UK Pension & Thai Tax

[cdwyer]

UK Pension guidance; this is a very complex area. Can I kindly ask that you only reply if you have specific accurate information as there are “many” old wives tales out there & I need clear guidance please, thanks. Most expats either have; incomes in Thai or incomes in a foreign country (eg UK) - I have neither! I also do not own a property in Thai & I have no plans to earn income in Thai. Hence 100% of my money (income) is from the UK & specifically from UK Pensions. I also retired so I do not have any incomes above & beyond the Pensions. UK Pensions will apply UK tax, which actually is perfect for me because I would pay zero tax! Reason; UK tax is 1st 25% of each Pension is tax free. Next £12,500 is a personal tax allowance eg tax free. I plan to use less than these combined amounts, to fund my Thai lifestyle & hence – zero tax & I avoid entering the UK Personal tax thresholds starting at 20% & going up. This was perfect, then I suddenly realised it is likely the UK Gov (HMRC) will view me as a non UK tax payer as I will be out of the UK for more than 183 days! I believe this will mean the HMRC will not tax me at all & instead I will have to pay tax in the country I sit in eg Thailand. I would get my UK Pensions (doesn’t seem sensible to move Pensions to Thai or anywhere outside uk) taxed & paid into a UK bank account. I could then reclaim that tax off HMRC so that I can pay Thai Gov. IF I am wrong – somebody pls shout!! If I have to pay Thai Tax on uk Pension incomes then looks like 1st 60k tbh is tax free then after this the NEXT 150k is tax free then after that it starts at 5% Web describes all sorts inc mutual funds, capital gains & health premiums but nowhere does it mention Pension income as a stand alone eg it mentions Pension if employed but I am retired. Q: 1) am I right that I cannot stay under uk tax since I will be out of UK for more than 183 days? 2) consequently, although no incomes at all except UK Pensions, will I stop paying uk tax & have to pay Thai tax? 3) If so; are Pensions incomes exempt under thai tax laws? 4) if not, was I correct with Thai tax levels eg; 1st 60k tbh & then another 150k tbh are tax free then 5% & climbing?

[Kwasaki]

2 hours ago, cdwyer said:

Next £12,500 is a personal tax allowance e.g. tax free.

It's quite simple really and Yes £12,500 it is a personal UK tax allowance and any top up from private UK pensions that takes you over that threshold you will be taxed on.

If you do work in Thailand and pay any kind of tax in Thailand like interest on Thai bank balances you can claim it back if you want. 

[pontious]

3 hours ago, cdwyer said:

Reason; UK tax is 1st 25% of each Pension is tax free. Next £12,500 is a personal tax allowance eg tax free.

Do not know where you get that from. Add up your pensions -in  2021 -2022 the personal allowance is 12570 pounds. Anything over that you will pay tax on.

[topt]

4 hours ago, cdwyer said:

IF I am wrong – somebody pls shout!!

Shouting........

Pension income from the UK is taxed in the UK.

And before somebody starts going on about DTAs unless your pensions are defined as govt. pensions (not the state pension) they do not apply to the DTA the UK has with Thailand.

 

This means that theoretically Thailand could tax you on that income as well but in practice currently this does not happen and unlikely to change in the near future - cross fingers..... If you want to be doubly safe you could transfer in the calendar year following receipt and then no liability to tax in Thailand. So you could save up payments Jan to Dec 2021 in the UK, which then becomes savings, and transfer savings in January 2022 to Thailand and no liability to tax in Thailand.

 

As you can see if you have savings already unlikely that Thailand revenue will be able to work out what is savings and what is current income. This is how it stands currently.

 

Unless you notify HMRC that you have moved abroad and wish to be classed as Non-resident for Tax they will probably not notice or care with regards to tax issues. For some people however it is advantageous to do this.

[cleopatra2]

1 hour ago, pontious said:

Do not know where you get that from. Add up your pensions -in  2021 -2022 the personal allowance is 12570 pounds. Anything over that you will pay tax on.

I presume the 25% comes from drawdown .

To answer the OP original question. In general terms

Non Resident status does not exclude the individual from UK tax liability from income sourced in the UK.

