UK Work Pension Taxed.

[phetphet]

Out of the blue, I just received a P60 to the UK address I use, from my pension provider showing tax paid on my pension this past year. I can't remember ever receiving one in years.

 

I haven't lived in the UK for over seven years, and wish to notify HMRC that I am no longer tax resident in the UK to reclaim this.. It should also help with any possible future CGT on UK shares I own as I cannot open an ISA as a non resident to protect any capital gains..

 

I presume the first step is to obtain a Thai Tax ID, which I plan to do.

 

However. Where I am slightly worried is this:

 

The UK address I use is also the registered address for my stockbroker and UK bank accounts. Both banks contacted me last year to ask where I am tax resident. I said UK in order to keep the accounts open. (We have all seen the many threads on here about people having their accounts closed.)

 

If I notify HMRC that I am not UK tax resident, is it likely that they will notify, or that the banks will find out that I am no longer living in the UK or no longer tax resident?

 

Also. Anything else I might be missing?  Any further advice on how to proceed will be much appreciated.

 

TIA.

 

 

 

[nigelforbes]

I can help perhaps with a couple of aspects:

 

UK HMRC will not notify your UK bank that you are not tax resident, its not off any consequence to them unless you receive income from products you have purchased at the bank.

 

You say your UK work pension has been taxed and you want to reclaim that tax or stop it. HMRC assigns you a tax number which shows how much tax free income you are allowed in the current year, this is based on the information they have at hand. If you already receive, for example, state pension of around 8,000 Pounds per year, that, for example, would leave you with the difference between 8,000 and the personal allowance, 12,550 as tax free income. If you work pension value is higher than that figure, the work pension will be fully taxed. Only you will know what all your income is and whether the work pension is rightly being taxed at source. Note: I assume your work pension arises in the UK, which means it is UK taxable, being non UK resident for tax purposes wont change that.

[phetphet]

7 minutes ago, nigelforbes said:

I can help perhaps with a couple of aspects:

 

UK HMRC will not notify your UK bank that you are not tax resident, its not off any consequence to them unless you receive income from products you have purchased at the bank.

 

You say your UK work pension has been taxed and you want to reclaim that tax or stop it. HMRC assigns you a tax number which shows how much tax free income you are allowed in the current year, this is based on the information they have at hand. If you already receive, for example, state pension of around 8,000 Pounds per year, that, for example, would leave you with the difference between 8,000 and the personal allowance, 12,550 as tax free income. If you work pension value is higher than that figure, the work pension will be fully taxed. Only you will know what all your income is and whether the work pension is rightly being taxed at source. Note: I assume your work pension arises in the UK, which means it is UK taxable, being non UK resident for tax purposes wont change that.

Thank you.

 

I was only going by this paragraph from the UK Gov website.

See the part I have marked in Bold.

Tax when you live abroad

If you live abroad but are classed as a UK resident for tax purposes, you may have to pay UK tax on your pension. The amount you pay depends on your income.

If you’re not a UK resident, you don’t usually pay UK tax on your pension. But you might have to pay tax in the country you live in. There are a few exceptions - for example, UK civil service pensions will always be taxed in the UK.

Double tax

If you live in a country without a ‘double taxation agreement’ with the UK, you might have to pay tax in both countries.

 

 

Edited April 20, 2023 by phetphet

[nigelforbes]

Just now, phetphet said:

Thank you.

 

I was only going by this paragraph from the UK Gov website. See the part I have marked in Bold

Tax when you live abroad

If you live abroad but are classed as a UK resident for tax purposes, you may have to pay UK tax on your pension. The amount you pay depends on your income.

If you’re not a UK resident, you don’t usually pay UK tax on your pension. But you might have to pay tax in the country you live in. There are a few exceptions - for example, UK civil service pensions will always be taxed in the UK.

Double tax

If you live in a country without a ‘double taxation agreement’ with the UK, you might have to pay tax in both countries.

 

 

Let me try and give you an example.

 

I am not UK tax resident.

 

I receive UK state pension, UK rental income plus I may chose to receive Self Invested Pension (SIPP) income but that is my choice, as is the amount. All those things arise in the UK. If the total sum of the State Pension and Rental Income is slightly less than than the UK personal Allowance, I may not take any SIPP income hence I do not pay UK tax. If I decide to take SIPP income that will push me over the Personal Allowance and the excess income is taxable.

