Holding Premium Bonds in the UK after moving to US

[Az21 0]

Hello all,

 

Looking for some advice regarding holding NSandI Premium Bonds in the UK after I have moved to the US.

 

After searching online, I am still unsure about a definitive answer to this.

 

I am reading in some places that the US frowns upon have Premium Bond savings, as it can be seen as a form of gambling due to the prizes you can win each month, despite it technically not being gambling since you can't lose the money invested.

 

Does anyone have any experience and advice as to what to do? I have a big saving invested in bonds, so I would ideally like to keep them in there, withdrawing only if I need to dip into these savings in the future.

 

Is it safe to keep them in, and if so, do I need to disclose this in some way before/after moving to the US?

 

Any and all advice will be very helpful. Thank you!

[P055UM 281]

I don't have a specific answer, but you're going to need to look at the laws of that state that you are planning on living in. Gambling is regulated at a state level and the laws in the US are therefore a patchwork.

 

Remember, if you decide to keep them, interest earned will be taxable in the US even though it isn't in the UK. I imagine that you would also need to report them on your FBAR return each year.

[Boiler 45,481]

Sadly I assume many people forget to mention them, obviously you need to do so and if memory serves me the interest is tax free in the UK but not the US.

[Tesco 70]

I believe its illegal for the USPS to circulate gambling mail, NS&I is 100% online though. You don't loose your stake, so wouldn't be viewed as gambling, as you have nothing to loose. You will need to file FinCEN114 and note as Securities. Also be mindful of IRS form 8938, as the thresholds fall dramatically when you move Stateside. You will need to look at your specific circumstances, (filling status). and then look at the specified balances to see if you need to file this form. It's a bit onerous, although once you study the process, its straightforward. Keep in mind that all FFI's need to be disclosed, to include pensions and annuities/life insurance polices with a positive balance/ surrender value, so it's your TOTAL foreign assets, (Non U.S.) that will dictate 8938 filing requirements. Unlike FinCEN114, there is no need to disclose POA & signatory authority accounts on 8938. FinCEN114 a Treasury form, more aimed to seek out money laundering. 8938 targets tax evaders (FACTA and the Hire Act)

 

Report NS&I PB's on Schedule B also and use any 1116 passive FTC's you may have to offset U.S tax exposure. Like ISA's these wrappers and not tax efficient with the IRS. 

 

Edited February 16 by Tesco

[Boiler 45,481]

You gamble with the interest not the capital.

[Tesco 70]

1 hour ago, Boiler said:

You gamble with the interest not the capital.

There’s no negative rate with NS&I, your investment is 100% protected by the U.K. Government. I think you’re referring to speculative positive income, which is not gambling. 

[yuna628 9,676]

I've seen a few discussions online that explain this type of product would not be legal in the US, and at the best possibility there are many tax implications if it is. It might be wise to speak to a CPA that might be knowledgeable in this sort of thing. Their own website does mention that holding this account may not be legal in the US and that it's important to check regulations. I've also seen discussions on expat forums that they spoke to NS&I advisors that told them it wasn't a good idea to continue them. It may not be technically illegal to hold them, but having physical communication sent via USPS mail service would be a problem regarding gambling laws and could additionally run afoul of state regulations. 'Winnings' would also be taxable and need to be reported on a variety of forms. If you ended up with a very large amount of winnings/earnings it would be a problem very quick. I think it is prudent to consider that this may be more trouble than it is worth and to move that money into safer legal options.

[Az21 0]

Thank you for the replies, everyone.

 

 

I think it might be the wiser decision to take the money out of bonds and put into an account I can still access from the US. Unfortunate, but I'd rather not risk things, even if I have gone all digital for the letter communication with NS&I.

 

The form filing is something I clearly need to look into as that's sailing right over my head at the moment. Definitely something I need to learn about.

 

On a related note, then, I assume I would need to disclose any stocks I have invested in from the UK?

 

[Boiler 45,481]

28 minutes ago, Tesco said:

There’s no negative rate with NS&I, your investment is 100% protected by the U.K. Government. I think you’re referring to speculative positive income, which is not gambling. 

Who mentioned negative rate, well unless you mean the effects of inflation, think that is about 4%.

