What is the UK IRA?

ira uk equivalent

When it comes to saving money and investing long term, having the right tools at your disposal is crucial. There are many different instruments that can help you achieve your financial goals but each country has its own unique quirks and requirements.

In the UK, the closest thing to an ira uk equivalent is either a Stocks and Shares ISA or a Self Invested Personal Pension (SIPP). These both allow you to invest your money tax efficiently but they do have some differences. For example, when withdrawing your money from an ISA, you are not paying any tax but withdrawals from a SIPP are subject to income tax.

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A further difference is that it may be harder to find a broker that will work with a US citizen abroad and there are concerns around PFICs and the need for HMRC reporting funds (though this is becoming less of an issue as more UK-domiciled UCITS funds are available). In addition, there is a question about whether the treaty allows you to use your Roth IRA allowance in the UK, but this depends on interpretations of specific treaty language and may change over time.

The UK does have one other special savings account called a Lifetime ISA (LISA) that is slightly like a Roth IRA. This is only available to people under 40 and the government tops up your contributions with a bonus that is taxable in the US (but not in the UK). However, withdrawals from a LISA are restricted and if you withdraw without a qualifying reason, you must pay a 5% penalty.