However there are exceptions and various DTT that impact on tax liability.

[treetops]

On 5/5/2021 at 10:02 AM, cdwyer said:

This was perfect, then I suddenly realised it is likely the UK Gov (HMRC) will view me as a non UK tax payer as I will be out of the UK for more than 183 days!

 

Time in the country is not the only criteria used to decide if you are ordinarily resident and unless you go chasing non-residency then it's unlikely you'll be given it ad hoc.

[prakhonchai nick]

UK tax is payable on all income (pensions, salaries dividends etc) which emanate from the UK. As a UK citizen, whether resident or not, you are entitled to a tax allowance of £12,750 in the current tax year (6th April 2021-5th April 2022) That means you only pay tax on anything over £12,750, the starting rate being 20%

[cdwyer]

On 5/5/2021 at 1:07 PM, Kwasaki said:

It's quite simple really and Yes £12,500 it is a personal UK tax allowance and any top up from private UK pensions that takes you over that threshold you will be taxed on.

If you do work in Thailand and pay any kind of tax in Thailand like interest on Thai bank balances you can claim it back if you want. 

many thanks.

[cdwyer]

On 5/5/2021 at 1:58 PM, pontious said:

Do not know where you get that from. Add up your pensions -in  2021 -2022 the personal allowance is 12570 pounds. Anything over that you will pay tax on.

ok thanks

[cdwyer]

On 5/5/2021 at 3:06 PM, topt said:

Shouting........

Pension income from the UK is taxed in the UK.

And before somebody starts going on about DTAs unless your pensions are defined as govt. pensions (not the state pension) they do not apply to the DTA the UK has with Thailand.

 

This means that theoretically Thailand could tax you on that income as well but in practice currently this does not happen and unlikely to change in the near future - cross fingers..... If you want to be doubly safe you could transfer in the calendar year following receipt and then no liability to tax in Thailand. So you could save up payments Jan to Dec 2021 in the UK, which then becomes savings, and transfer savings in January 2022 to Thailand and no liability to tax in Thailand.

 

As you can see if you have savings already unlikely that Thailand revenue will be able to work out what is savings and what is current income. This is how it stands currently.

 

Unless you notify HMRC that you have moved abroad and wish to be classed as Non-resident for Tax they will probably not notice or care with regards to tax issues. For some people however it is advantageous to do this.

Thanks. Can you kindly settle a discussion; uk tax states personal tax allowance £12,500pa . 1st 25% of uk Pension drawdown is tax free.

 

So, ... if I do not use up my personal allowance because I am retrired so no uk income, can I use it against pension drawdown? Eg; 1st 25% of Pension drawdown is tax free THEN the next £12,500 is also tax free & anything above is taxable at normal personal rates. Eg I can utilse BOTH - Correct?

[cdwyer]

On 5/5/2021 at 3:06 PM, cleopatra2 said:

I presume the 25% comes from drawdown .

To answer the OP original question. In general terms

Non Resident status does not exclude the individual from UK tax liability from income sourced in the UK.

However there are exceptions and various DTT that impact on tax liability.

thanks

[cdwyer]

On 5/7/2021 at 9:23 AM, treetops said:

 

Time in the country is not the only criteria used to decide if you are ordinarily resident and unless you go chasing non-residency then it's unlikely you'll be given it ad hoc.

Thanks

[cdwyer]

On 5/7/2021 at 10:19 AM, prakhonchai nick said:

UK tax is payable on all income (pensions, salaries dividends etc) which emanate from the UK. As a UK citizen, whether resident or not, you are entitled to a tax allowance of £12,750 in the current tax year (6th April 2021-5th April 2022) That means you only pay tax on anything over £12,750, the starting rate being 20%

Thanks

[topt]

1 hour ago, cdwyer said:

Thanks. Can you kindly settle a discussion; uk tax states personal tax allowance £12,500pa . 1st 25% of uk Pension drawdown is tax free.

 

So, ... if I do not use up my personal allowance because I am retrired so no uk income, can I use it against pension drawdown? Eg; 1st 25% of Pension drawdown is tax free THEN the next £12,500 is also tax free & anything above is taxable at normal personal rates. Eg I can utilse BOTH - Correct?

