Moving from the United Kingdom to the United States does not pause your UK pension. Your SIPP keeps growing. Your defined benefit scheme keeps accruing. Your State Pension entitlement keeps building. But once you become a US tax resident, the IRS takes an interest in all of it, and the rules are genuinely complex, often poorly understood, and in some cases still disputed.

This guide covers every dimension of the problem. It explains how different types of UK pension are treated under US tax law, how the US/UK tax treaty applies (see here), what forms you may need to file, what the penalties are for getting it wrong, and what the genuine areas of uncertainty are. It does not give advice for your specific situation, but it gives you the technical framework to understand what questions to ask and why they matter.

Part 1: Understanding the Types of UK Pension

Before examining US tax treatment, it is essential to understand what kind of UK pension you have. The US rules apply differently depending on the pension structure.

The UK State Pension

The UK State Pension is a government benefit paid by the Department for Work and Pensions (DWP) to individuals who have reached UK State Pension age and have sufficient National Insurance contribution years. It is not a funded pension in the investment sense. It is a government obligation paid from current taxation. You cannot transfer it, encash it, or draw it early. It simply pays a regular amount once you are eligible.

For US tax residents, the State Pension is income. The US/UK tax treaty is relevant here, but the default position in the absence of a treaty claim is that it is taxable in the US.

Defined Benefit (Final Salary) Schemes

A defined benefit scheme promises a retirement income based on your salary and years of service, typically calculated as a fraction of final or average salary multiplied by years of membership. The investment risk sits with the scheme, not the member. You do not have a pot of money. You have a promise of future income.

Once in payment, a defined benefit pension pays a regular income, often monthly. Before retirement, the scheme holds assets that you do not directly control or own in the conventional sense.

Defined Contribution Schemes (Workplace Pensions)

A defined contribution scheme accumulates a pot of money based on employer and employee contributions and investment returns. Auto-enrolment schemes, group personal pensions, and most modern workplace pensions fall into this category. At retirement, the pot is used to generate income, whether through an annuity, drawdown, or a combination.

Self-Invested Personal Pensions (SIPPs)

A SIPP is a defined contribution pension that gives the member wider investment choice than a standard personal pension. A SIPP holder can typically invest in stocks, bonds, funds, commercial property, and other asset classes. The SIPP provider acts as the scheme administrator and trustee. The member directs investment decisions but does not personally own the assets, which are held in trust by the provider.

This trust structure is central to the US tax problem and is examined in detail in Part 3 below.

Personal Pensions

A personal pension is similar to a SIPP but with more limited investment options, typically restricted to a range of funds offered by the provider. The underlying structure is still a trust arrangement. Many older personal pensions were sold before SIPPs became popular and carry the same US reporting questions.

Small Self-Administered Schemes (SSASs)

A SSAS is an occupational pension scheme typically used by small businesses. Like a SIPP, it offers wide investment flexibility including the ability to lend money back to the sponsoring employer. SSASs have their own US reporting complications and are outside the scope of this guide, though the fundamental treaty and foreign trust questions are similar.

Part 2: How the IRS Views UK Pensions

The United States taxes its residents on worldwide income. When you become a US tax resident, whether as a green card holder, a visa holder who meets the substantial presence test, or a citizen, you become subject to US tax on everything you earn or receive globally. This includes pension income from the UK.

Beyond income tax, the US has an extensive foreign information reporting regime. Even assets that are not generating current income may require annual disclosure. UK pensions sit at the intersection of both income tax and information reporting.

The Foreign Trust Classification Problem

The core problem for SIPP holders is this: the IRS does not have a specific category for UK personal pensions. When the IRS looks at a SIPP, it sees a structure where assets are held in trust by a foreign trustee for the benefit of a US person. That description fits the definition of a foreign trust under the US tax code.

A SIPP is obviously not a trust in the way any British person would understand the term. It is a pension. The UK Pensions Act governs it. HMRC regulates it. The pension provider is the scheme administrator with fiduciary obligations under UK law. But US tax law does not have a standalone category for UK personal pensions, and in the absence of one, the foreign trust rules can apply.

This classification creates two separate problems. First, it may trigger annual information reporting requirements under the foreign trust rules. Second, it affects whether the internal growth of the SIPP is sheltered from current US taxation or must be reported annually as income.

