I am a dual UK/US citizen, living and working in the UK.
Investing in the UK whilst a US citizen is fraught with difficulties. In short:
The majority of good investment options (e.g. most Stocks and Shares ISAs) aren’t available to me as the financial institutions won’t take US citizens due to FATCA reporting requirements
A few will take me, but any tax benefits due to ISAs are essentially wiped for me as the US doesn’t recognise these benefits and so will want to tax any capital gains
Some of the most prevalent and popular investments available in the UK are actually taxed punitively by the US authorities (basically if they are Passive Foreign Investment Companies (PFICs))
More on all this here if you’re interested.
Given my desire to invest, this has got me thinking about renouncing US citizenship.
However, the main benefit (and to be honest the only significant one I can think of), of hanging on to the US citizenship is that one day I can easily move to the US, where I may be able to do more good than in the UK. I am broadly working in policy, and from this angle it seems that the US is the place to be. I am worried about closing off potentially good career opportunities.
Also, it may be possible for me to be sneaky and avoid US tax whilst investing in the UK, or I may be able to invest in US (e.g in a Roth IRA), sidestepping these issues. I haven’t really figured out details here yet, but I don’t think it would be ideal.
What do you all think? On balance, should I hang on to citizenship or get rid? Appreciate y’all aren’t experts, but I would appreciate thoughts.
US citizenship is extremely valuable and your career opportunities at this stage are likely to be far more valuable to you in future earnings expectations than a few additional percentage points on investments.
In terms of investing, my understanding is that you are best off investing in the US and that there are US investment options open to you (Charles Schwab I believe often comes up as a broker in this area) rather than in the UK.
I renounced my US citizenship two years ago (I still have a German one, living in Germany) because of the restrictions on opening bank accounts, the uncertainty on taxes on capital gains as well around inheritance taxes as well as the yearly cost of paying and additional CPA for the US return. The process was pretty straight forward (going to the consulate, paying the exit fee) and at that time they told me at the consulate that many people were doing this.I’ve since then travelled to the US once and wasn’t questioned at the border.
Not having the option to work in the US is a significant downside so I wouldn’t take the decision lightly. However once you start having more assets outside the US (especially if you start investing in companies) the risks and tax requirements can be significant.
If you can manage to open a bank account in the US it might be easier to invest there but usually you need a permanent address.
I short I think it’s worthwhile to invest some time (and perhaps money in advisors) in further researching the options you have before making a decision that either reduces your work options or exposes you to unknown financial risks.
Do you currently have significant assets? I am not an expert in this but historically the US has imposed exit taxes on people who renounce their citizenship, to try to recoup the taxes they think you ‘should’ have paid.
No I don’t have significant assets at the moment
I’m not very familiar with investment options in the UK, but there are of course many investment options in the US. I believe that being a citizen of the US helps a fair bit for some of these options.
My impression is that getting full citizenship of both the US and the UK is generally extremely difficult, I imagine ever changing your mind would be quite a challenge.
One really nice benefit of having both citizenship is that it gives you a lot of flexibility. If either country suddenly becomes much more preferable for some reason or another (imagine some tail risk, like a political disaster of some sort), you have the option of easily going to the other.
You also need account for how the US might treat you if you do renounce citizenship. My impression is that they can be quite unfavorable to those who do this (particularly if they think it’s for tax reasons); both by coming at these people for assets, making it difficult to come back to the US for any reason, or other things.
I would be very hesitant to renounce citizenship of either, until you really do a fair amount of research on the cons of the matter.
https://foreignpolicy.com/2012/05/17/could-eduardo-saverin-be-barred-from-the-u-s-for-life/
Thanks. I will look at US investment options.
I don’t have significant assets so I would only have to pay a $2,350 renunciation fee (this obviously still isn’t great but in the grand scheme of things it’s not that bad).