Traditional IRA Withdrawal as a UK Resident: Treaty, Withholding and HMRC Rules

A traditional IRA withdrawal by a UK resident is normally taxed in the UK as foreign pension income. Article 17 of the US/UK treaty gives Britain the taxing right over regular payments, exempts the after-tax basis, and treats lump sums differently. US citizens are still taxed by the US as well, with credit for the UK tax. The details below decide whether you pay the right tax once or the wrong tax twice.

This guide deals only with the traditional IRA: the pre-tax individual retirement arrangement that many Americans in Britain, and many Britons who once worked in the US, still hold. It builds on our guides to 401(k) tax treatment for UK residents and how both countries tax retirement income, and focuses on what is different about an IRA: after-tax basis, ad hoc withdrawals that can become treaty lump sums, and the withholding forms a US custodian will ask for.

Is a traditional IRA a pension under the US/UK treaty?

Yes. The treaty's Exchange of Notes lists individual retirement accounts, individual retirement annuities, SEP and SIMPLE (section 408(p)) accounts among the US arrangements that count as a "pension scheme" under Article 3(1)(o). That matters because every rule in this article flows from that classification: Article 17 governs withdrawals, and Article 18 protects the growth inside the account from UK tax until money is paid out.

On the UK side, HMRC treats a traditional IRA as a foreign pension. GOV.UK confirms that from 6 April 2017 "the whole foreign pension or annuity payable to a UK resident will be chargeable to tax", replacing the old 90% rule. Payments go on the Foreign pages (SA106) of your Self Assessment return and are taxed at your marginal rate for the year, for example 2026/27, after the personal allowance.

Who taxes an IRA withdrawal as a UK resident? Article 17 in plain English

Article 17 of the treaty has three moving parts that apply to a traditional IRA. Reading them together is what most online summaries skip.

Article 17(1)(a): regular payments are taxed where you live

The treaty text says pensions and similar remuneration "beneficially owned by a resident of a Contracting State shall be taxable only in that State." For a UK resident, regular IRA withdrawals are therefore taxable only in the UK, and the US should not tax them. That is the position for a British citizen or other non-US person who lives in Britain.

Article 17(1)(b): the US-exempt part stays exempt

Sub-paragraph (b) adds that any amount of a pension paid from a scheme in the other country that "would be exempt from taxation in that other State" if you lived there is exempt in your country of residence too. HMRC's Double Taxation Relief Manual at DT19853 uses the IRA as its example: a distribution from a US IRA to a UK resident "will be exempt from tax in the UK to the same extent that the distribution would be exempt from tax in the US." This is the rule that protects your after-tax basis, covered below.

Article 17(2): lump sums are taxed where the scheme is

Article 17(2) says a lump-sum payment from a pension scheme in one country, paid to a resident of the other, "shall be taxable only in the first-mentioned State", meaning the US for an IRA. HMRC's International Manual at INTM163160 now says this is "in effect overridden" by the saving clause in Article 1(4), so the country where the recipient lives "will also be able to tax the payment", with double taxation relief in the usual way. A UK resident taking an IRA lump sum should plan for tax in both countries.

What makes an IRA withdrawal a lump sum?

This is the question that matters most for IRAs, because IRA owners rarely take a fixed monthly pension. They draw what they need, when they need it. INTM163160 defines a treaty lump sum as "any non-periodic, irregular or abnormal payment of a pension."

HMRC's guidance gives working markers. A payment of 50% or more of the fund available to you is generally safe to treat as a lump sum, and a payment of 20% or more is likely to be one, although the whole pattern of payments counts. Where someone draws a similar amount year after year, HMRC is more likely to see periodic payments; an unusually large draw in one year can be split, with the excess over the usual pattern treated as a lump sum. For an IRA owner, the practical lesson is that a steady, predictable withdrawal pattern keeps you inside Article 17(1), while a one-off large draw may move part of it into Article 17(2).

On the UK side, a lump sum from a foreign scheme is taxed under section 574A ITEPA 2003. HMRC's manual at EIM75550 starts at 100% of the payment and then allows three deductions, including the value immediately before 6 April 2017 of rights to lump sum benefits. For an IRA built up before 2017, a valuation at that date is worth locating before any large withdrawal.

How are US citizens taxed on an IRA withdrawal in the UK?

Article 1(4), the saving clause, lets the US tax its citizens "as if this Convention had not come into effect." Article 17(1)(a) is not on the list of exceptions in Article 1(5), so a US citizen living in London pays US tax on traditional IRA withdrawals as ordinary income, reported on Form 1040 from the Form 1099-R. Our guide to the saving clause explains the mechanism in more detail.

The double tax is resolved by Article 24(6), and the order matters:

1. The UK taxes the IRA withdrawal first, as the country of residence.
2. The UK gives credit only for the US tax that the US could charge a UK resident who is not a US citizen. For a regular IRA payment covered by Article 17(1)(a), that is nil, so HMRC collects its full tax.
3. The US then allows a credit for the UK tax against US tax on the same income.
4. Because IRA income is US-source, the foreign tax credit limit would normally block that credit. Article 24(6)(d) deems the income to arise in the UK "to the extent necessary to avoid double taxation", which is known as resourcing.
5. On the US return, resourced income goes on a separate Form 1116 for the "certain income re-sourced by treaty" category, and the treaty position may also need disclosure. See our guide to Form 8833.

Where UK rates are at or above US rates on that income, the result is usually little or no additional US tax, but you still file both returns. Green card holders are usually taxed the same way, but one who uses the treaty tie-breaker to be treated as UK resident is in a different position; see our guide for green card holders living abroad.

