Norfolkman2

I don't know who to turn to, has anyone had problems with paying tax on their pensions whilst still working? I know we have to pay tax on our pensions received from the U.K, but is it right to pay a third of your pensions in Tax?

I paid tax on my earnings from the job I do, and because my pensions are added to unearned incomes, it boosted my total earnings. Instead of taxing my pensions separately, the accountant has treated my pensions as if it was from normal employment.

It's bad enough paying tax from the U.K on my Pensions and also paying tax here in Australia.

The Pensions I received is half of what I earned from my employment, and they've taxed me to the total of what I should pay if I had earned that from my employment.

What I would like to know is, are overseas pensions taxed differently to what you earn from employment in Australia.

Can someone advise me what to do as I've never paid this amount on my overseas pension.

old.sparkles

I've moved your post into our main section.

Unfortunately you had posted in our update section which is pre-moderated.

Sorry can't help with the pensions / tax issue but hopefully others can now the post is visible.

BristolUK

Calling spouse of scouse...

oldandbold

My partner has just started receiving a small pension from the UK and I am about to be in the same position - these are private ones as we are not at the state pension age yet.
We have just done this years tax returns - my partners small pension was treated as you have discussed - it is overseas unearnt income on the Australian tax return and consequently was added to her income and taxed as you have described.

As she has earnt less than her UK tax free allowance it was not subject to tax in the UK just here in Australia.
My understanding is in Australia it will be treated as foreign unearnt income, in the UK it is taxable income but if you earn less than the personal UK tax allowance then you should be able to claim the UK tax back.... then comes the next problem when HMRC send you a UK GBP cheque in Australia but thats another post that I did yesterday.
You can look at the double tax arrangements.
Links below are what the UK tax office emailed me 2 days ago
Tax on your UK income if you live abroad: Overview - GOV.UK (www.gov.uk)
Double Taxation: UK-Australia (SI 2003 Number 3199) (Form Australia-Individual 2003) - GOV.UK (www.gov.uk)
Hope this helps - it is a bit complicated

Pulaski

With very few exceptions, if you aren't living in the UK your pensions paid in the UK should not be taxed in the UK. Exceptions (pensions that are taxed in the UK) are mostly pensions from the civil service, the military, and local government service, including teachers.

oldandbold

Here is what the UK tax office emailed me a couple of days ago....As you are not resident in the UK your UK pension provider is required to deduct UK tax but you may be able to subsequently obtain a repayment/ relief from UK tax under a Double taxtion agreement (DTA) if you are taxed twice.

Not all pensions are exempt but if this is the case you may still be able to claim UK personal allowances to cover part or all of the pension (dependant on the amount.of your pension)
In practice most of us will not reach the UK personal allowance but we have the allowance curtesy of being a British Citizen. So in practice most of us will have the basic UK tax free allowance of 12,570 pounds per year. If tax is taken off in the UK and we earnt less than that then we should claim it back.

Also comments below taken from Tax on your UK income if you live abroad: Personal Allowance - GOV.UK (www.gov.uk)

What’s taxed

You pay tax if your total annual income adds up to more than your Personal Allowance. Find out about your Personal Allowance and Income Tax rates.

Your total income could include:

• the State Pension you get (either the basic State Pension or the new State Pension)
• Additional State Pension
• a private pension (workplace or personal) - you can take some of this tax-free
• earnings from employment or self-employment
• any taxable benefits you get
• any other income, such as money from investments, property or savings

spouse of scouse

I'm not a tax expert, but my Brit husband receives partial State pension income from the UK, a small private pension, plus 50% of the rental income from our jointly owned properties. He also receives a partial Australian age pension. My comments below are only based on my experience with my husband's and my taxes.

The first thing to remember is that, with very few exceptions (and UK pension income is not one of those exceptions), the ATO taxes your worldwide income.

Secondly, although pensions themselves are not automatically taxed in the UK, if your income exceeds your personal tax allowance then you will be taxed on the amount over that allowance. So if a person is just receiving the basic State pension they won't pay UK tax, as the pension amount is under the personal tax allowance. My husband's State and private pensions, plus rental income, takes him over his personal tax allowance, so he pays tax In the UK on that 'extra' amount.

The third thing is that the Double Taxation Agreement between the UK and Australia can provide relief from paying tax twice. Unless you have an excellent understand of this agreement, and how it relates to your personal circumstances, I'd recommend getting professional and experienced tax advise.

Which brings me to my fourth point - if we didn't have a UK accountant handling our tax affairs there, I'd be up the proverbial creek. The UK/Australia double taxation agreement requires various codes and information to be input into the HMRC tax return, the accountant does all that and makes sure everything's kosher. I'd rather pay a few hundred quid for an expert to deal with that. When it's time to do our ATO tax returns, I give our Australian accountant the HMRC tax return form completed by our UK accountant to evidence the information I've put in our ATO tax forms. I just use an online tax service for this, only costs about $140 for both of us.

Which brings me to perhaps my most important point, in my opinion, if your tax affairs are quite complex, eg various income derived from two countries that have a double taxation agreement in place, then it's well worth getting the professionals to do your tax returns. Even if you only use them for one or two years, until you get your head around the various requirements.

I hope that helps a bit in getting your head around it all.

oldandbold

Kind of what i was trying to say.... but you did it far more eloquently

spouse of scouse

Not at all, your posts were very informative. I didn't see the one you posted just before mine, I probably started to write it about the same time but was interrupted and had to leave it for a while.
Hopefully between what the two of us have posted the OP will now have a better handle on how all this stuff works. It's headache inducing stuff! I hope you can find a way to cash your GBP cheque

rammygirl

There is a form you can fill in from the ATO. You send it back to them they verify and forward to HMRC. HMRC then inform your pension company to stop deducting tax at source and pay gross (to be taxed only in Australia). As you can imagine this does take a while! But you will then get any Uk tax refunded and going forward makes it easier.
The income is taxed at your marginal rate, however if you don’t actually need the cash now you might be able to pay it into Super at the concessional rate of 15% (it will also then become tax free income in the future). There are limits to how much you can put into super at the concessional rate though.