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Category: UK Tax
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I am a UK citizen shortly going back to live there after years

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I am a UK citizen shortly going back to live there after years overseas. I have a US based teachers pension (TIAA-CREF), which is essentially an investment in mutual funds.

if I am resident in the UK for tax purposes would gains in my mutual fund portfolio be taxable, even if I do not withdraw from it?


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Its MamaTax Here!

Thanks for the question.

Once you become a UK tax resident you become taxable on your worldwide income and gains.

Ideally if there are huge gains accrued, it might be wise to sell and rebuy the same units o fthe mutual fund before coming to UK.You only become tax resident once you arive in UK and not for the full tax year as you qualify for split year treatment. However selling and rebuying the same fund a few days later ma not be possible as some funds have either a penalty or 90 day hold period.

Also worh mentioning that you are only taxed on the gain when there is a distribution or sell of the mutual fund and not on UNrealised fair value/market value increase.

Hope this helps.

Let me know if you have any further comments. If sorted, could you please rate the question before you go.

Customer: replied 3 years ago.

Can you please clarify about the selling and rebuying?


If I put $100,000 in 5 years ago when overseas, which has now accrued to $130,000, but then receive a $10,000 distribution when in the UK - would the $10,000 be treated as income or is part of it regarded as a capital gain?

Can you please clarify about the selling and rebuying?
My suggestion is to sell the mutual fund before coming to UK. And another tax efficient investment once you are back in UK. Therefore there is no tax to pay on the US investment. See further details below.

US mutual funds are very popular investments for US persons due to special US tax rules for mutual funds however in UK, this investment is treated as an offshore fund /Collective investment scheme and they are treated diferently for UK tax purposes depending on whether the scheme/fund is authorised or not.

If fund/scheme is not authorised the gains realised are taxed as income rather than as capital i.e. generally you pay higher taxes (otherwise if authorised then gain is treated as capital gain) . Dividend and/or interest payments received will be treated as income.

In your case, the scheme is likely to be unathorised like in most cases (list of authorsied scheme is on HMRC website), therefore the $10,000 distribution will be treated as income.

Hope this helps.
TaxVince, Accountant
Category: UK Tax
Satisfied Customers: 965
Experience: Chartered Accountant >20 years + Qualified IFA
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