Small point but is £12,570 for current tax year.

Otherwise essentially what you say is correct except that initially HMRC may temporarily give you a tax code and take tax which you will then have to claim back via a tax return. 

 

Remember the 25% is a lump sum although I believe some providers will enable you to take it in smaller buckets but once its taken you can't keep taking a further 25% tax free.

[cdwyer]

24 minutes ago, topt said:

Small point but is £12,570 for current tax year.

Otherwise essentially what you say is correct except that initially HMRC may temporarily give you a tax code and take tax which you will then have to claim back via a tax return. 

 

Remember the 25% is a lump sum although I believe some providers will enable you to take it in smaller buckets but once its taken you can't keep taking a further 25% tax free.

many thanks.

[cdwyer]

26 minutes ago, topt said:

Small point but is £12,570 for current tax year.

Otherwise essentially what you say is correct except that initially HMRC may temporarily give you a tax code and take tax which you will then have to claim back via a tax return. 

 

Remember the 25% is a lump sum although I believe some providers will enable you to take it in smaller buckets but once its taken you can't keep taking a further 25% tax free.

Hi, I was hoping to close off that subject but “always” another question – sorry. Firstly, do you have any substantial knowledge of the UK Pensions offerings? I ask simply because having investigated this for months, it is a real headache. As previously explained I am a retired uk citizen living in Thailand & my only income is uk Pensions which I haven’t started to drawdown – yet. It looked like I could ignore Thai tax completely as I would earn no income whilst in Thailand. However, I think not! I think the UK Gov will say I am out of UK for more than “183 days” & thus should not be a UK tax payer. I could opt not to notify HMRC uk but aside from this; Thai Gov will surely state “you are living here for considerable period & so only right you contribute to Thai Gov, via tax.” My options seem to be; a) convert uk Pension drawdowns into savings account in uk & fall under the uk tax system (which for my purposes is perfect as zero tax!) & if Thai Gov chase – I can show Thai Gov it is savings (so already paid tax) & if they ask where did savings come from I can show paid tax under uk law. Whether this would be sufficient for Thai or they would say “nope, you should be paying Thai Gov not uk Gov” I don’t know. Option b) is I drawdown uk Pensions (perhaps at emerg rate not sure)  go via Thai Gov tax system; 1) will definitely cost me some tax whereas uk system is zero 2) who wants to do Thai paperwork! My latest plan is to clearly identify what UK Pension “vehicles,” “could be” feasible even if they are not a perfect match. Once I have a short list I can easily knock out those that don’t fit. So far I know I should consider; QNUPS SIPP UFPLS QROPS IORP Income Drawdown & Annuities but if you know any others – I am all ears! In summary; two points; 1) can I avoid getting involved with Thai Gov or will Thai Gov say I should be paying them & more importantly, will UK Gov say I should be paying Thai Gov! 2) Identify suitable UK Pen vehicles.

[Kwasaki]

50 minutes ago, cdwyer said:

Hi, I was hoping to close off that subject but “always” another question – sorry. Firstly, do you have any substantial knowledge of the UK Pensions offerings? I ask simply because having investigated this for months, it is a real headache. As previously explained I am a retired uk citizen living in Thailand & my only income is uk Pensions which I haven’t started to drawdown – yet. It looked like I could ignore Thai tax completely as I would earn no income whilst in Thailand. However, I think not! I think the UK Gov will say I am out of UK for more than “183 days” & thus should not be a UK tax payer. I could opt not to notify HMRC uk but aside from this; Thai Gov will surely state “you are living here for considerable period & so only right you contribute to Thai Gov, via tax.” My options seem to be; a) convert uk Pension drawdowns into savings account in uk & fall under the uk tax system (which for my purposes is perfect as zero tax!) & if Thai Gov chase – I can show Thai Gov it is savings (so already paid tax) & if they ask where did savings come from I can show paid tax under uk law. Whether this would be sufficient for Thai or they would say “nope, you should be paying Thai Gov not uk Gov” I don’t know. Option b) is I drawdown uk Pensions (perhaps at emerg rate not sure)  go via Thai Gov tax system; 1) will definitely cost me some tax whereas uk system is zero 2) who wants to do Thai paperwork! My latest plan is to clearly identify what UK Pension “vehicles,” “could be” feasible even if they are not a perfect match. Once I have a short list I can easily knock out those that don’t fit. So far I know I should consider; QNUPS SIPP UFPLS QROPS IORP Income Drawdown & Annuities but if you know any others – I am all ears! In summary; two points; 1) can I avoid getting involved with Thai Gov or will Thai Gov say I should be paying them & more importantly, will UK Gov say I should be paying Thai Gov! 2) Identify suitable UK Pen vehicles.

