Keeping a US 401(k) or IRA After Moving to the UK: How Each Country Taxes It

You can usually keep a US 401(k) or traditional IRA after moving to the UK, and for most people that is the sensible starting point. The US-UK tax treaty generally stops the UK taxing the growth inside a US pension scheme until money is paid out, and withdrawals are then taxed under the treaty's pension article — though the US keeps the right to tax its own citizens, so Americans in Britain usually deal with both systems at once. Moving the money into a UK pension is where things tend to go wrong: there is no clean, tax-free route, and it can trigger an immediate US tax charge.

Key takeaways

• Moving to the UK does not, by itself, cause a distribution. The practical risk is the provider: some US firms restrict or close accounts held by people living abroad.
• Under Article 18 of the treaty, income earned inside a US pension scheme is generally taxed as a UK resident's income only when it is paid out.
• Regular pension payments are allocated to the country of residence, but the treaty's "saving clause" lets the US tax its citizens regardless. For US citizens, credit relief does the work.
• Lump sums follow a different rule, and HMRC's guidance explains that both countries can tax them, with relief for the double charge.
• The IRS rollover rules list only US plans and IRAs as destinations, so moving a 401(k) or IRA into a UK pension is generally a taxable distribution for US purposes.

This article is educational. It is not investment or pension-transfer advice, and nothing in it recommends keeping, moving or drawing on any particular account.

Can you keep a 401(k) or IRA when you move to the UK?

In tax terms, yes. A 401(k) or IRA is a US arrangement governed by US rules, and changing your country of residence does not convert it into anything else. For US purposes it keeps growing on the same tax-deferred basis.

The real constraint is commercial. US brokerages and plan administrators set their own policies for holders with a foreign address: some limit new purchases, some restrict trading, and some ask non-resident holders to move their money — and a forced move at the wrong moment can become a tax event if handled badly.

• Ask each provider, in writing, what happens when a holder moves to the UK — before you change your address.
• Consider consolidating while you are still in the US. The IRS rollover chart shows that a qualified plan such as a 401(k) can generally be rolled into a traditional IRA, a US-to-US move that is usually simpler before you have a foreign address. Whether it suits you is a question for your financial adviser.

How the UK treats the account while it grows

Article 18(1) of the UK-US Double Taxation Convention provides that where a UK resident participates in a pension scheme established in the US, income earned by the scheme may be taxed as that individual's income only when — and to the extent that — it is paid to them, and not when it is transferred to another pension scheme.

In practice the dividends, interest and gains inside a 401(k) or traditional IRA are generally not taxed in the UK year by year while you live there. Two refinements matter:

• The definition is functional. A pension scheme is an arrangement generally exempt from income tax in the country where it is established and operated principally to provide retirement benefits. The treaty does not name US plans, although HMRC's treaty notes discuss IRAs specifically. A mainstream 401(k) or traditional IRA fits comfortably; anything unusual should be confirmed.
• US citizens keep this benefit. Article 18(1) is listed in Article 1(5)(a) as surviving the saving clause.

How regular withdrawals are taxed

Article 17(1)(a) provides that pensions beneficially owned by a resident of one country are taxable only in that country. For a UK resident drawing regular payments from a US plan, the starting point is that the UK taxes the income.

Article 17(1)(b) adds a protection that is easy to overlook: an amount that would be exempt from US tax if you were US resident is exempt from UK tax as well. HMRC's notes confirm that an IRA distribution to a UK resident is exempt in the UK to the same extent it would be exempt in the US. That matters for any after-tax basis, and it is the heart of the Roth analysis in our guide to ISA vs Roth IRA for US persons in the UK. Article 1(5)(a) preserves it for US citizens too.

For a US citizen, Article 1(4), the saving clause, allows the US to tax its citizens as if the treaty had not come into effect, except for the provisions listed in Article 1(5). In practice, both countries tax a regular 401(k) or IRA payment: the UK because you live there, the US because you are a citizen.

The double charge is relieved, but not symmetrically. HMRC's notes explain that the UK will not give relief for US tax charged on a UK-resident citizen solely under the saving clause, so on regular payments the UK broadly taxes first and the US credits the UK tax. How that credit works, including limits and carryovers, is covered in our guide to foreign tax credit carryovers for US expats.

A British national who has returned home and is not a US citizen is not caught by the saving clause through citizenship, so regular pension income may be taxable in the UK alone — confirm it before the first payment.

Lump sums: the rule that changes the answer

Article 17(2) provides that a lump sum from a pension scheme established in one country, beneficially owned by a resident of the other, is taxable only where the scheme is established. For a UK resident taking a lump sum from a 401(k), that points to the US.

But Article 17(2) is not protected by Article 1(5), so the saving clause cuts across it. HMRC's International Manual explains that the source country can tax the lump sum, the country of residence can also tax it, and double taxation is relieved under the treaty in the usual way.

