401(k), IRA and Roth IRA: How They Are Taxed in the UK

Once you are UK resident, the UK generally has the right to tax your worldwide income, and that includes payments you draw from US retirement accounts. The UK-US double tax treaty then decides which country taxes what, and how double taxation is relieved. For most UK residents drawing on a 401(k) or traditional IRA, the practical result is that the payment is taxed in the UK at your normal Income Tax rates, with credit given for any US tax that is properly due.

The picture differs by account type and by whether you take money as a regular stream or as a one-off lump sum. It also differs sharply depending on whether you are a US citizen or green-card holder, because the treaty contains a saving clause that lets the US continue to tax its own citizens on this income (see our guide to the treaty and its saving clause). In broad terms:

• Regular payments from a 401(k) or traditional IRA: taxable in the UK for a UK resident.
• Lump sums from a 401(k) or traditional IRA: taxable in the UK since March 2025, with credit for US tax (a change from the old position).
• Qualified Roth IRA distributions: widely accepted as tax-free in the UK, mirroring the US.
• US Social Security: taxable only in the UK for a UK resident under Article 17(3) of the treaty.

The abolition of the non-dom remittance basis from 6 April 2025 and its replacement with the 4-year Foreign Income and Gains (FIG) regime matters here too. A newly UK-resident individual who qualifies (broadly, someone in one of their first four UK tax years after at least ten consecutive years of non-UK residence) may be able to claim relief on eligible foreign income, and HMRC's detailed helpsheet indicates most foreign pension income can be relievable, so some US pension income may fall in scope during the four-year window. The GOV.UK summary of the regime does not spell pensions out, so the precise interaction should be confirmed for your facts. See our guide for Americans living in the UK.

Two articles do the heavy lifting. Article 17 covers pensions and similar remuneration; Article 18 covers cross-border pension contributions and the tax recognition of schemes. HMRC's own guidance on how these apply is in the Double Taxation Relief Manual at DT19853.

Article 17(1)(a) is the general rule: pensions and other similar remuneration are taxable only in the state where the recipient is resident. So a UK resident drawing a regular US pension is, as a starting point, taxed in the UK and not the US (the saving clause aside for US citizens).

Article 17(1)(b) is the mirror rule and it is the key to the Roth question. It requires the residence state to exempt any amount of the pension that would be exempt from tax in the source state if the recipient were resident there. HMRC's manual states plainly that a distribution from a US IRA to a UK resident will be exempt from UK tax to the same extent that it would be exempt from US tax. That is why a qualified Roth distribution, tax-free in the US, is generally treated as tax-free in the UK.

Article 17(2) historically dealt with lump sums, treating a lump sum from a scheme in one state as taxable only in that other (source) state. This is the provision affected by the March 2025 change described below. Article 18 supports the framework by allowing cross-border recognition of pension schemes and contributions in defined circumstances, which is what lets a US employer plan be respected as a pension for treaty purposes.

For a UK resident, regular income drawn from a 401(k) or a traditional IRA is generally taxable in the UK as pension income, reported through Self Assessment. Because contributions and growth in these plans were tax-deferred (not yet taxed), the distributions are ordinary taxable income, unlike a Roth. The UK taxes the gross payment at your marginal rate.

If you are not a US citizen or green-card holder, the treaty generally assigns taxing rights on periodic payments to the UK, and correctly certified US withholding should be avoidable or reclaimable, so you are not taxed twice. If you are a US citizen or green-card holder, the saving clause lets the US tax the same income; you then claim foreign tax credits to avoid double taxation, and the direction of credit depends on the type of income and the sourcing rules (an area where professional coordination pays off).

A Roth conversion (moving pre-tax 401(k) or traditional IRA money into a Roth) is a US taxable event in the year of conversion. The prevailing view among cross-border advisers is that a conversion is not itself a UK taxable event, and neither is the later qualified Roth distribution, so for a UK resident there is often no UK tax on either step (to confirm for your facts). Marketing that suggests the FIG regime is needed to shelter a Roth conversion from UK tax should be treated with caution, because the consensus is that the UK tax it warns against does not generally arise.

