negative tax consequences.
  • There are options to reduce, but not eliminate, the pain – that’s fairly advanced, though. To me, it’s interesting, but not worth the hassle.

Therefore, if you want to avoid PFICs, you’re mostly looking at stocks in individual companies. These could be in the US, the UK, or anywhere you like. Individual bonds are fine too, although make sure you’ll get the information you need from the UK broker to complete your US tax returns, just in terms of recordkeeping. Personally, I’m keeping bonds to a bond fun in my IRA, and leaving my S&S ISA with just stocks.

This is not the place for high risk/high return shares. If you get a 100x return, the UK won’t tax you but the US will. Instead, this is a great place for big, boring companies, probably as a sort of pseudo-index.

  • I’ll do a more detailed post eventually, but my approach has been to pick 20 of the largest companies in the FTSE 100 and hold them in roughly equal value. It’s simple, and my rough backtesting indicates it’ll approximate the overall return of the FTSE 100. I chose UK-only just because my broker charges additional foreign currency fees and I can hold non-UK funds in other accounts, so I’ll just avoid that extra cost.

Risk & Return

Depends on the investments you choose. In general, individual stocks are a higher risk than a diversified index fund. Fully replicating an index is possible, but cost prohibitive due to the number of transactions – at a typical £10 per trade, you’d spend £1,000 to buy the whole FTSE 100 or £5,000 for the S&P 500, and the same again to sell it.

Withdrawal Options

This is where ISAs are massively different from a pension or IRA – you can withdraw all of your contributions and earnings at any time. No penalties, no UK tax.

US tax will be due on any capital gains and dividends as they occur, whether that’s through a withdrawal or transactions within the account.

Contribution Limit

£20,000 per year per person (2021), shared with all other ISAs. The year is the UK tax year (06 April to 05 April).

If your ISA is “flexible”, you can contribute, then withdraw, and then replace it in the same year without counting against your annual limit. If it’s not “flexible” (many aren’t), both contributions count. Quick example:

  • Flexible: You deposit £20,000 in your ISA. You need £10,000 and withdraw it. Later in the year, you replace the £10,000, leaving £20,000 (plus any gains/minus any losses) to grow from there. You can contribute another £20,000 next year.
  • Not Flexible: You deposit £20,000 in your ISA. You need £10,000 and withdraw it. Later in the year, you have the £10,000, but you aren’t allowed to replace it, leaving £10,000 (plus any gains/minus any losses) to grow from there. You can contribute that £10,000 next year, plus another £10,000 for the total £20,000 limit.


Three main ways you get charged:

  • An annual platform fee. This might be a flat rate, a percentage, or a capped percentage. Huge variations, and what’s best for you will depend on how big your ISA is.
  • Dealing fees (what an American might call a transaction fee). This is a charge per trade. Many brokers don’t charge fees for dealing in funds, but since you probably want individual stocks, you’ll be paying these. They vary somewhat, and some brokers offer lower rates if you trade more often – that’s probably not what you want to be doing if you’re trying to emulate an index fund, though! These can add up quick – £10 or so a trade is typical. There’s also sometimes a discount for recurring transactions via direct debit, instead of on-demand trades.
  • Fees on the underlying assets – if these are just individual shares, there’s nothing. If you’re investing in mutual funds/ETFs, there will be.

UK Tax Treatment – Contributions

All ISA contributions are from after-tax money, there is no tax impact.

UK Tax Treatment – Withdrawals

Withdrawals of both contributions and earnings are tax free. No income tax, no capital gains tax, no tax on dividends or interest.

US Tax Treatment – Contributions

The US treats this like a taxable brokerage account, so all contributions are made with after-tax money, no tax impact.

US Tax Treatment – Withdrawals

Since the US treats a S&S ISA like a taxable brokerage account, you’re liable for tax on all the same sorts of transactions. Capital gains when you realize them, interest and dividends when they’re paid, etc. This applies even if you don’t take the money out of the account and reinvest it.

This does include the distinction between short vs long term capital gains and qualified vs ordinary dividends. In short, it’s more tax efficient to save for the long term and avoid holding investments for only short periods. That also saves you on dealing fees, so good all around.

There may be options for tax loss harvesting – realizing a capital loss in order to offset capital gains.

Further Reading

MoneySavingExpert on ISAs

Monevator list of ISA providers – sadly, most of these won’t work with US citizens

UK Self-Invested Personal Pension (Account Options)

A Self-Invested Personal Pension (SIPP) is a common type of retirement savings vehicle in the UK. It doesn’t have a neat equivalent in the US – it’s kind of like a 401(k) but just for you.


