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Is now an ok time to move savings into investments?

Investment discussion for beginners. Why you should invest your money, get help getting started
JohnB
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Re: Is now an ok time to move savings into investments?

#371428

Postby JohnB » December 30th, 2020, 8:09 pm

I think the OP forgot to mention he was a US citizen living over here.

johnhemming
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Re: Is now an ok time to move savings into investments?

#371429

Postby johnhemming » December 30th, 2020, 8:19 pm

JohnB wrote:I think the OP forgot to mention he was a US citizen living over here.

I know someone who repudiated his US citizenship to get away from the US approach to taxing citizens in other countries.

This may help:
https://en.wikipedia.org/wiki/Foreign_A ... liance_Act

gryffron
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Re: Is now an ok time to move savings into investments?

#371430

Postby gryffron » December 30th, 2020, 8:22 pm

TomKhakis wrote:Unfortunately, I just ran into a major roadblock while trying to open an ISA. From the Vanguard Website: "By clicking the “Proceed” button below, you are confirming that: You are a UK resident. You are not a US tax resident or US citizen." After a bit of searching, it turns out that “The individual is considered to hold the assets within the ISA directly and is taxed on them under normal US rules. The UK tax free treatment of the ISA is not replicated in the US.”
By any chance does anyone have any advice? I realize this is very specialized to expats, so I might have to migrate my question over to an expat forum.
It really a shame that because wealthy people would hide assets in other countries, they've made it very difficult for ordinary people to get by.


The US has unusual and really strict rules on taxing its citizens abroad. Precisely to stop "wealthy people hiding their assets in another country".

This causes a HUGE problem for ISAs, because ISA providers do not normally track and report all the gains and taxable dividends as they would for tax reporting on a normal account. They simply don't need to (for Brits, or indeed any British tax resident except a US citizen)

Hence far easier for a broker to simply ban US citizens from holding them, rather than try to explain to the US authorities why they cannot provide all the necessary information.

I don't know whether there are any ISA providers who DO allow US citizens. But I doubt it. And it certainly won't be cheap. Nor save you much tax and therefore, quite probably pointless.

For once, not our fault. It's the USA which refuses to follow all the ROTW's rules on tax residency :(

Gryff

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Re: Is now an ok time to move savings into investments?

#371433

Postby johnhemming » December 30th, 2020, 8:31 pm

gryffron wrote:This causes a HUGE problem for ISAs, because ISA providers do not normally track and report all the gains and taxable dividends as they would for tax reporting on a normal account. They simply don't need to (for Brits, or indeed any British tax resident except a US citizen)

Hence far easier for a broker to simply ban US citizens from holding them, rather than try to explain to the US authorities why they cannot provide all the necessary information.


I would think the general hassle of FATCA is more of an issue. I have some experience in writing stockbroking computer systems and I would expect the records for portfolios and dividends to be available. What people probably don't necessarily have is the systems for dealing with FATCA.

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Re: Is now an ok time to move savings into investments?

#371525

Postby TomKhakis » December 31st, 2020, 3:39 am

Thanks for the replies. I could be wrong as to why the US does this, but I heard that the US had to implement more and more regulations to stop wealthy US citizens from hiding assets and evading taxes. (They actually state asset hiding/tax evasion as the purpose on some of the required documents detailing my UK finance accounts, which I have to submit to the US every year along with my tax forms.) This is just me griping, since I'm just an average person trying to make some responsible investments for my future, and running into these complicated roadblocks.

From my reading the US government will penalize me harshly for Stocks and Shares, and I think this is regardless of whether or not it's an ISA. If it's not an ISA, then it's even worse I think, with me being taxed twice, by the UK and the US.

I've heard that a cash ISA is still taxed by the US government, but not as severely as as stocks and shares ISA. But it doesn't look worthwhile regardless, as the return on cash ISAs look to be negligible and a waste of time at the moment. (~00.05%, or £5 per year on each £10,000 in the cash ISA.)

I looked into investing in a home, but the prices are unaffordable at the moment.

So I guess I'll have to keep researching to hopefully find some options that are decent, and also won't fall prey to US tax laws.

SalvorHardin wrote:Much easier to buy non-American funds. There are plenty of UK / Dublin based funds which invest in America which don't create an American tax liability. E.g. a NASDAQ tracking ETF listed in Dublin will be almost the same as one listed in New York, but without the tax complications.