The Funded Welfare Benefit Plan Question

Some practitioners argue that a SIPP is better characterised as a funded welfare benefit plan rather than a foreign trust, which would change the reporting analysis. Others have argued for grantor trust treatment. None of these positions have been definitively blessed by the IRS in formal guidance addressing SIPPs specifically. The uncertainty is real.

Employer-Sponsored Schemes: A Different Analysis

Workplace defined contribution schemes and defined benefit schemes generally receive more sympathetic treatment under the treaty, particularly where they were established by an employer rather than by the individual member. The key distinction is between a scheme that exists primarily to provide retirement benefits in the normal course of employment and one that functions more like a personal investment vehicle with a pension wrapper.

Part 3: The US/UK Tax Treaty and Article 17

The United States and the United Kingdom have a comprehensive income tax treaty in force, most recently updated by a 2001 protocol. Article 17 of that treaty deals specifically with pensions and governs most of the relevant questions for UK expats in the US.

See also article here - US–UK Tax Treaty Explained: Dual Residency, Pensions, and Cross-Border Tax Planning for UK Expats

What Article 17 Covers

Article 17 establishes the principle that pension income arising in the UK and paid to a US resident is taxable only in the US, subject to certain conditions. It also establishes that pension income may in some circumstances retain tax-favoured treatment in the US similar to what it receives in the UK. The article covers both periodic pension payments and lump sums.

The Key Treaty Provisions for SIPP Holders

Tax-Free Growth During Accumulation

One of the most important and most disputed questions is whether a SIPP grows tax-free in the hands of a US resident during the accumulation phase. Under UK rules, investment income and gains inside a SIPP are exempt from UK income tax and capital gains tax. If the same treatment applied in the US, a SIPP holder living in America would not need to report annual income or gains arising within the SIPP.

The treaty, read carefully, does provide a basis for this position. The relevant provision allows a US resident to elect to defer US tax on income accruing within a pension scheme that would be exempt from UK tax if the individual were a UK resident. In other words, if the UK exempts the income from tax, the US can be asked to do the same through a treaty election.

• This election is not automatic. It must be claimed on your US tax return and it requires a formal disclosure. Failing to claim the election does not necessarily mean you have lost the benefit permanently, but it creates complexity and potential back-filing obligations. Whether there is a valid late election route depends on the treaty article, the type of plan, timing, and whether the taxpayer can obtain late-election relief. The IRS has issued private rulings on late relief in some pension election context

How to Make the Treaty Election

The treaty election for pension deferral is usually made on Form 8833, Treaty-Based Return Position Disclosure. The form requires you to identify the treaty article being claimed, explain the position, and disclose the relevant pension. It is filed with your annual Form 1040 or 1040-NR. Under Revenue Procedure 2002-23, certain treaty elections for foreign pensions (including UK schemes) do not require Form 8833 if properly disclosed on the return. Many practitioners do not file 8833 for UK pension deferral elections. Many US tax preparers are unfamiliar with this form in the context of UK pensions, which is one reason why UK expats often end up with incorrect filings.

Pension Income in Payment

Once your pension is in payment, whether through drawdown or an annuity, the treaty provides that pension income arising in the UK is taxable in the US as the country of residence. UK withholding tax may apply depending on the type of pension and whether the UK still has taxing rights under the treaty. Where UK tax is withheld, the foreign tax credit mechanism on Form 1116 allows that tax to be credited against your US liability, preventing double taxation in most cases.

Part 4: Form 3520 and Form 3520-A

These two forms sit at the centre of the SIPP reporting problem. Understanding what they are, when they are required, and what the penalties are for getting it wrong is essential for any UK expat with a personal pension.

What is Form 3520?

Form 3520 is the Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. It is filed by a US person who has certain dealings with a foreign trust. In the context of a SIPP, the relevant trigger is being treated as the owner of a foreign trust or receiving a distribution from one.

If the IRS treats your SIPP as a foreign trust, you may be required to file Form 3520 each year you are a US tax resident. The form asks for details of the trust, its assets, any distributions received, and the nature of your relationship with it.

What is Form 3520-A?

