Roth IRA Tax for UK Residents: What the Treaty Actually Says

A qualified distribution from a US Roth IRA is, on the better view of the UK-US treaty, exempt from UK income tax as well as US income tax. Article 17(1)(b) requires the residence state to exempt any pension payment that would have been exempt in the source state, a Roth sits on the treaty's agreed list of US "pension schemes", and the saving clause is expressly disapplied to that sub-paragraph. HMRC's guidance states the principle for IRAs generally but has never named the Roth, so the position is strong rather than certain — and growth, conversions and contributions each behave differently.

Key takeaways

• The Roth is a treaty "pension scheme". The 2001 Exchange of Notes names "Roth IRAs under section 408A" in the agreed list for Article 3(1)(o). Everything else rests on that.
• Article 17(1)(b) exempts the payment, and the saving clause cannot claw it back. Article 1(5)(a) lists it, and Article 18(1), as benefits that survive paragraph 4.
• Growth inside the account is not charged annually in the UK. Article 18(1) defers it to the point of payment, and is likewise protected.
• HMRC's own wording is generic. DT19853 says an IRA distribution "will be exempt from tax in the UK to the same extent that the distribution would be exempt from tax in the US". It does not say "Roth". ⚠ Treat a large withdrawal as a position to be documented, not a certainty.
• Conversions are the unclear part. The US cost is defined; the UK treatment of a conversion made while UK resident is not addressed in published HMRC guidance. Converting before you land in the UK, or after you leave, removes the question.

Why the Roth is a different question

How a 401(k) or traditional IRA behaves for a UK resident is covered in US 401(k) and IRA withdrawals as a UK resident, and the choice of wrapper in ISA vs Roth IRA for US persons in the UK. The Roth raises a question neither has to answer. A traditional IRA is taxed on the way out in both countries, so the treaty just decides who taxes and hands the other a credit. A Roth has already been taxed on the way in; taxed again on the way out, it would be taxed twice and relieved never. Three provisions decide whether that happens.

Is a Roth IRA a "pension scheme"?

Article 3(1)(o) defines a pension scheme as any arrangement established in a contracting state that is "generally exempt from income taxation in that State" and "operated principally to administer or provide pension or retirement benefits". A Roth satisfies both limbs — and you need not rely on that. The Exchange of Notes signed alongside the Convention on 24 July 2001 sets out an agreed list, and the US entry includes "Roth IRAs under section 408A". The US Treasury's Technical Explanation repeats the list and adds that "a distribution from a U.S. 'Roth IRA' to a U.K. resident would be exempt from tax in the United Kingdom to the same extent the distribution would be exempt from tax in the United States" — a bilateral understanding in a document both governments signed, and the strongest citation in this area.

Article 17(1)(b) — and why the saving clause does not bite

Article 17(1)(a) gives the residence state the exclusive right to tax pensions — for a UK-resident retiree, the UK. Sub-paragraph (b) then overrides it:

> the amount of any such pension or remuneration paid from a pension scheme established in the other Contracting State that would be exempt from taxation in that other State if the beneficial owner were a resident thereof shall be exempt from taxation in the first-mentioned State.

Apply it: a qualified Roth distribution paid to a US resident bears no US income tax, so the amount is exempt from UK tax in the hands of a UK resident. The test is counterfactual — what would the US do if the recipient lived in Ohio?

The obvious objection is the saving clause: Article 1(4) lets a state tax its residents "as if this Convention had not come into effect", and the UK is taxing its own resident. It does not apply here. Article 1(5)(a) provides that paragraph 4 "shall not affect ... sub-paragraph b) of paragraph 1 and paragraphs 3 and 5 of Article 17 ... [and] paragraph 1 of Article 18". Article 17(1)(b) is carved out by name — the point most write-ups miss, and the reason the Roth answer is materially better than it first looks.

Note what is not carved out: Article 17(2), the lump-sum rule — below.

What HMRC has actually published

Here the picture is thinner than the treaty text. DT19853 states that "a distribution from a US Individual Retirement Arrangement or 'IRA' to a UK resident will be exempt from tax in the UK to the same extent that the distribution would be exempt from tax in the US". That is the Article 17(1)(b) mechanism, stated by HMRC, and a Roth is an individual retirement arrangement. But HMRC does not say "Roth" there, and we are not aware of published guidance working through a qualified Roth distribution, a conversion by a UK resident, or the five-year rules.

⚠ Escalate. The treaty mechanism, the Roth's status as a pension scheme and the saving-clause carve-out are all documented, and HMRC's stated principle covers it — but there is no HMRC pronouncement on the Roth specifically. For a modest withdrawal that is comfortable. For a six-figure one, or a conversion, it is a position to be reasoned, evidenced and disclosed.

