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Tax-free (or low tax) investments for US citizen residing in the UK?

Personal Finance & Money Asked by Andrew Jaffe on April 26, 2021

I am a US citizen residing in the UK (long-term, possibly including in retirement). My spouse is also a US citizen, and my children have dual citizenships.

Are there any investments available to us that have the same tax benefits as both a UK ISA and a US IRA — i.e., an ISA with no (or minimal) US tax burden, or an IRA with no (or minimal) UK tax burden? Are there any particular pitfalls?

This seems like it should be a relatively common need, but I can’t find any definitive answers.

To answer some of the points in the comments, to the best of my (somewhat meagre) knowledge:

There are two separate (but related) issues: FATCA imposes pretty strict requirements on foreign firms that let US Citizens invest with them — so much so that some ISAs don’t even allow us to use them.

Furthermore, the IRS also imposes an onerous tax burden on many such foreign investments, cancelling out (some? much?) of the advantage of the ISA’s tax benefits.

I also understand that HMRC has similar rules that effect investments by UK residents in vehicles like IRAs in the USA.

But I don’t know how blanket these rules are, and whether there are any provisions that make these sorts of investments sensible in some contexts (it would seem strange if expats are basically prevented from these sorts of things).

I see that there is some overlap with this, slightly broader, question.

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