Form 3520-A is the Annual Information Return of Foreign Trust with a US Owner. This is the information return that the trustee of the foreign trust is supposed to file directly with the IRS. The problem is immediately obvious: your SIPP provider in the UK has no obligation under UK law to file anything with the IRS. They are unlikely to know what Form 3520-A is, and they will not file it.

When the foreign trustee fails to file Form 3520-A, the obligation falls back on the US owner, if the arrangement is a foreign trust with a U.S. owner. But for SIPPs, that underlying classification is exactly what is disputed. You must then prepare and file a substitute Form 3520-A yourself, treating yourself as the trustee for IRS filing purposes. This requires you to report the year-end value of the SIPP, the income and gains arising within it, and other details that may require coordination with your SIPP provider to obtain.

Deadlines

Form 3520 is filed with your personal tax return, due April 15 with an extension to October 15 if requested. Form 3520-A has a separate deadline of March 15, with a 6-month extension available. Note that Form 3520-A has an earlier deadline than Form 3520, and the extension must be requested separately.

Penalties

• The penalties for missing or incorrect Form 3520-A filings are severe. The IRS imposes a penalty of the greater of $10,000 or 5% of the gross value of the trust assets for each year the form is late or missing. On a SIPP worth £200,000, that is £10,000 per year. The IRS has been actively issuing these penalty notices.

Form 3520 penalties for failure to report distributions are also significant, typically 35% of the gross reportable amount.

The IRS has in some cases abated these penalties when taxpayers have come forward with reasonable cause arguments, but the process of challenging a penalty is expensive and stressful. Prevention is significantly cheaper than remediation.

The Debate: Are These Forms Actually Required for SIPPs?

This is where the professional disagreement lies. There are two broad camps.

The first camp takes the position that a SIPP is a foreign trust for US tax purposes and that Forms 3520 and 3520-A are required annually regardless of whether a treaty election is in place. On this view, the treaty election deals with the income tax treatment but does not change the information reporting obligation.

The second camp argues that a SIPP, properly characterised under the treaty as a pension scheme, is exempt from the foreign trust reporting rules. On this view, the treaty provides not just income tax relief but also an exemption from the foreign trust information reporting regime, on the basis that the pension scheme is recognised as equivalent to a US retirement plan.

The IRS has not issued definitive guidance on this question specifically for SIPPs. Both positions have been taken by experienced cross-border tax practitioners. The decision about which position to adopt requires weighing the strength of the legal argument against the risk of penalty exposure if the IRS disagrees.

This is precisely why you need a specialist who understands both UK pension structures and US international tax, not a general US tax preparer who will default to the most conservative filing position without understanding whether it is actually correct.

Part 5: The 25% Tax-Free Lump Sum

One of the most contentious areas for UK expats in the US is the treatment of the pension commencement lump sum, commonly known as the 25% tax-free lump sum. Under UK rules, you can take up to 25% of your pension pot as a lump sum free of UK income tax when you access your pension from age 55 onwards (rising to 57 from 2028).

The question is whether this lump sum is also tax-free in the United States.

The UK Position

Under UK law, the pension commencement lump sum is exempt from income tax up to the applicable lifetime allowance limits. It is a statutory entitlement built into the UK pension system. HMRC does not tax it.

The Default US Position

Without a treaty claim, the IRS would generally treat a lump sum from a foreign pension as ordinary income taxable in the year of receipt. On this basis, taking your 25% lump sum while a US tax resident could result in a significant US tax liability even though no UK tax applies.

The Treaty Argument

Article 17 of the US/UK treaty covers lump sums from pension schemes. The treaty provides that lump sum payments from pension schemes are taxable only in the country of source, which for a US resident with UK pensions means the US. Section of the Treaty states - 2. Notwithstanding the provisions of paragraph 1 of this Article, a lump-sum payment derived from a pension scheme established in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in the first-mentioned State

However, the treaty also includes provisions designed to prevent double non-taxation, meaning the US may resist giving full exemption to amounts that were never taxed in either country.

The technical treaty position on the 25% lump sum is nuanced. Some practitioners argue that because the UK explicitly exempts the amount from tax as a pension commencement lump sum, the US should recognise this treatment. Others argue that the treaty's anti-abuse provisions mean the US can tax the portion that was never subject to UK tax. The IRS has not issued a definitive ruling on this specific question.