Growth inside the account while you are UK resident

There is no annual UK charge on income and gains arising inside a Roth while you are UK resident, and this is the best-documented point of the lot. Article 18(1) provides that where a UK resident participates in a pension scheme established in the US, "income earned by the pension scheme may be taxed as income of that individual only when, and ... to the extent that, it is paid to, or for the benefit of, that individual". Dividends, interest and realised gains inside the account are not your income until they come out — and Article 18(1) is saving-clause protected by Article 1(5)(a). That is the Roth's biggest advantage over an ordinary US brokerage account: nothing to report year by year, and no offshore-fund analysis to run.

Roth conversions while UK resident

The US side is defined

Converting a traditional IRA to a Roth means including the converted amount in US gross income for the year, to the extent it represents deductible contributions and growth. That is unavoidable, and the foreign earned income exclusion does nothing for it: conversion income is not earned income. Two details matter here. A separate five-year clock starts for each conversion, from 1 January of the conversion year, purely for the 10% additional tax. And conversion income is excluded from modified AGI when testing eligibility to contribute — line 2 of Worksheet 2-1 in Publication 590-A subtracts it, so a large conversion does not by itself lock you out.

The UK side is not settled

There is a respectable argument that a conversion is not a UK taxable event at all. Article 18(1) defers the scheme's income until it is "paid to, or for the benefit of, that individual from the pension scheme (and not transferred to another pension scheme)". A conversion moves money from one arrangement on the agreed US list to another on the same list; nothing is paid out to you, so the parenthesis does the work. The counter-argument is that you have made an irrevocable election changing the character of the fund, and that HMRC is not bound by the US characterisation.

⚠ Escalate. We are not aware of published HMRC guidance resolving this. A conversion made while UK resident is a position, not a routine transaction.

Worked example: the ordering rules and the recapture

Assume a Roth holding $60,000 of regular contributions, a $40,000 conversion made in 2024 (entirely taxable then), and $25,000 of growth. The owner is 45, UK resident, and withdraws $70,000 in 2026. Under the ordering rules in Publication 590-B the money comes out in sequence:

• $60,000 regular contributions first. Basis: no income tax, no additional tax.
• $10,000 of the 2024 conversion next, taxable portion first. Not taxed as income again — that happened in 2024 — but the withdrawal falls inside the five-year period that began on 1 January 2024, so the 10% additional tax is recaptured: $1,000.
• The $25,000 of earnings is untouched.

The US outcome is $0 of income tax and $1,000 of additional tax, on Form 5329 alongside Form 8606.

The UK analysis then runs item by item, because Article 17(1)(b) applies to the amount rather than the withdrawal as a whole. Neither the $60,000 nor the $10,000 would bear US income tax in the hands of a US resident, so neither is taxable in the UK; the 10% charge is an additional tax on an early distribution, not evidence that the amount was income. Had the withdrawal reached the earnings layer, that layer would have been US-taxable, and the exemption would not have covered it.

Contributions while living in the UK

Two US rules decide whether you can contribute, and the first catches most expatriates: you need "compensation". Publication 590-A's list of what is not compensation includes "any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs". Exclude all of your UK salary on Form 2555 and you have no compensation, so no Roth contribution is possible that year. Claiming foreign tax credits on Form 1116 leaves the salary in income and preserves eligibility — one of the quieter reasons the credit route suits many UK-resident Americans, as set out in how the treaty prevents double taxation of income.

Then the income limits apply. For 2026 the IRA contribution limit is $7,500, with a catch-up of $1,100 from age 50; the Roth phase-out runs from $153,000 to $168,000 for single filers and heads of household and from $242,000 to $252,000 for married couples filing jointly. Worksheet 2-1 adds the foreign earned income exclusion, the housing exclusion and the housing deduction back for this test, so excluding income does not shelter you from the phase-out. There is no age limit, provided you have compensation.

The five-year rules and the 10% additional tax

There are two five-year rules and they are not the same clock.

1. The qualification clock. A distribution is qualified only if made after the five-year period beginning with the first tax year for which a contribution was made to any Roth set up for your benefit, and on or after age 59½, on death, on disability, or for a first home within a $10,000 lifetime limit. Meet both and it is not subject to tax.

2. The conversion clock. A separate five-year period runs from the first day of the tax year of each conversion, and applies only to the 10% additional tax on the taxable part of that conversion.

The additional tax is 10% and applies before age 59½; a qualified distribution is outside it entirely. The practical consequence for anyone moving to the UK is to start the first clock early: funding a Roth with even a small amount years ahead fixes the start date. The treaty exemption ultimately turns on that qualification test, because a non-qualified withdrawal of earnings is US-taxable and so falls outside Article 17(1)(b).