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Re: Is now an ok time to move savings into investments?

#371756

Postby TomKhakis » December 31st, 2020, 6:12 pm

This was the reply from Vanguard:

Thank you for your email and interest in Vanguard - I hope you are keeping well.

Our service is not available to anyone categorised as a US person I'm afraid and there are three reasons for this:

- The funds we offer for sale in the UK are not registered with the SEC in the US.
- We are bound by the requirements set out in the fund prospectuses that do not allow the sale of these funds to US persons.
- We have taken the decision not to capture dual tax reporting requirements as part of our on-boarding process. This means we are unable to comply with Foreign Account Tax Compliance Act (FATCA) reporting requirements for US persons.

The term ‘‘United States person’’ under the Foreign Account Tax Compliance Act (FATCA) means "a citizen or resident of the United States".

If you want to buy a Vanguard fund you could use a US broker or a specialist UK broker... The HMRC website has a list of funds that are defined as offshore funds and have successfully applied to HMRC for reporting fund status. This includes some US-registered Vanguard funds which, whilst not available through our UK personal investor service, may be available via alternative brokerage platforms.

I hope this helps in clarifying.

So I'll have to look into these other options.

And although this isn't relevant for most members here, you might find this video on US government double-taxation interesting and entertaining. It also includes a section on the ISA. YouTube Video: "What it's like as an American abroad with Taxes: Double Taxation"

gryffron
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Re: Is now an ok time to move savings into investments?

#371984

Postby gryffron » January 1st, 2021, 11:57 am

TomKhakis wrote:From my reading the US government will penalize me harshly for Stocks and Shares, and I think this is regardless of whether or not it's an ISA. If it's not an ISA, then it's even worse I think, with me being taxed twice, by the UK and the US.

Hi Tom,

AIUI:
As a US citizen you must always pay at least US level of tax. In most cases, any tax you pay in a foreign jurisdiction (e.g. UK) is allowable against your US tax. And often UK taxes are higher than US tax, so there is no extra to pay.

ISAs, which are free of UK tax for UK residents, just make this really obvious. And there's also the non-reporting status of ISAs in the UK which makes this a lot of extra work for the brokers.

Gryff

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Re: Is now an ok time to move savings into investments?

#372309

Postby neversay » January 2nd, 2021, 11:17 am

gryffron wrote:
TomKhakis wrote:From my reading the US government will penalize me harshly for Stocks and Shares, and I think this is regardless of whether or not it's an ISA. If it's not an ISA, then it's even worse I think, with me being taxed twice, by the UK and the US.

Hi Tom,

AIUI:
As a US citizen you must always pay at least US level of tax. In most cases, any tax you pay in a foreign jurisdiction (e.g. UK) is allowable against your US tax. And often UK taxes are higher than US tax, so there is no extra to pay.

ISAs, which are free of UK tax for UK residents, just make this really obvious. And there's also the non-reporting status of ISAs in the UK which makes this a lot of extra work for the brokers.

Gryff


@Gryff - Apologies for piggybacking on this thread but I've got similar US-UK tax issues being married to American. Each year I do the dreaded US tax return paperwork which is a nightmare but there's usually no payment as my wife's UK taxes cover her income. We have also enjoyed the stimulus 'checks' :) . However, to avoid issues practically all our UK savings and investments are in my name only which would give her (short-term) difficulty if anything happened to me. We also have a joint account that occasionally has high balances so I had to fill-in their overseas banking paperwork as well. So, my question is whether anyone knows of a guide anywhere that tells you the best way to organise assets and tax affairs in this kind of situation?

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Re: Is now an ok time to move savings into investments?

#372317

Postby gryffron » January 2nd, 2021, 11:38 am

Hi neversay,
I'm no expert. Your best bet would be the specialist expat forums. There is one here at LemonFool but the number of people on that will be tiny compared to the numbers on specialist forums.
e.g.
http://www.uk-yankee.com
http://www.expatforums.com

Gryff

neversay
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Re: Is now an ok time to move savings into investments?

#372318

Postby neversay » January 2nd, 2021, 11:45 am

gryffron wrote:Hi neversay,
I'm no expert. Your best bet would be the specialist expat forums. There is one here at LemonFool but the number of people on that will be tiny compared to the numbers on specialist forums.
e.g.
http://www.uk-yankee.com
http://www.expatforums.com

Gryff


Many thanks Gryff.

Apologies to all for interrupting the thread!


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