All I can say to you is carm down. ????

If you have a UK govt pension coming which amounts to more than the given tax allowance on UK earnings per year you will pay UK tax on the difference.

Usually earning more on top of the the UK govt pension being topped up with private pensions can put you over tax allowance.

Whatever you earn in Thailand is taxed by Thailand the UK has nothing to do with what you earn in Thailand. 

[cleopatra2]

1 hour ago, topt said:

Small point but is £12,570 for current tax year.

Otherwise essentially what you say is correct except that initially HMRC may temporarily give you a tax code and take tax which you will then have to claim back via a tax return. 

 

Remember the 25% is a lump sum although I believe some providers will enable you to take it in smaller buckets but once its taken you can't keep taking a further 25% tax free.

It is not clear if the OP is taking the 25% as a pension lump sum or via drawdown. 

Or if the pension will be fully crystallized.

If not fully crystallized it is possible a portion of the fund can be transferred to drawdown and 25 % of this taken as tax free. This process can be repeated for the following years and receive 25% tax free again.

[treetops]

2 hours ago, cdwyer said:

can I avoid getting involved with Thai Gov or will Thai Gov say I should be paying them & more importantly, will UK Gov say I should be paying Thai Gov!

 

You can forget about both governments and let the pension suppliers deduct tax at source, which in your case will be zero.

 

Do check first that your pension provider supports your proposed drawdown method as not all do.  It's easy to transfer a defined contribution pot if required to a provider who can.  If you have defined benefit pension(s) then it's a different kettle of fish.

[cdwyer]

1 hour ago, cleopatra2 said:

It is not clear if the OP is taking the 25% as a pension lump sum or via drawdown. 

Or if the pension will be fully crystallized.

If not fully crystallized it is possible a portion of the fund can be transferred to drawdown and 25 % of this taken as tax free. This process can be repeated for the following years and receive 25% tax free again.

“This process can be repeated for the following years and receive 25% tax free again.” You officially have my attention! I was previously advised several mths back, that the 25% was a 1 off not to be repeated (although 25% can be applied to several Pensions eg if have 5 Pensions, all 5 can utilise the 25% - correct?) I bow to your knowledge & accept there is a way to repeat the 25% year after year. Q; is there a limit on repeats or could I do for say 6yrs? I may have misused terminology; drawdown to me is lump sum to everybody else. However, I am flexible to whatever is most financially beneficial & that may well include regular small drawdowns as well as large lump sums. I am aware each Pen has its own criteria on this. In “top down” billy basic, simple words please; a) on the basis retired, no dependants, no income & living in Thailand & only Pens to fund going forward – WHICH of the UK Pen “vehicles” would you suggest I take a look at please? So far I know I should consider; QNUPS SIPP UFPLS QROPS IORP Income Drawdown Annuity but open to any other ideas!! Chances of me moving Pensions abroad – nil, but open to persuasion. b) difficult to answer but lets try; I need just £9k/pa to live off in Thai. I have 4 Pens but 75% is in 1 big Pen. Can you think of a way to utilise the 25% - YEAR AFTER YEAR? If we take the big Pen,” I presume it would go something like; Yr1: take 25% & £12,570 (as I can use my personal allowance each yr as I don’t have income!) then I would need to reformat that Pen to be able to collect again YR2? It is to do with crystalized non but beyond my small brain. The changes also need to be cost effective eg low admin cost.
 