A SIPP is very similar to a UK employer-provided pension, although won’t typically have employer contributions (it’s allowed, but I haven’t run into it much – welcome any examples in the comments).

Big caveat: Many tax professionals consider a SIPP a pension, and I’ve based the rest of this post on that judgment. However, others consider it a “foreign grantor trust”, which has much more complicated US tax filing requirements (forms 3520 and 3520-A) and PFIC limitations. You must be satisfied that a SIPP is a pension rather than a foreign grantor trust, or be willing to deal with the pain of the trust requirements – they probably aren’t worth the hassle except in specific circumstances.

  • In my layman’s reading of the US/UK tax treaty, I tend to agree that they are a pension rather than a foreign grantor trust, for what that’s worth (not much!)
  • Update 27Apr21: It’s also possible that a SIPP is a pension and thus tax protected from the US, but the IRS can impose informational filing requirements without taxing them (form 3520 and 3520-A). These forms don’t require you to pay anything to the IRS, but they’re pretty complicated and can be expensive to have a professional prepare. A tax professional I trust takes this view, so I’m inclined to agree – you get tax protection but onerous informational filing requirements.


If your employer pension has high fees, it’s probably better to use a SIPP after you maximize the match and max out a Roth IRA. Obviously, if you’re self-employed or otherwise don’t have an employer pension, a SIPP is the clear substitute – I’d probably still put it as a lower priority than the Roth, just since IRA fees tend to be lower, but it’s a tossup.

If you’ve got a good employer pension with low fees, there’s probably no point in a SIPP – they share the same contribution limits, anyway.

And if you’ve already brought your employer pension contribution up to equal your employer’s and are avoiding further contributions, a SIPP doesn’t make much sense – it’s the same argument about “foreign grantor trusts” that leads to the advice not to exceed your employer’s contributions that would also make a SIPP a pain.


All UK residents under age 75 are eligible to open a SIPP (even children). However, many UK providers don’t want to deal with US citizens due to the onerous requirements of the US government. There are some specialist expat providers, but they tend to have high fees and often active management.

I know for sure Hargreaves Lansdown will work with US citizens (I have my ISA with them) – if you know of others, please leave a comment and I’ll add them here.

Investment Options

The available options will depend on the provider, but will typically include a range of funds including index funds, target date funds, etc. You can also hold individual shares, if you want.

As long as you agree that a SIPP is a pension rather than a foreign grantor trust, the PFIC restrictions don’t apply and you’re free to hold mutual funds and ETFs.

Everything Else

All the other sections are the same as an employer provided pension.

Transfers from Pensions

You can use a SIPP as the recipient account for employer pensions, or other SIPPs. This is the same idea as rolling over a 401k to an IRA, to help you consolidate pensions from multiple old employers or move to a better/lower-cost provider.

Further Reading

MoneySavingExpert on SIPPs

Before You Move

I’ve put together this list of things you might want to do if you’re a US citizen thinking of moving to the UK, but you haven’t left the US yet. Not all of these are required, and the list can’t be 100% comprehensive for everybody’s individual situation, but it might save you some serious pain. In no particular order:

Make your existing investments UK-friendly

Transfer any taxable, non-retirement investments into HMRC reporting funds. I’ll write more later on reporting vs non-reporting funds, but the gist of it is that this can move you from getting taxed at 20-45% to 0-20%.

  • The other good news is that there are plenty of good options on that list. You can easily build a four-fund portfolio using VTI, VEU, BND, and BNDX, for example.
  • If you need to realize any capital gains to transfer into reporting funds, that is a US taxable event – but you can deal with that without getting the UK involved as well.
  • Some Vanguard mutual funds that are non-reporting have reporting ETF versions, like the funds above. More info here, under “Can I convert my conventional Vanguard mutual fund shares to Vanguard ETF shares?” This is a Vanguard-specific option (thanks Dave B, for pointing this out) – for other brokers, you may need to sell and buy into a reporting fund, which needs planning for capital gains.

Edit 09Nov21: Dave B in the comments also points out that an HSA needs some thought. To the UK, this is just a taxable investment account, so the points above apply, but you may need to change providers to access the right funds.

Figure out a plan for your US accounts

Will you keep using a US address, such as a friend or family member? This makes things easier, but is a little dubious and they’ll get your mail. Unfortunately, many US financial providers will freeze or close your account if you change to a UK address.