The Risk of Simply Reporting it as Income

Reporting the entire lump sum as ordinary US income, as some advisors suggest, may be the conservative approach but it is not necessarily the correct one. Depending on the size of the lump sum and your marginal US tax rate, this approach could result in a very large and potentially avoidable tax bill. It also fails to engage with the treaty analysis that the US/UK treaty was designed to address.

• Do not simply add your pension lump sum to your Form 1040 as ordinary income without first obtaining a proper treaty analysis. The tax cost of getting this wrong in either direction is significant.

Part 6: Pension Drawdown Income

Flexi-access drawdown allows you to keep your pension fund invested and draw income from it as needed. It replaced the previous drawdown rules from April 2015 and is now the most common way UK retirees access their defined contribution pensions.

UK Treatment

In the UK, drawdown income is taxed as income in the year of receipt at your marginal rate, after the pension commencement lump sum has been taken. The fund itself continues to grow free of UK income tax and capital gains tax while it remains within the pension wrapper.

US Treatment of Drawdown Income

For a US tax resident, drawdown payments are pension income and are taxable in the US in the year received. If the treaty election has been made to defer tax on accumulation within the SIPP, the drawdown payments are then brought into charge when distributed. The character of the income for US purposes is generally ordinary income.

UK Withholding and the Foreign Tax Credit

The UK may withhold income tax on drawdown payments if they are classified as UK-source pension income. Where UK tax has been withheld, you can claim a foreign tax credit on Form 1116 against your US tax liability. The foreign tax credit reduces the US tax due by the amount of UK tax paid, preventing double taxation in most cases.

The mechanics of claiming the foreign tax credit correctly require care. The credit is limited to the US tax that would otherwise be due on the foreign income, calculated using the relevant income category. Excess credits can in some cases be carried forward or back.

Uncrystallised Fund Pension Lump Sums (UFPLSs)

An UFPLS is a withdrawal directly from an uncrystallised pension fund, where 25% is tax-free and 75% is taxable under UK rules. The US treatment of an UFPLS is even more uncertain than the treatment of a standard pension commencement lump sum followed by drawdown, because the tax-free and taxable elements are blended in a single payment rather than separated. Specific advice is essential before taking an UFPLS as a US tax resident.

Part 7: Defined Benefit Pensions and Annuity Income

Defined benefit pension income, whether paid directly from the scheme or converted to an annuity, is periodic pension income. The treaty treatment is generally cleaner for defined benefit pensions than for SIPPs because the reporting complexity around foreign trusts is less acute.

Treaty Treatment

Defined benefit pension income arising in the UK is taxable in the US as the country of residence. The UK may retain withholding rights depending on the specific pension and the individual's circumstances. Where UK tax is deducted at source, the foreign tax credit mechanism applies as described above.

FBAR Reporting

An important question is whether a defined benefit pension must be reported on the FBAR. The FinCEN guidance is that a defined benefit pension, where the individual does not have a specific account balance but a promise of future income, is generally not required to be reported on the FBAR. However, defined contribution pensions, including SIPPs, where you have a specific account with a monetary value, may require FBAR reporting. This distinction is examined in detail in Part 8.

Part 8: FBAR Reporting

The Report of Foreign Bank and Financial Accounts, filed on FinCEN Form 114 and commonly called the FBAR, requires US persons to report foreign financial accounts when the aggregate value of all such accounts exceeds $10,000 at any point during the calendar year.

Does a SIPP Require FBAR Reporting?

This is a question that generates significant debate. The key issue is whether a SIPP constitutes a foreign financial account for FBAR purposes.

FinCEN's guidance indicates that pension accounts may be reportable if they are financial accounts held at a foreign financial institution. A SIPP is held by a UK pension provider, which is a foreign financial institution. The SIPP has a specific account value that can be ascertained at any point. On this basis, many practitioners take the position that a SIPP should be reported on the FBAR if its value exceeds the relevant threshold.

The threshold is $10,000 in aggregate across all foreign accounts, not per account. If you have a SIPP worth $50,000, a UK bank account with $5,000, and a UK ISA, all three values are aggregated. If the total exceeds $10,000, the FBAR filing requirement is triggered for all of them.