[cleopatra2]

5 minutes ago, cdwyer said:

“This process can be repeated for the following years and receive 25% tax free again.” You officially have my attention! I was previously advised several mths back, that the 25% was a 1 off not to be repeated (although 25% can be applied to several Pensions eg if have 5 Pensions, all 5 can utilise the 25% - correct?) I bow to your knowledge & accept there is a way to repeat the 25% year after year. Q; is there a limit on repeats or could I do for say 6yrs? I may have misused terminology; drawdown to me is lump sum to everybody else. However, I am flexible to whatever is most financially beneficial & that may well include regular small drawdowns as well as large lump sums. I am aware each Pen has its own criteria on this. In “top down” billy basic, simple words please; a) on the basis retired, no dependants, no income & living in Thailand & only Pens to fund going forward – WHICH of the UK Pen “vehicles” would you suggest I take a look at please? So far I know I should consider; QNUPS SIPP UFPLS QROPS IORP Income Drawdown Annuity but open to any other ideas!! Chances of me moving Pensions abroad – nil, but open to persuasion. b) difficult to answer but lets try; I need just £9k/pa to live off in Thai. I have 4 Pens but 75% is in 1 big Pen. Can you think of a way to utilise the 25% - YEAR AFTER YEAR? If we take the big Pen,” I presume it would go something like; Yr1: take 25% & £12,570 (as I can use my personal allowance each yr as I don’t have income!) then I would need to reformat that Pen to be able to collect again YR2? It is to do with crystalized non but beyond my small brain. The changes also need to be cost effective eg low admin cost.
 

The 25% tax free re occuring is for uncrystallized funds You need to look into flexible pensions and if your pension funds allow or qualify for such.

If this is indeed the position then the advice of a recognized professional is required.

 

 

 

 

 

 

[steve187]

3 hours ago, cdwyer said:

Hi, I was hoping to close off that subject but “always” another question – sorry. Firstly, do you have any substantial knowledge of the UK Pensions offerings? I ask simply because having investigated this for months, it is a real headache. As previously explained I am a retired uk citizen living in Thailand & my only income is uk Pensions which I haven’t started to drawdown – yet. It looked like I could ignore Thai tax completely as I would earn no income whilst in Thailand. However, I think not! I think the UK Gov will say I am out of UK for more than “183 days” & thus should not be a UK tax payer. I could opt not to notify HMRC uk but aside from this; Thai Gov will surely state “you are living here for considerable period & so only right you contribute to Thai Gov, via tax.” My options seem to be; a) convert uk Pension drawdowns into savings account in uk & fall under the uk tax system (which for my purposes is perfect as zero tax!) & if Thai Gov chase – I can show Thai Gov it is savings (so already paid tax) & if they ask where did savings come from I can show paid tax under uk law. Whether this would be sufficient for Thai or they would say “nope, you should be paying Thai Gov not uk Gov” I don’t know. Option b) is I drawdown uk Pensions (perhaps at emerg rate not sure)  go via Thai Gov tax system; 1) will definitely cost me some tax whereas uk system is zero 2) who wants to do Thai paperwork! My latest plan is to clearly identify what UK Pension “vehicles,” “could be” feasible even if they are not a perfect match. Once I have a short list I can easily knock out those that don’t fit. So far I know I should consider; QNUPS SIPP UFPLS QROPS IORP Income Drawdown & Annuities but if you know any others – I am all ears! In summary; two points; 1) can I avoid getting involved with Thai Gov or will Thai Gov say I should be paying them & more importantly, will UK Gov say I should be paying Thai Gov! 2) Identify suitable UK Pen vehicles.

All UK pensions are taxable, But there is no method in place for HMRC to collect tax from a state pension, they take your personal allowance of £12,570 and deducts the state pension from that of say £9,343 leaving you a balance of £3227 which they give to the private pension company as a income tax code, to use to deduct income tax,

all you HMRC affairs can be viewed online via government gateway or on a HMRC app.

you can have a 25% draw down from any private pension tax free, the rest is taxable using the notice of tax coding

[topt]

3 hours ago, cdwyer said:

1) can I avoid getting involved with Thai Gov or will Thai Gov say I should be paying them & more importantly, will UK Gov say I should be paying Thai Gov!