I’d like to put together a list of US brokerages that are happy to work with UK residents – if you have any suggestions, please put them in the comments!

Banks may also be a problem – I strongly recommend keeping at least one US bank account open, preferably one that will take app-based check deposits (depositing a $$$ check in the UK can be a pain and have high fees – these almost inevitably happen, whether it’s a birthday present from your aunt or a COVID stimulus check). It’s also handy to have a US bank to pay US bills, like if you ever do owe the IRS money.

Keep a US phone number

Many US accounts are moving to two-factor authentication, which is great for security but a real pain if you don’t have a US phone number (some, but not all, will also work with emails). I’ll explain these options in more detail in a future post, but a quick list:

  • Port your existing number or create a new one on Google Voice – check that this works with your bank before you leave the US!
  • Keep a US cell phone and use it in the UK. You’ll want something with reasonable international rates, and preferably no monthly charge. All you want is to receive US texts while in the UK. You won’t want to keep using a US phone as your primary phone in the UK, since you’ll need a UK number for all kinds of things.
  • Use the real US phone number of a friend or family member. This definitely works, but can have practical issues if you’re trying to log in at 10am UK time but it’s 5am or earlier in the US. And they might get sick of you.
Open any IRAs you might want

For Traditional IRAs, if you ever want the option of deducting contributions on your UK income, you should open one and make some kind of contribution before leaving the US. There’s an open question as to whether the contributions are UK deductible or not, but if the account wasn’t open before moving to the UK, it’s pretty clear contributions are not UK deductible.

For Roth IRAs, there’s no tax or treaty constraint, it’s just logistically easier to open an IRA while physically in the US.

There’s really no harm in having one of each, even with only a token contribution – you’re setting yourself up for flexibility in the future. If you never touch them again, that’s fine too.

Edit 07Jul21: This part was originally specific to Roth IRAs, but there are considerations for Traditional as well.

Get a US credit card with no foreign transaction fees

Using a US credit card is the easiest, fastest way to spend US dollars in the UK, especially for relatively low amounts. You can avoid the annoying signature requirements by using Apple or Android Pay – I bought my first car in the UK using Apple Pay (on a card that gave me 4.5% back on Apple Pay transactions – different story).

Even if you don’t need it much now, it will likely come in handy in the future. Even silly things come up – some US tax software only lets you pay using a US credit card!

Make sure you keep it active while you’re in the UK. A small, recurring payment is perfect – my £10 a month mobile phone payment goes to my US credit card.

I’m a big fan of CapitalOne cards – they’ve worked flawlessly since I moved and none of them have any foreign transaction fees. I like my Venture* card since it gives me 2% back, much better than any UK cards – but you’ve got to have dollars you’re able to spend to take advantage of that and be worth the $95 annual fee. If you won’t use it that much, the Quicksilver card is another great option, with 1.5% cash back and no annual fee.

Open an American Express card

You might or might not be able to combine this with the one above (many Amex cards have a foreign transaction fee). You want this one for an entirely different reason – Amex is the only company that I’ve found that will consider your US credit history when giving you a UK credit card. This can be a huge plus in building your UK credit when you first arrive, and helps a lot to have a UK credit card shortly after arriving, instead of waiting until you build some credit or getting a really crappy card for people with no credit.

It doesn’t matter what US American Express card you get, so pick one that’s a good fit for you.

Once you get to the UK, go to this Amex site to apply for your UK Amex.

Note that Amex is not universally accepted in the UK – you’ll be fine in grocery stores and many online places, but even bigger shops like B&Q and Screwfix (think Home Depot and Lowes) don’t take Amex. Use your UK debit card or US credit card for these.

Make a plan for your first UK bank account

This is a notorious catch-22 for new arrivals in the UK: to rent a place, they want you to have a bank account. To get a bank account, they want to see proof of residence. And many old-school banks want that on paper, maybe verified by the Post Office, with a copy of your passport, and mailed to them. Ugh.

A few options here:

  • Some newer app-based banks like Monzo and Starling have more modern ways of verifying who you are. You might wind up taking a video of yourself holding ID, that kind of thing. They’re also fast – you probably can’t get an account while still in the US, but you can do it very shortly after arrival.
  • Wise (TransferWise until recently)* isn’t really a bank, but they have a handy product called a “borderless account.” You can open this in the US and get a GBP debit card. They do direct debit and direct deposit, so you can pay your rent and get paid by your employer. They don’t pay interest and their deposit production is slightly convoluted (you’d probably get your money back but it might take a while), but it’s a great start, just probably don’t keep lots of money here. They’re also a strong competitor for transferring money back and forth for low fees – I moved my house deposit using Wise.
If you have a 529, figure out what to do with it

529s aren’t particularly well suited for Americans in the UK – I’ll write a post on it soon, but basically they don’t have any special UK treatment, probably have more complicated treatment as a trust, and likely will be full of funds that don’t report to HMRC.