FBAR Deadline

The FBAR is due by April 15 each year for the preceding calendar year, with an automatic extension to October 15. It is filed electronically through the FinCEN BSA E-Filing System, not with your tax return.

FBAR Penalties

• FBAR penalties are among the most severe in the US tax system. Non-wilful violations carry a penalty of $10,000 per form per year. Wilful violations carry the greater of $100,000 (indexed for inflation) or 50% of the account balance per year, and can in theory be applied for multiple years. Criminal penalties are also possible in egregious cases.

The IRS has pursued FBAR enforcement actively. While there have been court cases limiting the IRS's ability to stack penalties for non-wilful violations, the risk of significant penalties for historic non-disclosure remains real.

UK ISAs and FBAR

A UK ISA is a foreign financial account for FBAR purposes. The fact that it is tax-free in the UK is irrelevant for US reporting purposes. ISA balances must be included in the FBAR aggregate calculation. The income and gains within an ISA are also not sheltered from US tax unless a treaty claim is made, and the treaty does not provide a clear exemption for ISAs in the way it does for pension schemes.

Part 9: FATCA and Form 8938

FATCA, the Foreign Account Tax Compliance Act, created a parallel reporting regime to the FBAR. US persons with foreign financial assets above certain thresholds must file Form 8938, Statement of Specified Foreign Financial Assets, with their annual tax return.

Thresholds

The Form 8938 filing thresholds depend on your filing status and whether you live in the US or abroad. For a single filer living in the US, reporting is required if total specified foreign financial assets exceed $50,000 on the last day of the year or $75,000 at any point during the year. For married filing jointly, the thresholds are $100,000 and $150,000 respectively. For those living outside the US, the thresholds are significantly higher.

What Counts as a Specified Foreign Financial Asset

Specified foreign financial assets include foreign financial accounts, foreign stock and securities, foreign partnerships, and other foreign financial instruments. A SIPP would generally fall within this definition. The Form 8938 and the FBAR are not mutually exclusive. If you are required to report an account on the FBAR, you will generally also need to report it on Form 8938 if you meet the threshold, though there are some overlap rules.

Penalties for Form 8938

Failure to file Form 8938 carries a $10,000 penalty with an additional $10,000 for each 30-day period of continued failure after notification, up to a maximum of $50,000. There is also a 40% penalty on any underpayment of tax attributable to undisclosed foreign financial assets.

Part 10: PFICs Inside Your SIPP

This is one of the most technically complex and least-discussed dimensions of the UK pension problem for US residents. If your SIPP holds non-US funds, whether UK unit trusts, OEICs, ETFs domiciled outside the US, or other collective investment vehicles, those funds are very likely classified as Passive Foreign Investment Companies under US tax law.

What is a PFIC?

A PFIC is a foreign corporation that meets either an income test (75% or more of gross income is passive) or an asset test (50% or more of assets produce passive income). Most UK and European investment funds, including those commonly held inside SIPPs, meet the PFIC definition. This includes well-known fund providers, ISA-eligible funds, and most ETFs not domiciled in the United States.

Why PFICs are a Problem

The US PFIC regime is extraordinarily punishing by design. It was created to prevent US taxpayers from deferring income by investing through foreign funds. Under the default excess distribution regime, gains and distributions from PFICs are subject to the highest ordinary income tax rates plus an interest charge that effectively eliminates the benefit of tax deferral. The result can be a tax bill that significantly exceeds what would have been due if the investment had been held directly.

The Treaty Protection Question

If the treaty election is made to defer tax on income arising within the SIPP, and the SIPP is accepted as a pension scheme rather than a foreign trust, the PFIC problem may be deferred along with all other income and gains within the SIPP. The PFIC rules would then become relevant at the point of distribution rather than on an annual basis.

However, if the treaty election is not made, or is not accepted by the IRS, the PFIC rules could apply to the underlying fund holdings on a current basis, creating significant annual US tax compliance obligations and potentially large tax charges.

Practical Implications

Many UK expats in the US are unaware that the funds inside their SIPP create PFIC exposure. This is one of the strongest arguments for getting proper specialist advice before you become a US tax resident, rather than after. Restructuring a SIPP to hold PFIC-compliant investments, or making appropriate treaty elections, is significantly easier to do proactively than retrospectively.

