Do British ex-Pats pay income tax on their UK Pension.

[charles_reed]

Actually what he says is confusing. The state pension is taxable, but the single person's allowance is greater than the pension so is applied first to that, so the pension is paid free of tax. You then get a code to reflect the allowance from the state pension up to your allowance. This is then applied to your other income.

Like Charles I have state pension plus 3 other pensions so my unused allowance is set against the income from one which is always greater than the allowance. The other two are then taxed at the standard rate.

Unless you have additional income from other sources such as dividends, or interest that exceed the tax free amounts or any self employed income you do not have to fill in a self assessment form. When I retired from the uni and drew all my pensions I carried on consultancy , training and examining for some time and therefore filled in self assessment (and the dreaded VAT!) every year. All this stopped 4 years ago and I rely just in pensions and modest investments, no more self assessment.

Now who's being confusing.

We are, after all trying to simplify a complicated subject; including the concept of the personal allowances is, IMHO, a red herring and likely to confuse rather than illuminate.

Still I understand the overpowering necessity for schoolies to have the last word. ;-)
After all my daughter is a Prof and Department Head in a Russell Group Uni.

 

[Tranona]

Now who's being confusing.

We are, after all trying to simplify a complicated subject; including the concept of the personal allowances is, IMHO, a red herring and likely to confuse rather than illuminate.

Still I understand the overpowering necessity for schoolies to have the last word. ;-)
After all my daughter is a Prof and Department Head in a Russell Group Uni.

But it is you that has made it complicated by introducing completing a self assessment form when on the scenario you posed (which is virtually the same as me except I have 3 rather than 2 private pensions) I do not need to.

Perhaps instead of explaining why there is no need I should have asked you why you have to.

 

[macd]

If you are in receipt of a British Government occupational pension, you will alwys be liable to income tax in the UK. However, the state pension, private pensions and non-government pensions will be taxed by your country residence.

Like most generalisations about tax liability, this is sometimes the case but by no means universally true. Some treaties offer full relief on government pensions, some on 'other pensions including annuities', some on both. Equally, some treaties offer no relief on one or the other or both.

The text below is an overview of HMRC treaty arrangements, from my link much earlier in the thread: https://www.google.co.uk/url?sa=t&r...ril_2018.pdf&usg=AOvVaw1HfRM7xbNcWFBAvx3tEpRk

The digest includes these notes:

State Pension
The State Pension is paid to people who have reached State Pension age. It is based on National Insurance contributions (NICs) and relief from UK income tax is available under the terms of many, but not all, double taxation treaties. For that reason it is important to check the text of the relevant treaty.

Government' pensions (pensions that are paid to former Government or local authority employees) If you receive a pension that is paid for service to the UK Government or a local authority, it is important that you look at the text of the relevant double taxation treaty. This is because:  A pension paid by the Government of a territory to one of its former employees will, under most but not all double taxation treaties, continue to be taxed by that Government. However that is not always what has been agreed in a particular treaty and there are variations to this general rule.  Some treaties also provide that, in addition to pensions paid by central government, pensions that are paid to former employees of local authorities will continue to be taxable by the territory that is making the payments.  Many treaties provide that where the person who is paid a government pension by one territory is a national of (and resident in) the other territory then the right to tax the pension is transferred from the UK to the territory in which the person is resident. These treaties are identified in the table by the abbreviation (N & R) or (UK N excl) as appropriate.

(The bolds are mine.)

Whilst generalisations may sometimes be helpful, any individual seeking to clarify tax liability should shun them and seek guidance specific to their (proposed) circumstances. The personal experience of any expat, however correct and well-documented, is only of the broadest usefullness to anyone else.

Since the issue of tax-free allowances was raised in the threads above, it's also worth checking the 'portability' of same, which is also quite variable.

 

[Tranona]

Just to add to that (if I am allowed to!) the term "ex-pat" is misleading as the key determinant is state of residence for tax purposes.

People who spend extended periods outside the UK but do not become officially resident elsewhere either in or out of the EU are resident and taxed in the UK even though they may refer to themselves as ex-pat. Many such people have a range of income streams varying from the simple (like mine) to complex such as rental properties, investment income that is taxable, self employed earnings or even salaries if they work from their boat.

Really important to take professional advice if you are in this position.