It might be better to just close the account before leaving the US and eat the 10% penalty and taxes on any gains, without getting HMRC involved.

Think about Social Security & State Pension

Added 25 March 2021, at the suggestion of Peter Dampier on Facebook’s “US Expat Tax Questions” group

This sounds a little vague – that’s because this one gets pretty specific to individual situations. I will write a more detailed post in the future on both systems and how they can apply together to Americans in the UK. For now, a few things you may want to think about:

  • Check your US Social Security statement. Make sure your online account works, your earnings are all correct, and look at how many years you have. If you’re just under the minimum 10 years (40 credits), maybe you think about timing your move carefully – you only need to earn $5,880 in a year to get the full 4 credits, so moving in February of one year instead of December the previous year might push you over the edge.
  • If you were previously in the UK and now moving back, you may want to pay voluntary National Insurance contributions before you move to get “credit” for the years you were out of the UK. This may be cheaper if you pay before moving to the UK – more details at
Optional: Simplify your retirement accounts

This doesn’t have any real financial advantages, but you might think about consolidating IRAs, 401(k)s, 403(b)s, Thrift Savings Plan, etc. if you have a lot of them scattered around. This just keeps things simpler, fewer logins to remember, fewer two-factor authentications to break, etc. This tends to be easier while you’re still in the US, because some dinosaur institutions insist on sending paper checks, and these could be large amounts. US to UK mail usually works fine (aside from COVID – my parents’ 2020 Christmas card took almost 4 months to arrive), but having tens or hundreds of thousands of dollars of paper checks crossing the Atlantic makes me nervous.

Further Reading

There’s a good post over on on financial preparations for the leaving the US – he’s recommended a few specific products I hadn’t heard of, like the Curve card, which sounds like it could be really handy if you don’t have/don’t want to use Apple or Android Pay.

*These are affiliate links – they help fund the site and don’t cost you anything.

US Roth IRA (Account Options)

Number 2 in the series on account options – full list is at Account Options.

Edit 07Jul21: I’ve changed my view on whether Roth IRAs need to be opened before leaving the US – I no longer think that’s a requirement, although it’s logistically easier. I’ve updated the post to reflect that.

Edit 13Aug21: There are some people who are pretty convinced that Roth IRAs do need to be opened before leaving the US, although I’m not convinced. I’ve added a recognition of that point for completeness, and added my rationale for why I think this is an overly conservative interpretation.


As long as you’re eligible, this is a great option with tax benefits in both countries and no tax-related limits on what you can invest in.


Filling your annual Roth IRA allowance should come right after maxing out the employer match in your UK employer pension – or maybe after maxing out the employer pension as a whole, kind of a tossup there, depending on the options and fees in the pension.

There’s an argument for considering a Traditional IRA instead of a Roth, if you can deduct your Traditional contributions on your UK taxes. That’s theoretically possible (albeit subject to some treaty interpretation), so long as you meet the eligibility requirements, but whether you want to jump through the hoops to do it is up to you


You must have earned income to contribute to a Roth IRA. Not gifts, not interest, not capital gains, not unemployment, not welfare, not stimulus payments – earned income. But the good news is that foreign earned income is completely fine, as long as you haven’t excluded it using the Foreign Earned Income Exclusion (FEIE). For most Americans in the UK, the Foreign Tax Credit (FTC) is more beneficial anyway – I’ll post more on that in the future.

There are income limits as well – for 2021, the amount you’re allowed to contribute starts to phase out at $125k (single filing), $198k (married filing jointly), and a very low $10k (married filing separately). For those people with a non-US spouse they want to keep out of the US tax system, that’s a big drawback.

If you’re above the income thresholds, there is a completely legitimate loophole, called the Backdoor Roth. I’ll post more on that in the future, but the short version is that you make a non-deductible contribution to a Traditional IRA and then immediately convert it to a Roth IRA. There’s no income limit this way, and it’s just a little bit more paperwork/mouse clicks.