 

I also receive other income from none UK sources, all of which is not taxable in the UK and is excluded income from my UK tax return.

 

The UK State Pension is at the bottom of the stack, any other income is added on top of it, that is why the State Pension is not usually taxable in the UK. Works pensions is simply other income, the fact it is pension income is not relevant to anything taxwise, ie there are no special benefits or rules etc, it's simply income.

 

[BritManToo]

Any income sourced from the UK is liable to UK tax no matter where you live.

Current UK state pension is 10,400 pounds, tax allowance is 12,500 pounds.

So you get around 2,000pounds tax free from any other UK income.

20% tax will be deducted from any excess.

 

Best to leave your tax residence in the UK, if you don't want your financial accounts in the UK closed ..... and you want state pension rises.

Edited April 20, 2023 by BritManToo

[nigelforbes]

7 minutes ago, BritManToo said:

Any income sourced from the UK is liable to UK tax no matter where you live.

Current UK state pension is 10,400 pounds, tax allowance is 12,500 pounds.

So you get around 2,000pounds tax free from any other UK income.

20% tax will be deducted from any excess.

 

Best to leave your tax residence in the UK, if you don't want your financial accounts in the UK closed ..... and you want state pension rises.

It's not that straight forward, potentially, everyone is different. Anyone having offshore income needs to do the math. In my case, it pays me to not be UK tax resident and since I don't live in the UK I'm not entitled to the annual state pension increase anyway although this doesn't mean I can't go back every few years and get legally uprated! As far as closing accounts is concerned: my bank has no problem with me living in Thailand and even sends my new bank cards here.

[phetphet]

3 hours ago, nigelforbes said:

Let me try and give you an example.

 

I am not UK tax resident.

 

I receive UK state pension, UK rental income plus I may chose to receive Self Invested Pension (SIPP) income but that is my choice, as is the amount. All those things arise in the UK. If the total sum of the State Pension and Rental Income is slightly less than than the UK personal Allowance, I may not take any SIPP income hence I do not pay UK tax. If I decide to take SIPP income that will push me over the Personal Allowance and the excess income is taxable.

 

I also receive other income from none UK sources, all of which is not taxable in the UK and is excluded income from my UK tax return.

 

The UK State Pension is at the bottom of the stack, any other income is added on top of it, that is why the State Pension is not usually taxable in the UK. Works pensions is simply other income, the fact it is pension income is not relevant to anything taxwise, ie there are no special benefits or rules etc, it's simply income.

 

Thank you for explaining.

I am not yet eligible for UK state pension until next year when 66, and not full state pension at that.

But am I right in thinking that if non tax resident, I will not pay CGT on any shares in UK companies if out of UK for over five years? 

 

 

[nigelforbes]

1 hour ago, phetphet said:

Thank you for explaining.

I am not yet eligible for UK state pension until next year when 66, and not full state pension at that.

But am I right in thinking that if non tax resident, I will not pay CGT on any shares in UK companies if out of UK for over five years? 

 

 

Correct:

 

https://www.gov.uk/capital-gains-tax/what-you-pay-it-on#:~:text=If you're abroad,within 5 years of leaving.

[billd766]

6 hours ago, nigelforbes said:

I can help perhaps with a couple of aspects:

 

UK HMRC will not notify your UK bank that you are not tax resident, its not off any consequence to them unless you receive income from products you have purchased at the bank.

 

You say your UK work pension has been taxed and you want to reclaim that tax or stop it. HMRC assigns you a tax number which shows how much tax free income you are allowed in the current year, this is based on the information they have at hand. If you already receive, for example, state pension of around 8,000 Pounds per year, that, for example, would leave you with the difference between 8,000 and the personal allowance, 12,550 as tax free income. If you work pension value is higher than that figure, the work pension will be fully taxed. Only you will know what all your income is and whether the work pension is rightly being taxed at source. Note: I assume your work pension arises in the UK, which means it is UK taxable, being non UK resident for tax purposes wont change that.

IIRC, ANY income earned through any UK company, onshore or offshore, is deemed to be taxable in the UK.