 

[Zing]

Just to add to that (if I am allowed to!) the term "ex-pat" is misleading as the key determinant is state of residence for tax purposes.

People who spend extended periods outside the UK but do not become officially resident elsewhere either in or out of the EU are resident and taxed in the UK even though they may refer to themselves as ex-pat. Many such people have a range of income streams varying from the simple (like mine) to complex such as rental properties, investment income that is taxable, self employed earnings or even salaries if they work from their boat.

Really important to take professional advice if you are in this position.

Not exactly. To become non resident you just need to fulfil the requirements of the HMRC and they don’t require you demonstrate tax residency elsewhere. You can be dual resident also or a tax resident abroad, but that requires more than just being a tax resident abroad. To escape HMRC there are arcane hoops to go through. This is not a subject for amateurs.

 

[Robin]

We lived in the USA for a year or two and the US immigration peeps insisted I File taxes in the USA on all income including UK state pension, in order to have my 'green card' legal alien status. our USA accountant notifed HMRC and we were 'Opted out' of UK tax to avoid double taxation under an agreement USA/UK amount so small to be insignificant, but now back in UK we pay here, albeit zilch as below the personal allowances.

 

[Tranona]

Not exactly. To become non resident you just need to fulfil the requirements of the HMRC and they don’t require you demonstrate tax residency elsewhere. You can be dual resident also or a tax resident abroad, but that requires more than just being a tax resident abroad. To escape HMRC there are arcane hoops to go through. This is not a subject for amateurs.

I know that, but many people are tax resident in other states, either through employment or because they have chosen to retire abroad. It is not, however easy, as you say if you are just going off sailing for a few years to escape HMRC.

This thread was started by somebody who (I believe) is UK citizen, who now lives in Sweden but draws a UK pension. This is a relatively common situation - a high proportion of the around 2m UK citizens that live in the EU are pensioners rather than workers, and include many who are liveaboards. Some of those will be "simple" cases such as I described, others more complex and need professional advice.

 

[BurnitBlue]

I know that, but many people are tax resident in other states, either through employment or because they have chosen to retire abroad. It is not, however easy, as you say if you are just going off sailing for a few years to escape HMRC.

This thread was started by somebody who (I believe) is UK citizen, who now lives in Sweden but draws a UK pension. This is a relatively common situation - a high proportion of the around 2m UK citizens that live in the EU are pensioners rather than workers, and include many who are liveaboards. Some of those will be "simple" cases such as I described, others more complex and need professional advice.

Yes,I draw a UK pension, I am still Sole British with a HMRS tax number. I "live" in Sweden and have a tax number here also. but I spend more than 183 days a year in Greece on board my boat which is British registered. Complicated to obey all EU instructions liabilities and "don't do this unless you fill in "that" procedure.

According to the agreements between states, I should pay tax of 30% on my UK pension even if it is below UK threshold. The big problem is that countries are getting sophisticated computer tracking of EU subjects, so it is getting a risk to live a live-aboard life without breaking one rule or another. I wanted to know if any other resident (Spain) for instant pays local tax even if they are below the UK threshold.

 

[Tranona]

Yes,I draw a UK pension, I am still Sole British with a HMRS tax number. I "live" in Sweden and have a tax number here also. but I spend more than 183 days a year in Greece on board my boat which is British registered. Complicated to obey all EU instructions liabilities and "don't do this unless you fill in "that" procedure.

According to the agreements between states, I should pay tax of 30% on my UK pension even if it is below UK threshold. The big problem is that countries are getting sophisticated computer tracking of EU subjects, so it is getting a risk to live a live-aboard life without breaking one rule or another. I wanted to know if any other resident (Spain) for instant pays local tax even if they are below the UK threshold.

Worth reading post#23 and the reference in it. Not sure whether what might happen in Spain is relevant, nor what happens to other people whose circumstances may be different from yours. As macd says you need to look at the specific treaty between UK and Sweden if indeed you are considered resident for tax purposes in Sweden. As he says not all double taxation agreements are the same, nor are personal allowances. and, of course strictly speaking you should be applying for Greek residence if you spend over 183 days a year there!

The state of registration of your boat is completely irrelevant to your personal tax situation (and residence). I do hope it is not on the SSR as based on what you say you are not eligible to use that register.