 

No different to investing in a say a Government bond which pays 4 ish % and using that income to buy lottery tickets.

[Tesco 70]

22 minutes ago, Boiler said:

Who mentioned negative rate, well unless you mean the effects of inflation, think that is about 4%.

 

No different to investing in a say a Government bond which pays 4 ish % and using that income to buy lottery tickets.

A U.K. lottery account would be problematic with the US authorities. That’s definitely gambling. 

[Tesco 70]

36 minutes ago, Az21 said:

Thank you for the replies, everyone.

 

 

I think it might be the wiser decision to take the money out of bonds and put into an account I can still access from the US. Unfortunate, but I'd rather not risk things, even if I have gone all digital for the letter communication with NS&I.

 

The form filing is something I clearly need to look into as that's sailing right over my head at the moment. Definitely something I need to learn about.

 

On a related note, then, I assume I would need to disclose any stocks I have invested in from the UK?

 

If you do decide to ‘Cash in’ your PB’s you could

look at a Direct Saver with NS&I. You’re safe with deposits over £85,000 (unlike regular banks). If you have an existing ISA, then you can make no further deposits once you’ve left the U.K. (not a product I’d recommend under the circumstances).

 

I’d be far more concerned with any stocks you retain when Stateside. There maybe PFIC and OEIC reporting. Also US SEC implications. You’d really need guidance from a U.K./U.S. tax expert on that. 
 

Good luck -)

[Az21 0]

55 minutes ago, Tesco said:

If you do decide to ‘Cash in’ your PB’s you could

look at a Direct Saver with NS&I. You’re safe with deposits over £85,000 (unlike regular banks). If you have an existing ISA, then you can make no further deposits once you’ve left the U.K. (not a product I’d recommend under the circumstances).

 

I’d be far more concerned with any stocks you retain when Stateside. There maybe PFIC and OEIC reporting. Also US SEC implications. You’d really need guidance from a U.K./U.S. tax expert on that. 
 

Good luck -)

Appreciate the help.

 

I have an NS&I Direct ISA but not a Direct Saver. You would recommend I open a Direct Saver and move my bond (and ISA) money to that instead? The ISA does look like it is intended for UK residents only upon further reading, and the Direct Saver may be the way to go.

 

The stocks I will try to look into as well.

 

I think the other financial thing I need to sort is a student loan I am paying off. In two minds as to continue paying it off while I'm in the US or just pay it off before I go.

[yuna628 9,676]

1 hour ago, Az21 said:

Appreciate the help.

 

I have an NS&I Direct ISA but not a Direct Saver. You would recommend I open a Direct Saver and move my bond (and ISA) money to that instead? The ISA does look like it is intended for UK residents only upon further reading, and the Direct Saver may be the way to go.

 

The stocks I will try to look into as well.

 

I think the other financial thing I need to sort is a student loan I am paying off. In two minds as to continue paying it off while I'm in the US or just pay it off before I go.

 

The SLC thing was an annoyance for us to handle stateside (needing to send off proof of non-employment, late letters, phone calls, and threats), but once done we only needed to start paying once my husband had started his first job in the US. You're then reassessed every year. Honestly? It's a giant pain. If you have the funds to pay it off might be worth it to never deal with it again. We're still paying and will continue to do so for years. We kept a UK account for that purpose. Also make sure to complete a P85 and you might get money back from the HMRC. We also got rid of the ISA before leaving the UK.

[Az21 0]

4 minutes ago, yuna628 said:

 

The SLC thing was an annoyance for us to handle stateside (needing to send off proof of non-employment, late letters, phone calls, and threats), but once done we only needed to start paying once my husband had started his first job in the US. You're then reassessed every year. Honestly? It's a giant pain. If you have the funds to pay it off might be worth it to never deal with it again. We're still paying and will continue to do so for years. We kept a UK account for that purpose. Also make sure to complete a P85 and you might get money back from the HMRC. We also got rid of the ISA before leaving the UK.

Great info, thank you!

 

 

Really do appreciate any and all financial advice (noting I should still seek expert advice). I realise I started the thread in relation to bonds, but I'm starting to see there's more than that I need to figure out! I want to make sure I get as much done as possible before making that step on the plane!