Tax on foreign pension
Tax on foreign pension
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Discussion

King Herald

Original Poster:

23,501 posts

246 months

Friday 5th January 2018
quotequote all
Are income tax rates the same for foreign income pensions as they are for salary or pension paid in the U.K. assuming one lives in the U.K.

And do we still get the £11,000 personal allowance?

I just got my tax return back from my tax accountant and it looks like I have been taxed on everything at more than 20%. I am below the £30k income bracket too.

It also states I have to make a payment now, and another in July. confused This is the first time I have had to pay tax in the U.K. in 28 years as I have been overseas.

I have fired off an email to her, but it is Friday and I probably won’t hear back until Monday. frown

PurpleMoonlight

22,362 posts

187 months

Friday 5th January 2018
quotequote all
I don't know the answer but you didn't receive any UK tax relief when the pension provision was made, so it would seem somewhat unfair that HMRC would seek to tax it just because you happen to be living here now that you are receiving the benefit.

Has is suffered any tax deduction in the country of payment?

PurpleMoonlight

22,362 posts

187 months

King Herald

Original Poster:

23,501 posts

246 months

Friday 5th January 2018
quotequote all
PurpleMoonlight said:
I don't know the answer but you didn't receive any UK tax relief when the pension provision was made, so it would seem somewhat unfair that HMRC would seek to tax it just because you happen to be living here now that you are receiving the benefit.

Has is suffered any tax deduction in the country of payment?
No tax was deducted at source, it is a simple direct payment in $US every quarter. I don’t mind paying the normal U.K. tax rate, but I appear to be expected to pay around 20% of total income, with no personal allowance figured in.


PurpleMoonlight said:
I browsed that already, too complicated for my simple brain. frown

PurpleMoonlight

22,362 posts

187 months

Friday 5th January 2018
quotequote all
King Herald said:
I browsed that already, too complicated for my simple brain. frown
Me too and I work in pensions!

I think it's saying 90% is subject to income tax assessment.

There is no special tax rate as far as I know.

King Herald

Original Poster:

23,501 posts

246 months

Friday 5th January 2018
quotequote all
PurpleMoonlight said:
Me too and I work in pensions!

I think it's saying 90% is subject to income tax assessment.

There is no special tax rate as far as I know.
So it should just fall under U.K. allowances? There is something this current tax year 100% is subject to U.K. tax laws, but I don’t think it means I don’t get a personal tax allowance.

It would be nice to think they encourage people to bring foreign money into the U.K. economy, even at this low level.

PurpleMoonlight

22,362 posts

187 months

Friday 5th January 2018
quotequote all
Yes, I agree it's now 100% not 90%.
See: https://www.gov.uk/hmrc-internal-manuals/employmen...


It seems to me that foreign income is no different for tax than a UK pension.
See Part 9 Pension Income: https://www.legislation.gov.uk/ukpga/2003/1/conten...

Your person allowance can be use against a UK pension (if not used elsewhere) so I can't see why it can't for a foreign pension too.

King Herald

Original Poster:

23,501 posts

246 months

Friday 5th January 2018
quotequote all
And it is my only income, not additional to a U.K. job or pension.

However, I can see me having to get a job some day soon to make ends meet.

dingg

4,548 posts

249 months

Friday 5th January 2018
quotequote all
has the pension provider took off tax in the country of origin by any chance?

King Herald

Original Poster:

23,501 posts

246 months

Friday 5th January 2018
quotequote all
dingg said:
has the pension provider took off tax in the country of origin by any chance?
No.

trickywoo

14,205 posts

260 months

Friday 5th January 2018
quotequote all
You should get the personal allowance on any taxable income.

Sounds like your self assessment has resulted in a tax liability above £1k. This automatically results in HMRC asking for tax payment on account which assumes you will have the same level of income in the next tax year.

Essentially this means you pay the tax due for the year ended April by the end of January plus half again for the tax year running at the same time and the other half in July. Rinse and repeat.

It’s a pretty stty practice by HMRC particularly if your income from year to year is volatile but the tax man is nobody’s friend.

King Herald

Original Poster:

23,501 posts

246 months

Friday 5th January 2018
quotequote all
Trickywoo, There is mention of a ‘circumstances meet criteria for split year treatment’ in the tax return my accountant has asked me to sign. Maybe because I didn’t move to the U.K. until January last year.

While looking at that I also noticed a page called ‘Tax calculation summary’ which details ‘total tax’ of £3083 and that looks very similar to what I calculated roughly myself.

So you are probably right; they are hitting me up for a bunch of tax in advance. frown

Edited by King Herald on Friday 5th January 22:33

Monkeylegend

29,298 posts

261 months

Friday 5th January 2018
quotequote all
The UK allowance is currently £11500 going up to £11850 in April.

King Herald

Original Poster:

23,501 posts

246 months

Saturday 6th January 2018
quotequote all
Monkeylegend said:
The UK allowance is currently £11500 going up to £11850 in April.
I’m happy with that, makes my meagre pension go further, as long as I am actually entitled to it.

