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Income Taxes on US Military Retirees’ Pay

Posted 10/1/2007   Updated 10/1/2007 Email story   Print story


Retiree Activity Office

10/1/2007 - RAF MILDENHALL, England  -- UK/US Income Taxes on Retired Pay

Income Taxes on US Military Retirees' Pay: Money received as retirement pay by a retired US military person resident in the United Kingdom is subject to income tax by the United States Government, but such money is wholly exempt from tax by the British Government. 

Authority for this is the bilateral tax treaty between the United States Government and the United Kingdom Government. The current treaty came into effect on Jan. 1, 2004. For United Kingdom purposes the treaty may be referred to as United Kingdom-3 Income Tax Treaty, and the relevant article is Article 19. 

Should any bank or other financial institution attempt to impose British taxes on such money you should refer them to the provisions of this treaty. If a retired US military person resident in the United Kingdom is required to file a British income tax return then the person's military retired pay may be reported in the following manner [this procedure has worked without known exception for decades]. 

On the supplementary pages for Foreign income make no entry to the question about Pensions income. In the additional information box at the end of the supplementary pages enter the following: "Page F[number of page where question about pensions income is located], Pensions: Military Retirement Pay received from USA Government is not subject to UK tax--the provisions of Article 19, Section 2(A), of the United Kingdom-3 Income Tax Treaty apply." Should you wish you may add "(For information only the amount received was $.......)". 

Should you desire a copy of the treaty article, you may obtain it from the Internal Revenue Service, 24 Grosvenor Square, London W1A 1AE, England.

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