The common and well-supported position is that a qualified Roth IRA distribution is tax-free in the UK, because Article 17(1)(b) requires the UK to mirror the US exemption. Since a qualified Roth distribution is free of US federal income tax, the UK exempts it to the same extent. The treaty definition of a pension scheme expressly includes a Roth IRA (a plan under section 408A of the US Internal Revenue Code), so it is analysed as a pension for treaty purposes rather than as an ordinary offshore investment account. This makes the Roth one of the most UK-friendly US retirement vehicles.

There are conditions and nuances to respect:

• The exemption depends on the distribution actually being a qualified Roth distribution for US purposes (generally the account open at least five years and the holder aged 59 and a half, or another qualifying condition met). A non-qualified Roth distribution that would be partly taxable in the US would not get full UK exemption.
• The mirror principle keys off what would be exempt if you were US resident, so the character of the payment under US rules drives the UK answer.
• HMRC's DT19853 gives the IRA example but does not spell out Roth-versus-traditional in detail, so the Roth conclusion is drawn from applying the mirror rule to a qualified Roth. Where the sums are large, obtaining written confirmation for your situation is sensible.
• For US citizens in the UK, the UK exempts the qualified Roth distribution while the US also treats it as tax-free, so there is usually no double tax and no residual US tax to credit.

In short: the Roth is generally the cleanest account to hold as a UK resident, but the exemption is only as good as the distribution being genuinely qualified under US rules.

The most important recent development concerns lump sums. Until 2025, many advisers read Article 17(2) as making a lump sum from a US pension taxable only in the US, and therefore UK-exempt. On 12 March 2025 HMRC updated its guidance and now takes the view that lump-sum distributions from taxable US pension plans are also taxable in the UK, with foreign tax credit relief for US tax paid. HMRC reaches this through the saving clause: although Article 17(2) gives exclusive taxing rights over the lump sum to the source state, Article 17(2) is not among the provisions listed in Article 1(5) that are protected from the saving clause, so under Article 1(4) the residence state can still tax its own resident, with double-tax relief given in the usual way.

The practical effect is that a UK resident taking a 401(k) or traditional IRA lump sum can face UK Income Tax at up to 45% (or 48% at the top Scottish rate for 2026/27) on the payment, against a top US federal rate of 37%, with credit for US tax reducing but not always eliminating the UK charge. A large lump sum can also push you into higher UK bands in a single year. This change makes the timing and structuring of any lump sum a live planning point, and anyone who took or is planning a lump sum around this period should review their position.

Separately, the US imposes a 10% additional tax (penalty) on distributions before age 59 and a half, subject to US exceptions. This is a US charge and the treaty does not remove it. Because it would not be exempt if you were US resident, the mirror rule does not shelter it either, and for US citizens the saving clause keeps the US charge fully in play. Plan withdrawals with the age-59-and-a-half threshold in mind.

Finally, a frequent misunderstanding: the 25% UK tax-free pension commencement lump sum applies only to UK-registered pension schemes. It does not apply to a 401(k), IRA or Roth IRA, so do not assume 25% of a US lump sum is UK tax-free.

If you are UK resident and take taxable payments from a US retirement account, you report them to HMRC through Self Assessment, on the foreign income pages, converting amounts to sterling and claiming foreign tax credit relief for any US tax properly suffered. Even a Roth distribution that ends up exempt should generally be disclosed with the treaty exemption claimed, so the position is transparent.

US citizens and green-card holders have a parallel US filing obligation on the same accounts and distributions, and must also handle US information reporting, principally the FBAR (FinCEN Form 114) and FATCA (Form 8938) where thresholds are met. Our separate guide on FBAR and FATCA covers those forms. Coordinating the UK and US returns so credits line up in the right year and the right direction is where most avoidable double tax is lost or reclaimed.

Practical points to keep clean records for: US 1099-R distribution forms, any US withholding certificates (Forms W-8BEN or W-9 as appropriate), the date and character of each distribution (periodic versus lump sum, qualified versus non-qualified Roth), and evidence supporting any treaty position taken. If in doubt on a specific distribution, flag it as to confirm and get advice before you draw, because the UK and US treatment can be hard to unwind after the event.