The big challenge is that you may find it challenging to manage an account without a US address. Many people use a US address (a friend, family member, etc.) – that’s not ideal, since they’ll get your mail and might get sick of it, and it’s of somewhat dubious legitimacy. This is something I’d like to do some more research on and find a good way around. For the moment, Charles Schwab and Interactive Brokers are known to work with people, and I’ve seen some mixed reports as to whether Vanguard won’t freeze your account if you’re already an established customer. Worst case, you won’t lose your money, but you might get your account shut down and only have 60 days to find another IRA provider or get hit with some ugly US taxes on an early distribution.

One more caveat – I have seen some interpretations that even if a Roth IRA is already open, once you move to the UK any new contributions are not tax advantaged in the UK. This seems to be an unusual interpretation, possibly based on a clause in the US/Canada tax treaty (Article XVIII Paragraph 3b from the 2007 protocol, if you’re interested). That treaty is pretty clear, but there’s no similar language in the US/UK tax treaty. There’s obviously major drawbacks if this interpretation is true, and if you have any doubts, you should seek professional advice. For my own personal situation, I’m confident that this is an overly restrictive interpretation.

Edit 13Aug21: There are some people of the opinion that only a Roth IRA that was already open prior to moving to the UK is treated as a tax-advantaged account by HMRC. I think this is an overly conservative interpretation of the treaty, but figured I should call it out for completeness. I’ve added a section at the bottom of this post as to why I don’t think this is the case. That said, I do recommend that you open both Traditional and Roth IRAs before leaving the US – even with just a nominal sum, it avoids any worries about this. It matters more for Traditional IRAs, due to the contribution question.

Investment Options

From a tax perspective, you can invest in whatever you like. It’s pretty clear that you can hold funds that don’t report to HMRC without any problem (although if you want to be extra safe, it’s not hard to have a good three or four fund portfolio using only HMRC reporting funds). You probably shouldn’t hold PFICs here, but there’s no real reason why you would want to when you can buy US-based funds anyway.

That makes a Roth IRA the perfect place for any weird, high-risk investments – YOLO on GME! If you make 1000x returns, it’s still tax free.

Big Caveat: There’s some lovely EU, and now UK, legislation called MiFID and PRIIP that requires funds to issue a Key Information Document (KID) to prospective investors. There are no US funds that I’m aware that issue such a document – supposedly, they’re caught in a Catch-22 around US vs EU/UK reporting requirements. If the fund doesn’t issue that document, the broker shouldn’t sell the funds to retail investors living in the UK/EU like you and me. A few ways around this:

  • Keep using a US address on your Roth IRA (although maybe a little dubious!)
  • Don’t be a retail investor – you’ll need a large portfolio (€500k+) and/or be a finance professional
  • Invest in individual stocks only, same solution as getting around PFIC, I’ll post more on how to do this later
  • Use options and actually exercise them (I added this option on 07Jul21 – I’m going to explore it some more to see how feasible it is, but it’s been mentioned other places and worth at least thinking about. Edit 13Aug21: I’ve explained this option more in this post, plus a new one below.
  • Invest in EU (probably Irish) ETFs in your US Roth IRA. The IRA wrapper means PFIC concerns don’t apply, and there’s a broad selection to choose from.
  • Have an advisor invest for you – but you’ll pay them, of course

Risk & Return

Entirely depends what you invest in – capital at risk, no guarantees

Withdrawal Options

One nice thing about the Roth IRA is that you can access your contributions at any time, with no penalty. Of course you have to sell any investments, but as long as you don’t take out more than you’ve contributed, there’s no tax or penalties. Certainly not the first place for your emergency fund, but a better option than most investments.

For earnings, you can withdraw them at 59 1/2 or older, as long as you’ve held the account for 5 years. There are no taxes or penalties on withdrawal.

If you want to withdraw earnings before 59 1/2, you’ll pay tax on the gains plus penalties. There are some exceptions for first-time home purchases, education, medical expenses, disability, death, etc. You’d also want to check into UK tax implications – this gets a bit complicated, and ideally you want to avoid it anyway!

Contribution Limit

For 2021, you can contribute $6,000 per year, per person ($7,000 if you’re over age 50). This goes up with time. The contribution limit is shared with any Traditional IRAs. The UK doesn’t impose any additional limits over what the US does.


These will depend on the provider, but having the account open should be free or nearly free. Fees on the underlying investments will vary, but if you’re using index funds these should be low, usually under 0.1%.

UK Tax Treatment – Contributions

Roth IRA contributions always come from after-tax money, so there’s no tax impacts at the time of contributing.