 

All pension providers report pensions to the DWP  and there is a tax free allowance that every person gets. Income beyond that point is taxable.

 

https://www.gov.uk/income-tax-rates

 

Income Tax rates and bands
The table shows the tax rates you pay in each band if you have a standard Personal Allowance of £12,570.

Income tax bands are different if you live in Scotland.

Band    Taxable income    Tax rate
Personal Allowance    Up to £12,570            0%
Basic rate                    £12,571 to £50,270    20%
Higher rate                  £50,271 to £125,140   40%
Additional rate            over £125,140            45%

 

You need to contact the DWP directly and ask them why your pension is being taxed and by how much.

 

Whilst Thailand and the UK do have a dual taxation agreement you will only pay income tax in one country, in your case as with most of us in Thailand, it will be in the UK.

 

https://www.gov.uk/contact-hmrc

 

 

[nigelforbes]

11 minutes ago, billd766 said:

IIRC, ANY income earned through any UK company, onshore or offshore, is deemed to be taxable in the UK.

 

All pension providers report pensions to the DWP  and there is a tax free allowance that every person gets. Income beyond that point is taxable.

 

https://www.gov.uk/income-tax-rates

 

Income Tax rates and bands
The table shows the tax rates you pay in each band if you have a standard Personal Allowance of £12,570.

Income tax bands are different if you live in Scotland.

Band    Taxable income    Tax rate
Personal Allowance    Up to £12,570            0%
Basic rate                    £12,571 to £50,270    20%
Higher rate                  £50,271 to £125,140   40%
Additional rate            over £125,140            45%

 

You need to contact the DWP directly and ask them why your pension is being taxed and by how much.

 

Whilst Thailand and the UK do have a dual taxation agreement you will only pay income tax in one country, in your case as with most of us in Thailand, it will be in the UK.

 

https://www.gov.uk/contact-hmrc

 

 

"ANY income earned through any UK company, onshore or offshore, is deemed to be taxable in the UK".

 

Agreed. But that doesn't mean that the pension provider withholds tax at source in every instance, it depends on the notice of tax coding supplied to them by HMRC. Hargreaves Lansdowne administers my SIPP. Every year that write to me and tell me what my HMRC notice of tax coding is and how much money I can take from my SIPP tax free, before they start deducting tax at source.

[Sigma6]

7 hours ago, nigelforbes said:

Let me try and give you an example.

 

I am not UK tax resident.

 

I receive UK state pension, UK rental income plus I may chose to receive Self Invested Pension (SIPP) income but that is my choice, as is the amount. All those things arise in the UK. If the total sum of the State Pension and Rental Income is slightly less than than the UK personal Allowance, I may not take any SIPP income hence I do not pay UK tax. If I decide to take SIPP income that will push me over the Personal Allowance and the excess income is taxable.

 

I also receive other income from none UK sources, all of which is not taxable in the UK and is excluded income from my UK tax return.

 

The UK State Pension is at the bottom of the stack, any other income is added on top of it, that is why the State Pension is not usually taxable in the UK. Works pensions is simply other income, the fact it is pension income is not relevant to anything taxwise, ie there are no special benefits or rules etc, it's simply income.

 

My understanding is how you have explained it, but the OP makes a good point with what he read on the HMRC website - the 2nd paragraph is fairly concise - it doesnt specify between state pension or otherwise

This is in the section solely talking about tax on pensions

 

https://www.gov.uk/tax-on-pension/tax-when-you-live-abroad

 

I'm not disputing what you say, but their own website makes it a little unclear.

[nigelforbes]

17 minutes ago, Sigma6 said:

My understanding is how you have explained it, but the OP makes a good point with what he read on the HMRC website - the 2nd paragraph is fairly concise - it doesnt specify between state pension or otherwise

This is in the section solely talking about tax on pensions

 

https://www.gov.uk/tax-on-pension/tax-when-you-live-abroad

 

I'm not disputing what you say, but their own website makes it a little unclear.

The difference in the wording I think is between not living in the UK but being UK resident for tax purposes, and, not being UK resident. For example, I am a UK citizen but I lived in the US for two decades, during which time I was not UK resident. And since I didn't have income that arose there, I wasn't UK resident for tax purposes either. Today, I live in Thailand, so once again I am not UK resident but since I do have income that arises in the UK, I am UK resident for tax purposes. 