• Characterisation matters. HMRC describes a lump sum as any non-periodic, irregular or abnormal payment of a pension. Whether a withdrawal, or a pattern of them, is periodic or a lump sum can change which country taxes first and which gives the credit — a question of fact to settle before the money moves.
• Bunching is expensive. One large withdrawal lands in a single US and UK tax year, pushing income into higher bands in both systems.

Early withdrawals and the additional tax

The IRS applies a 10% additional tax to early distributions from traditional and Roth IRAs taken before age 59½, reported on Form 5329, and its rollover guidance warns that a plan payment not rolled over is taxable and may attract the additional tax unless an exception applies.

Living in the UK is not among the listed exceptions, so check those that apply to your specific account type. The additional tax is a purely US charge; whether any of it can be relieved against UK tax is a question to settle before you withdraw.

Why transferring a 401(k) into a UK pension rarely works cleanly

The IRS describes a rollover as depositing a retirement plan or IRA payment into another retirement plan or IRA within 60 days. Its rollover chart lists the permitted destinations — Roth, traditional, SIMPLE and SEP IRAs, governmental 457(b) plans, qualified plans, 403(b) plans and designated Roth accounts — and every one is a US arrangement. Money leaving a 401(k) or IRA for a UK scheme is therefore generally treated for US purposes as a distribution: taxable, and potentially subject to the early-withdrawal additional tax.

The treaty does not fix that. Article 18(1) mentions transfers only to stop the country of residence taxing income inside the other country's scheme, and the treaty contains no provision governing transfers between a US and a UK scheme.

The UK has its own rules on what a UK scheme can accept from overseas, and for a US citizen the receiving UK pension becomes a foreign pension with its own US reporting questions, covered in US tax on UK pensions and SIPPs. If anyone offers a "tax-free 401(k) to UK pension transfer", ask for the specific IRS and HMRC authority. This is a pension-transfer decision that needs regulated advice as well as tax advice.

Contributing while you live in the UK

401(k) contributions are made through the sponsoring employer's payroll, so once you are paid by a UK employer they generally stop.

IRAs are subtler. Contributions must be based on compensation, and IRS Publication 590-A is explicit that amounts excluded from income, such as foreign earned income and housing costs, do not count. Exclude all your UK salary under the foreign earned income exclusion and you generally have nothing to base an IRA contribution on; relying on the foreign tax credit instead keeps that income on the return, so model the choice.

On the UK side, contribution relief is built around UK schemes. Article 18 contains a limited relief for contributions to a home-country scheme, but its conditions are narrow and fact-specific.

Required minimum distributions

RMDs apply wherever you live. The IRS states that you generally must start taking withdrawals from traditional IRAs and employer plans, including 401(k)s, at age 73, and that Roth IRAs are exempt during the owner's lifetime. A missed RMD can attract an excise tax of 25%, reduced to 10% if corrected within two years.

For a UK resident an RMD is still a withdrawal, generally taxable in the UK under Article 17 and, for a US citizen, in the US as well — so it belongs in the same cross-border plan as every other payment.

Currency and timing: the planning point most people miss

The US computes income in dollars; the UK computes it in sterling. The exchange rate on the day of payment sets the figure HMRC sees, and a withdrawal that looks modest in dollars can look larger in pounds after a currency move.

The tax years do not line up either, so a payment can fall into a UK tax year that straddles two US returns and leave credits stranded. Decide when to withdraw, how much, in which currency and how each payment will be characterised under the treaty — before you instruct the provider.

If your reporting has fallen behind

It is common to find a 401(k) growing quietly while US returns went unfiled, or distributions reported on one side of the Atlantic and not the other. Where returns are missing and the failure was not deliberate, our guide to streamlined filing for retirees abroad explains the usual starting point.

How we approach it

Our US-UK expat tax practice maps every retirement account, sets out the treaty position for each payment and models both currencies before anything is withdrawn or moved. A licensed CPA or Enrolled Agent reviews and signs off every filing that leaves the firm; investment and pension-transfer decisions stay with your regulated financial adviser. If you hold a 401(k) or IRA and live in the UK, or are about to move, book a confidential consultation.

This article is general information, not tax, investment, financial or pension-transfer advice, and does not create a professional relationship. Treaty positions, US and UK rules and provider policies change, and the treatment of any account or payment depends on your own facts; confirm the current position with a licensed professional before acting.

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Reviewed by a CPA / Enrolled Agent. Last updated: 10 September 2026.

Official sources: GOV.UK — 2001 UK-USA Double Taxation Convention, as amended | HMRC — DT19853, United States of America: notes | HMRC — INTM163160, Pensions: lump sums | IRS — Topic no. 557, Additional tax on early distributions | IRS — Rollovers of retirement plan and IRA distributions | IRS — Rollover chart | IRS — Required minimum distributions FAQs | IRS — Publication 590-A