UK Tax Treatment – Withdrawals

The UK recognizes the US tax advantages, so there is no tax on withdrawing contributions at any time, or on earnings after 59 1/2. Early withdrawals that are subject to US tax and penalties get complicated – try not to do this!

US Tax Treatment – Contributions

Same as with the UK, contributions are from after-tax money, so there’s no impact.

US Tax Treatment – Withdrawals

As long as you’re 59 1/2 and have had the account for 5 years, there’s no tax on your withdrawals of earnings. Contributions can be withdrawn tax and penalty free at any time.

Roth Conversions

I’ll write a focused post on this in the future, but the quick version is that you can convert a Traditional IRA (including any rollovers from a 401(k) or similar) to a Roth IRA, and then that money will be tax-free on withdrawal after age 59 1/2. This is a taxable event in the US – you’re taking tax-deferred money and moving it to an after-tax account, so the IRS wants to get paid.

The good news is that this is very probably not a taxable event in the UK. So you can take money that you didn’t pay UK income tax on when you earned it (mostly because you didn’t live in the UK yet), and convert it so you don’t pay UK tax when you withdraw it, and not pay UK taxes in the process. Caveat is that there are a few different treaty interpretations, but this seems to be the prevailing one. You might also be able to use excess foreign tax credits to offset the US tax due – this gets a bit complicated and I’ll explore it more later, but it could be a very significant advantage.

Does an IRA need to be open before moving to the UK?

Usual disclaimer: I am not a lawyer, and this is bordering on legal interpretation of the treaty. Seek professional advice if this is important to you.

Some people argue that a Roth IRA is only treated as a tax-advantaged “pension” if it was opened prior to moving to the UK. I think this is a flawed interpretation of the US/UK tax treaty:

  • Article 18 deals with pension contributions, and says that contributions to a pension in the other country (in this case, a US IRA) can only be treated as tax advantaged if the pension was established prior to moving to the first country (the UK).
    • This is the clause that raises the question as to whether Traditional IRA contributions can be deducted on UK taxes if the tIRA is opened after moving to the UK – I think it’s pretty clear that the answer is “no” (there’s a different question as to whether they’re UK deductible at all, but that’s not the question at hand).
    • But the deductibility of contributions isn’t the question here – nobody thinks that they can deduct Roth IRA contributions, from US or UK taxes. That’s the whole point of a Roth account – after-tax money going in, no more taxes ever again.
  • Article 17 deals with pension earnings and distributions. There’s nothing in this article dealing with accounts that were or weren’t opened in the country of current residence, it’s just not a topic. It does make it clear that any payments from a US pension that would be tax-free in the US are also tax free in the UK – so because a Roth IRA is US tax free on withdrawal, it’s also UK tax free.
  • That’s really it – there’s nothing in the treaty dealing with the topic at all, and I haven’t found anything in UK law or regulation, either.
    • HMRC’s double taxation manual doesn’t have anything to say about it
    • The US technical explanation of the treaty makes it clear that the limit requiring pensions to be opened before moving only applies within Article 18 – to contributions (note that the US interpretation isn’t binding on the UK, but hopefully indicates that some people very familiar with the treaty have this interpretation).

If anybody has an alternative argument, I’d be very open to hearing it and will happily update this post with the counter-argument in the name of openness (and will change my opinion if it’s convincing!).


Thanks for finding my new site, focusing on FIRE (Financial Independence/Retire Early) for Americans who live in the UK, or want to.

This site grew out of an idea that I had after helping a number of people on both Facebook and Reddit. There is lots of information out there about how to invest for FIRE, and tons of information on both US and UK taxes, although somewhat less on how the two systems interact. It’s really hard to find something that ties it all together, and that’s really important for US citizens in the UK. Investing in a way that isn’t tax efficient can be hugely punitive (55%+ tax rates, massive fines for non-compliance with unexpectedly complicated tax filings, etc.).

I started putting a document together to summarize the basics of what you need to know. Once that document reached 40 pages (!), I realized I needed to either write a book or create a better site for it. That’s this site.

Next Steps

For starters, I’ll be moving the content from that initial document here, organizing and expanding. Those topics include:

  • Summary of each account option for investing (pensions, ISAs, IRAs, SIPPs, etc.)
  • High level review of real estate, inheritance tax, things to consider before you move, and the US/UK tax treaty

From there, I’ve got some ideas about other topics I’d like to explore, and will also post on more timely topics as they come up. I’ve started a list on this page – definitely welcome your comments on other topics you’d like to see!