After-tax basis: the part of the withdrawal nobody should tax

Many people living abroad made non-deductible contributions to a traditional IRA, because their income was too high for a deduction or because they were covered by a workplace plan. Those after-tax dollars are your basis. The IRS tracks them on Form 8606, which is used to report non-deductible contributions and distributions from traditional, SEP or SIMPLE IRAs where you have ever made non-deductible contributions.

In the US, each withdrawal is split pro rata between taxable and non-taxable parts across all your traditional, SEP and SIMPLE IRAs; you cannot choose to take the basis out first. Under Article 17(1)(b), and as DT19853 confirms for IRAs, the part the US treats as a tax-free return of basis is also exempt in the UK. That benefit is listed in Article 1(5)(a) as an exception to the saving clause, so HMRC cannot sidestep it by taxing you as a UK resident under domestic law.

In practice, HMRC will not know your basis unless you tell it. Keep every Form 8606 you have filed, calculate the exempt fraction for each year, report only the taxable portion on the SA106, and note the treaty claim in the "Any other information" box. If your Form 8606 history is incomplete, rebuilding it is worth doing before you start withdrawals.

US withholding on an IRA withdrawal from the UK

US custodians withhold under US rules, whatever the treaty says, and the form you give them decides the rate.

Who you are	Form to give the custodian	Default US withholding	What to watch
US citizen or other US person, ad hoc withdrawal	Form W-4R	10% on nonperiodic payments (2026 form)	You generally cannot choose less than 10% for payments delivered outside the United States
US citizen or other US person, regular instalments	Form W-4P (periodic payments)	Set by the choices on Form W-4P	Withholding is a prepayment; the final US tax is settled on Form 1040 with the foreign tax credit
Non-US person resident in the UK	Form W-8BEN claiming the treaty	30% unless a treaty rate is claimed	Payments are reported on Form 1042-S; without a valid W-8BEN the custodian withholds at 30%
Non-US person taking a lump sum	Form W-8BEN	30% is generally expected	Article 17(2) leaves the US with the taxing right on lump sums, so the treaty does not remove US tax

The 2026 Form W-4R confirms that IRA distributions payable on demand are nonperiodic payments with a default 10% rate, and that payments to nonresident aliens do not use Form W-4R. IRS Publication 515 sets out the 30% withholding on US-source income paid to foreign persons and the reduced rates available by treaty on a Form W-8. A British citizen who has left the US should check that the custodian holds a current W-8BEN, not an old W-9, before the first withdrawal.

The 10% additional tax and RMDs still apply

Two US rules follow the account wherever you live.

Early withdrawals. The IRS early distribution page (updated 11 December 2025) says withdrawals before age 59½ generally carry a 10% additional tax unless an exception applies. The IRA-only exceptions include up to $10,000 lifetime for a first home, qualified higher education expenses and health insurance premiums while unemployed. Exceptions shared with workplace plans include disability, a series of substantially equal periodic payments, and emergency personal expense distributions of up to $1,000 a year. The age-55 separation-from-service exception is a plan-only rule and does not apply to IRAs. The additional tax matters whenever the US has taxing rights: always for US citizens, and on lump sums for everyone.

Required minimum distributions. The IRS RMD page (updated 4 August 2026) says RMDs begin at age 73, with the first IRA distribution due by 1 April of the year after you turn 73. The still-working exception does not apply to IRAs. The excise tax on a shortfall is 25%, or 10% if corrected within two years. A regular annual RMD is also the kind of predictable payment HMRC is likely to treat as periodic rather than a lump sum.

Illustrative example: a US citizen aged 66 living in Bristol holds a traditional IRA, about 12% of which, on her Form 8606 pro-rata calculation, is after-tax basis. She takes a similar sum each year. The custodian withholds 10% under Form W-4R. On her UK return she reports the withdrawal less the basis portion, which is exempt under Article 17(1)(b), and pays UK tax at her marginal rate with no UK credit for US tax. On Form 1040 she reports the same taxable amount, resources it under Article 24(6) on a separate Form 1116, and credits the UK tax, so the 10% withheld largely comes back as a refund. This is illustrative only; the outcome depends on her full circumstances.

What people get wrong with an IRA in the UK

• Reporting the full gross withdrawal to HMRC. Returned basis is exempt in the UK under Article 17(1)(b); without Form 8606 records, people overpay.
• Assuming Article 17(2) makes a lump sum UK tax free. HMRC's current manual says the UK can also tax it.
• Emptying the IRA in one go before a move. A large irregular draw is likely a treaty lump sum, can carry the 10% additional tax before 59½, and bunches income into one year in both countries.
• Leaving an old W-9 on file. A non-US person then suffers US tax the treaty reserves to the UK.
• Missing Article 24(6) resourcing. Without it, a US citizen's foreign tax credit for UK tax on US-source IRA income may be limited, and the same income is taxed twice.
• Forgetting the RMD after 73 because statements go to an old US address.

Planning an IRA withdrawal as a UK resident

The decisions that change the outcome come before the first payment: the withdrawal pattern (instalments or a lump sum), the withholding form on file, basis records, and for recent arrivals whether the UK's Foreign Income and Gains regime helps, which our 401(k) guide covers. Converting to a Roth IRA is a separate decision with its own US and UK consequences and needs modelling in its own right. People moving the other way should read our guide to UK pensions on a US return.

US/UK Cross Border Tax — US CPAs and UK tax advisers working as one team; London, Manchester, New York, San Francisco. Our IRA withdrawal planning for UK residents sits within our US/UK pensions service, alongside treaty relief claims, and we work with Americans in the UK and retirees drawing on US accounts. If you want the US and UK sides of an IRA worked through together, get in touch.