[cleopatra2]

24 minutes ago, Sigma6 said:

My understanding is how you have explained it, but the OP makes a good point with what he read on the HMRC website - the 2nd paragraph is fairly concise - it doesnt specify between state pension or otherwise

This is in the section solely talking about tax on pensions

 

https://www.gov.uk/tax-on-pension/tax-when-you-live-abroad

 

I'm not disputing what you say, but their own website makes it a little unclear.

The 2nd paragraph is referring to the different DTT agreements in place between the UK and other states.

For the purposes of Thailand there is no provision for pensions with the exception of Government Pensions. Thus the UK has taxing rights on any UK derived pension .

[nigelforbes]

4 minutes ago, cleopatra2 said:

The 2nd paragraph is referring to the different DTT agreements in place between the UK and other states.

For the purposes of Thailand there is no provision for pensions with the exception of Government Pensions. Thus the UK has taxing rights on any UK derived pension .

I don't think that's 100% correct. DTA's do exist but as you say they refer only to government pensions. That means that Thailand has no right to tax such pensions. But the DTA's don't extend to non-governement pensions, that means the UK AND Thailand have the right to tax those pensions (as long as the remittance criteria is met)  which in my case they sometimes do. That also means (as you say) that the UK can tax those payments and that if they are subsequently also taxed by Thailand, the additional tax cannot be reclaimed under the terms of the DTA.

 

The US has a DTA with Thailand governing SSc pensions, that means Thailand is forbidden from taxing those payments and only the US can. 

[phetphet]

1 hour ago, nigelforbes said:

I don't think that's 100% correct. DTA's do exist but as you say they refer only to government pensions. That means that Thailand has no right to tax such pensions. But the DTA's don't extend to non-governement pensions, that means the UK AND Thailand have the right to tax those pensions (as long as the remittance criteria is met)  which in my case they sometimes do. That also means (as you say) that the UK can tax those payments and that if they are subsequently also taxed by Thailand, the additional tax cannot be reclaimed under the terms of the DTA.

 

The US has a DTA with Thailand governing SSc pensions, that means Thailand is forbidden from taxing those payments and only the US can. 

But looking at paragraph below, wouldn't it be possible to avoid any double taxation by Thailand on money earned outside by not bringing the money in in the same year it was earned?

 

A resident of Thailand is liable for personal income tax on income from sources inside Thailand and on assessable income derived from sources outside Thailand. However, the imposition of tax on income derived outside Thailand will apply only to income derived and brought into Thailand in the same year in which such income is earned. 

[nigelforbes]

6 minutes ago, phetphet said:

But looking at paragraph below, wouldn't it be possible to avoid any double taxation by Thailand on money earned outside by not bringing the money in in the same year it was earned?

 

A resident of Thailand is liable for personal income tax on income from sources inside Thailand and on assessable income derived from sources outside Thailand. However, the imposition of tax on income derived outside Thailand will apply only to income derived and brought into Thailand in the same year in which such income is earned. 

Yes, which is why I wrote, "as long as the remittance criteria is met". In my particular case, I had no choice, it was purely a timing issue.

[cleopatra2]

3 hours ago, phetphet said:

But looking at paragraph below, wouldn't it be possible to avoid any double taxation by Thailand on money earned outside by not bringing the money in in the same year it was earned?

 

A resident of Thailand is liable for personal income tax on income from sources inside Thailand and on assessable income derived from sources outside Thailand. However, the imposition of tax on income derived outside Thailand will apply only to income derived and brought into Thailand in the same year in which such income is earned. 

It is irrelevant the DTT prevents double taxation.

Article 23 of the UK Thai DTT gives the opportunity to get credit for UK tax paid for any Thai tax liability.

Since the pension income is derived from the UK it is UK tax paid that credit can be used for Thai tax.

If the income was Thailand source then the Thai tax can be credited against any  UK tax

[nigelforbes]

7 hours ago, cleopatra2 said:

It is irrelevant the DTT prevents double taxation.

Article 23 of the UK Thai DTT gives the opportunity to get credit for UK tax paid for any Thai tax liability.

Since the pension income is derived from the UK it is UK tax paid that credit can be used for Thai tax.