Part 11: UK State Pension

The UK State Pension presents a simpler set of US tax questions than a SIPP, but it still requires attention.

US Tax Treatment

The UK State Pension is taxable income in the United States for a US tax resident. The treaty does not provide an exemption from US tax for State Pension income. It is reported as pension income on your Form 1040 in the year it is received.

UK Tax Treatment

For UK residents, te UK State Pension is potentially subject to UK income tax if your total UK income exceeds the UK personal allowance. Where UK tax has been withheld or is due, the foreign tax credit mechanism applies to prevent double taxation.

Note that UK State Pension is paid gross. HMRC collects any UK income tax due through the PAYE code applied to other UK income or through the UK self-assessment return.

FBAR

The UK State Pension is not a financial account. It does not have a balance that can be reported. It is not reportable on the FBAR or Form 8938. It is simply income when received.

National Insurance Contributions

If you are still working and paying National Insurance Contributions, or making voluntary Class 2 or Class 3 contributions to build up your State Pension entitlement, those contributions are generally not deductible for US tax purposes. They are not equivalent to contributions to a US Social Security system for US tax purposes. Cross-border employee contribution treatment can depend on treaty article, assignment structure, and whether the person is in an employment situation covered by Article 18(2).

Part 12: The US/UK Totalization Agreement

The United States and the United Kingdom have a Totalization Agreement that coordinates Social Security coverage between the two countries and prevents dual Social Security taxation. This agreement is separate from the income tax treaty and covers social security contributions rather than income tax.

Relevance for UK Expats

If you are employed in the US, you pay US Social Security and Medicare taxes. You are generally exempt from continuing to pay UK National Insurance during the same period. If you are self-employed in the US, you pay US self-employment tax. The totalization agreement prevents you from having to pay into both systems simultaneously for the same work.

If you have a mixed work history between the UK and the US, the totalization agreement allows contribution periods in both countries to be combined when calculating benefit eligibility, which is relevant for State Pension entitlement on the UK side and Social Security benefit eligibility on the US side.

Part 13: Coming to the US with an Existing SIPP

The most important time to address the SIPP and US tax question is before you become a US tax resident, not after. Once you are a US tax resident, the clock starts on filing obligations. Actions that could have been taken while you were a UK resident, such as restructuring the investments within the SIPP to avoid PFIC exposure, may be more complex or costly once you are subject to US tax on a worldwide basis.

Pre-Departure Planning

Before becoming a US tax resident, consider the following questions.

• What type of UK pension do you have and how is it likely to be treated for US purposes?

• Should you take the 25% tax-free lump sum before becoming a US tax resident, when it will be UK tax-free and before you are subject to US tax?

• What investments does your SIPP hold, and do any of them constitute PFICs?

• Should you consolidate multiple UK pensions before moving?

• Have you considered whether the pension can or should be transferred to a QROPS (Qualifying Recognised Overseas Pension Scheme)?

QROPS: Qualifying Recognised Overseas Pension Schemes

A QROPS is a foreign pension scheme that meets HMRC's requirements for receiving a UK pension transfer without triggering a UK tax charge. Transferring a SIPP to a QROPS was previously promoted as a way to simplify the US reporting position, but the landscape has changed significantly.

The Overseas Transfer Charge, introduced in 2017, imposes a 25% UK tax charge on transfers to QROPS unless certain conditions are met, including that the member lives in the same country as the QROPS. QROPS based in Malta or Gibraltar that were previously used for US-bound expats have become much less attractive as a result. This is a complex area requiring specific advice based on your circumstances.

Part 14: Annual Compliance Checklist

Once you are a US tax resident with a UK pension, the following annual obligations may apply depending on your specific situation.

