We dive into US federal tax on investment income for British nationals who count as non-resident aliens (NRAs) for US tax purposes. This comprehensive guide covers crucial topics from determining your tax status to navigating the complex US-UK tax treaty benefits that can significantly reduce your tax burden.
• Confirming your US tax status is the critical first step – NRA vs. resident status changes all the rules
• US taxes NRA investment income differently based on type – FDAP income (dividends, interest) faces up to 30% withholding while capital gains on stocks often have zero US tax
• The US-UK tax treaty can reduce dividend tax rates from 30% to 15% and interest tax to 0%, but only if you properly claim benefits
• Form W-8BEN must be filed with your US broker/payer and renewed every three years to receive treaty benefits
• US real estate investments face different rules under FIRPTA, with 15% withholding on gross sales price
• UK residents must report US income on UK returns but can claim Foreign Tax Credit Relief to avoid double taxation
Remember to properly document your tax status, keep your W-8BEN current with your broker, and consider seeking expert help if navigating these complex regulations becomes overwhelming.
Here is a comprehensive overview of US taxation on investment income for British non-resident aliens.