If the income was Thailand source then the Thai tax can be credited against any  UK tax

Not irrelevant. A person has to have paid tax in that country to get credit against in the first place!

 

Here's the DTA (Double Tax Agreement)

 

https://www.rd.go.th/fileadmin/download/nation/en

glish_e.pdf

 

 

Edited April 20, 2023 by nigelforbes

[cleopatra2]

2 hours ago, nigelforbes said:

Not irrelevant. A person has to have paid tax in that country to get credit against in the first place!

 

Here's the DTA (Double Tax Agreement)

 

https://www.rd.go.th/fileadmin/download/nation/en

glish_e.pdf

 

 

It is irrelevant because the OP is trying to avoid paying UK tax on UK sourced income . There is no provisions in the DTT that provides for this.

Even if such a sceneria existed the UK tax authorities would want to see evidence from the Thai tax authorities that tax is being deducted from this source of income in order not to apply UK tax.

[nigelforbes]

7 minutes ago, cleopatra2 said:

It is irrelevant because the OP is trying to avoid paying UK tax on UK sourced income . There is no provisions in the DTT that provides for this.

Even if such a sceneria existed the UK tax authorities would want to see evidence from the Thai tax authorities that tax is being deducted from this source of income in order not to apply UK tax.

We seem to be talking at cross purposes.

 

 The OP asked: "wouldn't it be possible to avoid any double taxation by Thailand on money earned outside by not bringing the money in in the same year it was earned?", to which I responded yes. Then you began with an argument that I don't really  understand what it is or why. You seem to think the OP's suggestion and my answer are irrelevant, they aren't, it isn't.

 

Ball, court, yours.

 

[cleopatra2]

34 minutes ago, nigelforbes said:

We seem to be talking at cross purposes.

 

 The OP asked: "wouldn't it be possible to avoid any double taxation by Thailand on money earned outside by not bringing the money in in the same year it was earned?", to which I responded yes. Then you began with an argument that I don't really  understand what it is or why. You seem to think the OP's suggestion and my answer are irrelevant, they aren't, it isn't.

 

Ball, court, yours.

 

The OP wants to reclaim tax paid in his UK pension by stating his residence is now Thailand.

There is no provisions in the DTT that allows relief on UK tax for pension income sourced in the UK.

In this respect it is irrelevant when the monies are remitted into Thailand.

At present the OP stated he will obtain a tax id , thus is not paying Thai  tax presently.

[nigelforbes]

1 hour ago, cleopatra2 said:

The OP wants to reclaim tax paid in his UK pension by stating his residence is now Thailand.

There is no provisions in the DTT that allows relief on UK tax for pension income sourced in the UK.

In this respect it is irrelevant when the monies are remitted into Thailand.

At present the OP stated he will obtain a tax id , thus is not paying Thai  tax presently.

Ah, yes, I understood his situation differently but this may well just be me. I didn't think he was trying to reclaim tax, I thought he was trying to avoid it. He said that he doesn't yet receive his state pension so his only source of income is the private pension that is being taxed at source in the UK, very recently for the first time. I presumed that the Personal Allowance in the UK would allow him to receive this income tax free so he needs to address this with HMRC.

 

Then separately and as a subsequent issue: he talked about avoiding Thai tax which introduced the question about the timing of remittances that I reaffirmed.

 

Whatever, the OP surely must have enough information now regarding the situation in both countries to arrive at an answer.

 

Hopefully all good at this stage.

[phetphet]

I posted my OP as though I have been receiving my work pension for almost five years, this was the first time I had received a P60 pointing out the tax I was paying.

 

I found the wording on the Gov UK website regarding tax on pensions to be somewhat ambiguous. 

See below the main part that I wasn't sure about,. Which Is why I asked.

 

If you’re not a UK resident, you don’t usually pay UK tax on your pension. But you might have to pay tax in the country you live in. 

 

This made me wrongly believe I could claim the UK tax back. I have gone through the figures and it seems you are correct. The first 12570 is tax free, and the remainder is taxed at 20%.

 

It has also made me think about getting my tax affairs in order. Especially as I have shares which cannot be put into an ISA as a UK non resident, but which could be Iiable to CGT.

 

Thanks to everyone, especially nigelforbes for all the advice and valuable info offered.