By April 15 (or October 15 with extension)

• Form 1040: Report all UK pension income received during the year

• Form 8833: Treaty-Based Return Position Disclosure if claiming treaty benefits for pension accumulation or income treatment

• Form 1116: Foreign Tax Credit for any UK tax withheld on pension income

• Form 8938: Report specified foreign financial assets if above threshold

• Form 3520: Report transactions with foreign trusts if applicable

By March 15 (or September 15 with extension)

• Form 3520-A: Annual information return for foreign trust if applicable (filed as substitute if SIPP provider does not file)

By April 15 (automatic extension to October 15)

• FinCEN Form 114 (FBAR): Report foreign financial accounts if aggregate exceeds $10,000

Ongoing

• Obtain annual SIPP statements in a format sufficient to complete required US filings

• Track UK tax withheld at source for foreign tax credit purposes

• Monitor the value of all UK accounts for FBAR and Form 8938 threshold purposes

• Keep records of treaty elections made in prior years

Part 15: Common Mistakes

Ignoring the SIPP Entirely

Many UK expats simply do not disclose their UK pension to their US tax preparer, either because they are unaware it is relevant or because they assume it is too small to matter. Given the penalty regime, this is a significant risk. The IRS has been actively pursuing foreign account non-disclosure and the SIPP falls squarely within the disclosure regime.

Reporting Everything as Income

Some US tax preparers, unfamiliar with the treaty, default to reporting all UK pension receipts, including the 25% lump sum, as ordinary US income. This is a conservative position but it may not be correct, and it can result in a substantial overpayment of US tax.

Not Making the Treaty Election

Failing to make the Article 17 treaty election to defer tax on accumulation within the SIPP means the IRS may treat the annual growth of the SIPP as currently taxable US income. This election is not retroactive in a simple sense. Addressing historic failure to make the election may require an amended return or a disclosure procedure.

Missing the Form 3520-A Deadline

The Form 3520-A deadline of March 15 catches many people by surprise because it is earlier than the main tax return deadline. A late Form 3520-A triggers automatic penalty notices.

Failing to Coordinate the FBAR with Form 8938

These are two separate forms filed with two separate agencies. Completing one does not satisfy the other. Both must be filed if the relevant thresholds are met.

Part 16: Working with the Right Advisor

The UK pension and US tax intersection requires a very specific combination of expertise. Most US tax preparers understand domestic US retirement accounts well but have limited experience with UK pension structures, the US/UK treaty, and the foreign trust reporting regime. Most UK financial advisers and accountants understand UK pensions well but are not licensed or qualified to advise on US tax.

You need someone who understands both. The practical test is whether your advisor can articulate the treaty election available under Article 17, explain the Form 3520-A substitute filing process, and discuss the PFIC implications of your SIPP's investment holdings. If they cannot, they are not the right person for this work.

Questions to Ask a Potential Advisor

• Have you previously filed Form 3520 and Form 3520-A for UK SIPP holders?

• What is your position on whether a SIPP requires these forms at all under the treaty?

• How do you handle the treaty election for pension accumulation?

• How do you treat the 25% pension commencement lump sum?

• Do you assess PFIC exposure within SIPP investment portfolios?

• Are you familiar with the FBAR reporting requirements for UK financial accounts?

If the advisor hesitates on any of these questions, or gives a one-line answer without acknowledging the genuine complexity and uncertainty in some of these areas, seek a second opinion before filing.

Disclaimer

This article is published by Antravia Advisory for informational purposes only. It reflects research, professional analysis, and our perspective on a complex and evolving area of cross-border tax law. It does not constitute legal, tax, or accounting advice. The US tax treatment of UK pensions involves genuine legal uncertainty, and individual circumstances vary significantly. Readers should obtain specific professional advice before making any decisions based on the content of this article. Antravia Advisory does not accept liability for reliance on the information contained herein.

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Our UK Expats in US Series

UK Citizens Moving to the U.S.: Tax Issues to Understand Before You Arrive
ISAs and UK Investments Under U.S. Tax: What Stops Being Tax-Free
Selling UK Property After Moving to the U.S.: Capital Gains and Timing Risks
UK Pensions and U.S. Tax: What Happens to Your SIPP When You Move to America
UK Pensions and U.S. Tax: The 25% Pension Lump Sum and US Tax
US–UK Tax Treaty Explained: Dual Residency, Pensions, and Cross-Border Tax Planning for UK Expats
FBAR and FATCA for UK Expats: Reporting Your UK Accounts to the IRS
FIRPTA Explained: U.S. Tax Withholding When Foreign Owners Sell Property
U.S. Tax for Foreign Owners of Rental Property: A Guide for UK Investors

Disclaimer:
Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.

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