 

[steveej]

You need to look at the domestic legislation around what constitutes 'residence' in each country. In the UK we now have what is know as the 'Statutory Residence Test' which makes it more difficult to break UK tax residence if you continue to have ties to the UK (such as available accommodation). Sweden and Greece will have their own residency rules, but if you have been living in Sweden for a number of years it is likely you will be tax resident there. You may also be resident in Greece.

Based on the domestic rules, you may be non resident in any of these countries, or resident in one, two or all three countries at the same time.

This is important because your residence status combined with your domicile will determine how you are taxed in each of those countries. You may still be taxable even if non resident just on different forms of income.

Taking the example of someone who left the UK a number of years ago and rents out their UK home to pay for the cruising, they would be likely to be Non UK resident. However, they would still be taxable on UK sources of income such as UK pension (in whatever form), UK rental income and any other UK investment income. Provided you are a british citizen you are also eligible for a tax free personal allowance currently £11,850 and any income above this is then taxed at the normal rates of 20/40%

In Sweden, based on whatever your Swedish residence status is, they may wish tax some of this income or they may not, or they may only tax it if you remit the income to Sweden. This will all depend on Swedish tax rules.

The same applies for Greece.

If it is found that income is taxable in more than one country, then you can look at the treaty which should grant tax relief in one of those countries to eliminate any double taxation. Likely that tax returns will be required in both countries to facilitate this.

You do however need to be resident in at least one of the countries in order to be able to use the treaty.

You are correct in that the authorities are getting better at talking to each other, but the vast majority of individuals in your situation are not 100% compliance because the rules are too complex for a normal high street accountant to deal with.

 

[BurnitBlue]

Thanks for the advice. I honestly did not expect a black and white answer. I declared my UK pension to Swedish authorities shortly after I started receiving it. I have never had any problems and I have been left alone. My interest peaked a month ago when I came across the Swedish "ex-pat" forum run by the LOCAL newspaper in English. This in itself was fired up by the coming Brexit uncertainty where the theme seemed to be keep heads below the parapet, don't ask, don't tell.

Just like the LOCAL forum the advice is similar to this forum because of the complexity of the problem and further complicated by all the different treaties which are amended quite regularly and in fact due for an absolutely massive amendment following hard or soft Brexit. So I am not getting worked up about it, ... yet.

From the discussion on the LOCAL forum it appears that the subject is also too complicated for the average front line tax worker so no use asking for advice from the officials in case the fact that Sweden as a country is hurting for cash made much worse by the enormous intake of unemployable migrants will sway or bias a reply to the advantage of the Government. Frankly, I suspect the Government will be forced to put up taxes which are already high so they will be looking for new source of money.

Thanks

 

[steveej]

It becomes reasonably logical when you have been working in Expat Tax for 15 years both in Big4 and In-House.

It is only the Big4 that can ever really advise on these issues because of the simple fact you need a global network of advisory firms that understand the local rules in each country.

These firms will only ever deal with Corporate clients or VHNW individuals.

The local tax man or high street accountant will not have the skills to deal with this.

And yes, we could see all the treaties renegotiated as part of brexit unless some GB-EU layer of legislation protects what is already in place

 

[BurnitBlue]

It becomes reasonably logical when you have been working in Expat Tax for 15 years both in Big4 and In-House.

It is only the Big4 that can ever really advise on these issues because of the simple fact you need a global network of advisory firms that understand the local rules in each country.

These firms will only ever deal with Corporate clients or VHNW individuals.

The local tax man or high street accountant will not have the skills to deal with this.

And yes, we could see all the treaties renegotiated as part of brexit unless some GB-EU layer of legislation protects what is already in place

I agree with that. Can I add a further idea that is a source of irritation even anger among many. Most pensions are the result of contributions made during a working life. In many cases this predates the arrival of a retired "ex-pat" to their new adopted country. In short the pension is giving back what was paid in using income that was already taxed. Do you know what justification the new country can use to consider a pension as new income. Basically I consider it to be savings I am spending. I know this does not seem right but I cannot put my finger on why I may be wrong about this.

I use the word "many" to cover my total lack of statistics.

 

[steveej]

As a general rule, you get tax relief on pension contributions made during your working life. They then become taxable when the pension income starts paying out. The advantage being many people will then typically pay tax at lower rates.