Monkeylegend

29,298 posts

261 months

Saturday 6th January 2018
quotequote all
King Herald said:
Monkeylegend said:
The UK allowance is currently £11500 going up to £11850 in April.
I’m happy with that, makes my meagre pension go further, as long as I am actually entitled to it.
I have been taking an income from my private pension and pay £7 a month tax on it.
My state pension has just started meaning I will pay 20% on this if I stick with the current income from my private pension.

You can't escape the clutches of HMRC wink

Eric Mc

125,701 posts

295 months

Saturday 6th January 2018
quotequote all
HMRC will reduce the tax allowance on your private pension and allocate the allowance to the state pension.

Even though the state pension is actually taxable, the Department of Work and Pensions does not want the hassle of having to deduct and pay over PAYE on the state pension. Instead, they make the private pension company do all the hard work for them.

King Herald

Original Poster:

23,501 posts

246 months

Saturday 6th January 2018
quotequote all
Monkeylegend said:
I have been taking an income from my private pension and pay £7 a month tax on it.
My state pension has just started meaning I will pay 20% on this if I stick with the current income from my private pension.

You can't escape the clutches of HMRC wink
That is foreign private pension?

Monkeylegend

29,298 posts

261 months

Saturday 6th January 2018
quotequote all
Eric Mc said:
HMRC will reduce the tax allowance on your private pension and allocate the allowance to the state pension.

Even though the state pension is actually taxable, the Department of Work and Pensions does not want the hassle of having to deduct and pay over PAYE on the state pension. Instead, they make the private pension company do all the hard work for them.
I presume they will do this automatically?

Hopefully that avoids me having to do a tax return then.

Eric Mc

125,701 posts

295 months

Saturday 6th January 2018
quotequote all
Monkeylegend said:
Eric Mc said:
HMRC will reduce the tax allowance on your private pension and allocate the allowance to the state pension.

Even though the state pension is actually taxable, the Department of Work and Pensions does not want the hassle of having to deduct and pay over PAYE on the state pension. Instead, they make the private pension company do all the hard work for them.
I presume they will do this automatically?

Hopefully that avoids me having to do a tax return then.
They normally do split the tax allowances correctly.

The important thing is, pay close attention to the PAYE Tax Code that is being used by your private pension provider. When the state pension starts, the tax code being used by the private pension provider should plummet in line with the amount of allowance that has been transferred over to the DWP to offset against the state pension.

In addition, HMRC USUALLY posts out to the taxpayer a paper copy of the amended PAYE Coding Notice and that is your opportunity to check that they are allocating everything correctly.

Having said that, HMRC is not infallible and they may -

a) fail to send you a paper notice of coding

b) allocate the allowance correctly

It is possible these days for a taxpayer to log into their personal tax account at HMRC and that is another route they can take to monitor what HMRC is up to regarding splitting and allocating of allowances.

Indeed, when Making Tax Digital is fully implemented (we don't know when this will be), it will be probably the ONLY way for taxpayers to monitor what HMRC is up to regarding PAYE Codes.

And, of course, if HMRC gets it wrong, they will probably blame the taxpayer for not noticing their mistakes.

Monkeylegend

29,298 posts

261 months

Saturday 6th January 2018
quotequote all
Eric Mc said:
Monkeylegend said:
Eric Mc said:
HMRC will reduce the tax allowance on your private pension and allocate the allowance to the state pension.

Even though the state pension is actually taxable, the Department of Work and Pensions does not want the hassle of having to deduct and pay over PAYE on the state pension. Instead, they make the private pension company do all the hard work for them.
I presume they will do this automatically?

Hopefully that avoids me having to do a tax return then.
They normally do split the tax allowances correctly.

The important thing is, pay close attention to the PAYE Tax Code that is being used by your private pension provider. When the state pension starts, the tax code being used by the private pension provider should plummet in line with the amount of allowance that has been transferred over to the DWP to offset against the state pension.

In addition, HMRC USUALLY posts out to the taxpayer a paper copy of the amended PAYE Coding Notice and that is your opportunity to check that they are allocating everything correctly.

Having said that, HMRC is not infallible and they may -

a) fail to send you a paper notice of coding

b) allocate the allowance correctly

It is possible these days for a taxpayer to log into their personal tax account at HMRC and that is another route they can take to monitor what HMRC is up to regarding splitting and allocating of allowances.

Indeed, when Making Tax Digital is fully implemented (we don't know when this will be), it will be probably the ONLY way for taxpayers to monitor what HMRC is up to regarding PAYE Codes.

And, of course, if HMRC gets it wrong, they will probably blame the taxpayer for not noticing their mistakes.
Thanks for that.

My private pension is with the Pru and so far they have been very much on the ball so hopefully they will do the right thing. They are very good at communicating and quickly sorted out a tax muddle made by Aegon when I transferred the fund over without me having to ask or get involved.

Probably worth a quick phone call to them though.