Event by event

| Event | US treatment | Likely UK treatment | Confidence |

|---|---|---|---|

| Income and gains arising inside the Roth | Not taxed | Not taxed; deferred by Article 18(1) | Documented |

| Qualified distribution (5 years + age 59½) | Not subject to tax | Exempt under Article 17(1)(b) | Documented in treaty; not Roth-specific in HMRC guidance |

| Regular contributions withdrawn, non-qualified | Basis; no income tax, no 10% | Exempt — would be exempt in the US for a US resident | Arguable, from 17(1)(b) |

| Converted amount withdrawn inside its 5-year clock | No income tax; 10% recaptured | Exempt as to the amount; the 10% is a US charge, not income | Arguable |

| Earnings withdrawn, non-qualified | Taxable, plus 10% unless an exception applies | Taxable, with credit under Article 24 | Documented |

| Conversion to Roth while UK resident | Taxable in the US that year | Arguably outside Article 18(1) as a transfer to another scheme | Unclear — ⚠ escalate |

| One-off withdrawal of the whole account | Qualified: not taxed | Article 17(2) gives lump sums to the source state, and is not saving-clause protected | Unclear — ⚠ escalate |

| Contribution while claiming the FEIE on all UK earnings | No compensation, so not permitted | n/a | Documented |

The lump-sum row deserves a sentence of its own. Article 17(2) gives a lump sum to the source state only — for a Roth, the US, where a qualified distribution bears no tax. But it is missing from the Article 1(5)(a) carve-out, so the UK could in principle invoke the saving clause against it, and whether a single large Roth withdrawal is a "lump sum" at all is undecided. Emptying a Roth in one go is the highest-risk way to access it from the UK; staging withdrawals is safer.

Where it goes on a UK return

If any part of a distribution is taxable in the UK — realistically, earnings taken in a non-qualified distribution — it is foreign pension income and belongs in the overseas pensions section of the foreign pages, SA106, with a separate row for each source. Relief for US tax on the same amount is foreign tax credit relief, capped at the lower of the US and UK tax on that income; helpsheet HS263 sets out the calculation and warns that the treaty may restrict how much US tax counts.

Where you treat a distribution as exempt under Article 17(1)(b) there is no taxable income to enter, but set out the article relied on and the amount in the additional information box, and keep the Form 1099-R with the return. A position explained on the return is a better start with HMRC than one discovered later.

Deciding which side of the Atlantic to convert on

1. Fix the dates. Establish the exact day UK residence starts or ends under the statutory residence test, and whether split-year treatment applies.

2. Model the US cost of converting as a US resident, against your other income that year.

3. Compare with converting as a UK resident. The US cost is identical, but you take on an unresolved UK question and a year-end mismatch — 5 April against 31 December — that can strand the credit if the UK did charge.

4. Prefer a pre-arrival conversion where the numbers are close. A conversion in a non-resident year removes the argument and starts the clock sooner.

5. If you must convert while UK resident, size it deliberately, and document the reasoning before you act.

The same logic applies in reverse; moving a UK pension to the US covers that direction.

Common mistakes

• Assuming the ISA logic runs backwards. An ISA is not a treaty pension scheme and the US taxes it throughout; a Roth is, and the UK on the better view does not.
• Treating the saving clause as fatal. Article 1(5)(a) answers it for Article 17(1)(b) and Article 18(1) by name.
• Emptying the account in one transaction, which turns a well-supported Article 17(1)(b) analysis into an unsettled Article 17(2) one.
• Claiming the FEIE and then contributing. Excluded earnings are not compensation, so it is an excess contribution and carries its own charge until corrected.
• Confusing the two five-year clocks, in particular assuming a conversion resets qualification. It does not.
• Rolling a Roth into a UK pension. A UK registered scheme is not on the agreed list, so it is not a treaty-recognised rollover.

Sources

• GOV.UK: 2001 UK-USA Double Taxation Convention as amended by the 2002 protocol — Articles 1, 3, 17, 18
• US Treasury: Exchange of Notes, 24 July 2001 and the Technical Explanation
• HMRC: DT19853, Double Taxation Relief Manual — United States of America: notes
• IRS: Publication 590-A, Publication 590-B and Topic no. 557
• IRS: 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500
• HMRC: Self Assessment: Foreign (SA106) and Relief for Foreign Tax Paid 2026 (HS263)

When to take advice

Most UK-resident Roth holders need no more than a clear file note: the account is a treaty pension scheme, the growth is deferred, and qualified distributions are exempt on both sides. The threshold is crossed when you are contemplating a conversion while UK resident, planning a large or one-off withdrawal, arriving in or leaving the UK within two tax years, or holding a Roth alongside a 401(k) and a UK pension with the interaction never mapped. We prepare the analysis and the evidence file; a licensed CPA or Enrolled Agent reviews and signs off the US side and an ACCA-qualified accountant the UK side. If that is where you are, book a consultation or read how we work with US-UK expatriates. This is general information about the law as at 24 September 2026, not advice on your circumstances.