How do my investment options change once I become a US connected person?
I'm British but will be living in the US for a while, which is going to make me a US-connected person. How are my investments likely to be impacted?
Watch: How do my investment options change once I become a US connected person?
I'm British but will be living in the US for a while, which is going to make me a US-connected person. How are my investments likely to be impacted?A key factor here is establishing when you're moving to the US and become a US connected person.
The substantial presence test asks you to report the number of days spent in the US in the current year, plus one third of the days you spent there during 2023 and one sixth of the days you spent there during 2022. If the sum of those numbers comes to 183 days or more, you would be considered a US tax resident.
Therefore, if you were moving to the US in October 2024, and you have spent very little time there during 2023 and 2022, you most likely would not be resident in the US for this US tax year. If you’re planning to stay there for a few years though, then from 1st January 2025 you will be tax resident and taxable on your worldwide income.
If you've got stocks and shares ISAs in the UK, you'll be taxed on the income generated within that ISA from 1st January 2025, possibly at punitive rates. Therefore, this is a good time to get things in order before moving to the US, or at least before you become tax resident in the US.
If you’re coming to the US on a green card, the rules are different. You’ll be considered a tax resident from the day you land in the US and will be required to report your worldwide income from that point onwards. Additionally, if you hold a green card for more than eight years in a 15-year period, you'll be subject to the US exit tax rules – exactly the same as a US citizen giving up their citizenship.
Ultimately, if you are going to spend any time in the US, whether on a visa or green card, talk to an expert advisor before you even get on the plane. Whether you’re in the US and moving to the UK, or in the UK and moving to the US, there are things you can do when you're only tax resident in one place that get a lot more difficult and more expensive after you arrive in the US.
However, if you do your pre-departure planning properly, you'll save yourself a huge amount of headache, and most likely a huge amount of tax as well.