The local rules in the countries concerned will determine whether or not they wish to tax the pension income. It will be taxable in the UK subject to personal allowance. Therefore double taxation and the need for tax returns to eliminate the double taxation. Most people simply don't declare the UK pension income to the authorities in the overseas location.

 

[Tranona]

Pensions are always taxed. You are wrong that they are savings from taxed income. In the UK at least and I would guess other countries pension contributions are made before tax and are taxed as income when drawn. There is a distinction between the state pension and private contributory pensions though. With the former there is only a tenuous link between contributions and the level of pensions. Contributions are sort of linked to income while contributing and the years contributing. However payments are linked to qualifying years and to an extent individual circumstances. So, I have been earning well above the average wage over a very long time (46 years contributions) but you only need 30 years (I think thats the latest) to qualify for roughly the same pension as I get. However, the state pension is well below the personal allowance so is essentially tax fee.

On the other hand my contributory pensions got tax relief at the higher rate and grew tax free until I drew them. I now pay tax at the lowest rate on the income I draw from them. I don't need to draw all my pensions so some are still growing tax free and now under the new rules there is the option of passing them on outside my estate essentially tax free.

If your adopted country wants to tax your UK pension then the double taxation agreement will help and you will only pay the equivalent of whichever rate is higher.

 

[Sybarite]

My U.K. pension is not taxed at source. It gets lumped with my other pensions and is taxed in France.

 

[nortada]

My U.K. pension is not taxed at source. It gets lumped with my other pensions and is taxed in France.

Assume that is your OAP pension? :encouragement:

 

[macd]

My U.K. pension is not taxed at source. It gets lumped with my other pensions and is taxed in France.

This is no doubt true, but no guide to the circumstances of others, including the OP. There are no general rules in such matters. See my post #23 for that from the horse's mouth (and steveej's posts for a dash of proper expertise).

 

[nortada]

# 39 in and what a refreshing difference this thread is - no nastiness but people just trying to help by offering their experience. and knowledge and from a truly impressive bunch of forumites - the YBW at it's very best. :encouragement:

As this thread has progressed it has become ever more evident that peoples responses are coloured by a number of factors; their financial circumstances, expectations, experience and country/ies involved, to mention but four and I am sure there are many others.

Possibly presumptuous on my part (if so unintended) but I would like to draw a few strands together.

First, there are two fundamentally different paths a traveler can follow; seek specialist advice or go deep an silent.

Seeking specialist advice - unfortunately their openness has lead to some folk being clobbered tax-wise and once Pandora's Box is open, it is nye impossible to get the bloody lid back on:disgust:.

By going silent, I do not mean knowingly evade paying tax. In the modern world exchange of data is such that it is very likely you will be found out and clobbered and give the rest of us a bad name that could lead to greater scrutiny.:disgust:. By going silent, I mean doing as much research as possible to work out the best course for you. The problem, if (unlike me) your tax situation is complicated this can be difficult to do.

Having decided you course of action, I think you need to ask the fundamental, why do I want to move my tax affairs into another domain, rather than remain taxed in my home country (in this case the UK)? Going native can have tax attractions but can cause a lot of unintended consequences.

Now in our eighteenth year 'away' there is much more I could add:sleeping: but others are as well/better equipped to compile a list of dos and don'ts.

For me 2 cardinal dos:

First, maintain an address in the UK, ensure you remain on the electoral roll and visit your UK surgery at least once a year.

Second learn as much as possible about your hosts nations tax laws and, as equally important their attitude to their tax laws. For example, as for most EU countries, if you spend more than 183 days in a calendar year you are required to register a tax return. Some countries strictly enforce this regulation, others, Portugal, for example do not even pay lip-service.

Nevertheless, unlike many I know, we never exceed 180 days in Portugal, we just return to the UK or push off to Gib, Cyprus, Morocco or elsewhere.

I finish as a started. Guys thanks for participating in a really worthwhile thread.

 

[Sybarite]

Tax residence is, theoretically, not optional. It is where you are ordinarily resident more than 183 days. The U.K. used to have a 90 day rule (at the time of my studies) i.e. An average of 90 days assessed over a number of years.

The measures you take are ok in themselves but if the tax people are determined there are many more steps they can take:

Look at your mobile phone records
Look at your credit card transactions,
Sound out your neighbours
Etc etc

Theoretical of course but it depends on whether they think you are worth going after. Sunseeker owner?