I believe this was covered in my first reply to you........

 

For your pension queries I would start with your pension company and see what they say and then as @cleopatra2says take some professional advice.

 

 

[treetops]

23 minutes ago, cdwyer said:

Can you think of a way to utilise the 25% - YEAR AFTER YEAR?

 

I do this by instructing my pension provider to give me £xxx each month tax free and £yyy each month taxable.  If 12 x £yyy is below £12,570 then no tax will be paid.  If your planning on living off £9,000 per year then you will never get close to paying tax.

 

As before, not all providers allow this method so check first.

[UKresonant]

10 hours ago, cdwyer said:

I presume it would go something like; Yr1: take 25% & £12,570 (as I can use my personal allowance each yr as I don’t have income!) then I would need to reformat that Pen to be able to collect again YR2?

 

One example would be for a SIPP moved to a drawdown pension....

Well if it's a SIPP say 400k 

Year 1

You move 50k to a pension in drawdown so once transferred, you then take 12.5k tax free cash and £12.5k taxable income (but not taxed due to your personal allowance), and leave 25k invested in the pension in drawdown.  you can keep the money withdrawn tax free that you don't use in an ISA.

 

So year 2, say the SIPP that was left of £350k has grown 8% and is now 378k, you move another 50k, to the pension in drawdown 12.5k tax free, and the 37.5k from which you can take your 12.5k taxable (but not taxed due to your personal allowance).

 

So you get 25% tax free of the amount that is moved into a pension in drawdown, from the SIPP.  you could do it all in year 1, or progressively over years.

 

As long as they don't change the tax rules!

 

Since a SIPP is not my main pension I did that procedure, to move the 25% tax free out to invest in ISA's, but I don't take any taxable income from the 75% for the foreseeable, leave it rolling up tax free.

 

 

 

[cdwyer]

18 hours ago, cleopatra2 said:

The 25% tax free re occuring is for uncrystallized funds You need to look into flexible pensions and if your pension funds allow or qualify for such.

If this is indeed the position then the advice of a recognized professional is required.

 

 

 

 

 

 

thank you.

[cdwyer]

7 hours ago, UKresonant said:

 

One example would be for a SIPP moved to a drawdown pension....

Well if it's a SIPP say 400k 

Year 1

You move 50k to a pension in drawdown so once transferred, you then take 12.5k tax free cash and £12.5k taxable income (but not taxed due to your personal allowance), and leave 25k invested in the pension in drawdown.  you can keep the money withdrawn tax free that you don't use in an ISA.

 

So year 2, say the SIPP that was left of £350k has grown 8% and is now 378k, you move another 50k, to the pension in drawdown 12.5k tax free, and the 37.5k from which you can take your 12.5k taxable (but not taxed due to your personal allowance).

 

So you get 25% tax free of the amount that is moved into a pension in drawdown, from the SIPP.  you could do it all in year 1, or progressively over years.

 

As long as they don't change the tax rules!

 

Since a SIPP is not my main pension I did that procedure, to move the 25% tax free out to invest in ISA's, but I don't take any taxable income from the 75% for the foreseeable, leave it rolling up tax free.

 

 

 

thanks

[cdwyer]

18 hours ago, steve187 said:

All UK pensions are taxable, But there is no method in place for HMRC to collect tax from a state pension, they take your personal allowance of £12,570 and deducts the state pension from that of say £9,343 leaving you a balance of £3227 which they give to the private pension company as a income tax code, to use to deduct income tax,

all you HMRC affairs can be viewed online via government gateway or on a HMRC app.

you can have a 25% draw down from any private pension tax free, the rest is taxable using the notice of tax coding

thanks

[cdwyer]

18 hours ago, treetops said:

 

I do this by instructing my pension provider to give me £xxx each month tax free and £yyy each month taxable.  If 12 x £yyy is below £12,570 then no tax will be paid.  If your planning on living off £9,000 per year then you will never get close to paying tax.

 

As before, not all providers allow this method so check first.

thanks

[cdwyer]

thanks