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Consultation on non residents tax allowance

Consultation on non residents tax allowance

Old Aug 12th 2014, 3:00 pm
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Default Consultation on non residents tax allowance

Can anyone put this into plain English from an expat perspective living in Hungary?

https://www.gov.uk/government/consul...onal-allowance
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Old Aug 12th 2014, 3:33 pm
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Default Re: Consultation on non residents tax allowance

Originally Posted by cathyg
Can anyone put this into plain English from an expat perspective living in Hungary?

https://www.gov.uk/government/consul...onal-allowance
It means that if it were to be implemented...and you were a non-UK resident receiving a UK pension (which a lot of expats are)...you would not receive the UK personal allowance on that income, and could in theory end up paying tax in your resident country (i.e. Hungary). However, in the consultation they have recognised this, especially in relation to service pensions and are seeking input.

Or at least that is what I think it means!
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Old Aug 12th 2014, 3:47 pm
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Default Re: Consultation on non residents tax allowance

See section 6.6 which relates to pensioners. I would copy and paste but I think it might infringe copyright.
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Old Aug 12th 2014, 3:54 pm
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Default Re: Consultation on non residents tax allowance

Hi Polly

I am interested as a non resident landlord and I also have a small job here (I earn very small amount though). I was looking at annex A where it describes the country of residence tax arrangement. Under Hungary it says Credit and Deduction????? I don't want to lose the UK personal allowance obviously and will want to reply to the consultation once I have a better grip on how it would affect us.
It's all very confusing
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Old Aug 12th 2014, 7:35 pm
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Default Re: Consultation on non residents tax allowance

Originally Posted by Pollypaprika
See section 6.6 which relates to pensioners. I would copy and paste but I think it might infringe copyright.
Not sure the pensioner section relates to Cathy yet Pol - correct me if I'm wrong Cathy but if you are, you definitely don't look it!!

I think you understand it as I do Pol, it's been on the news quite a bit.... If not a pensioner, section 6.5 is relevant and my understanding of it would be that by losing your personal allowance, you would then be liable for UK income tax.
Assuming you currently pay tax on your rental income in Hungary, you will not have had to claim double tax relief as, again an assumption, your income was lower than the personal allowance so you wouldn't have paid it in the UK. However, losing the personal allowance would mean you must now also pay income tax in the UK though relief can be claimed in Hungary but only if you are paying enough tax to do so.
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Old Aug 13th 2014, 10:39 am
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Default Re: Consultation on non residents tax allowance

Originally Posted by Rural Hungary
I think you understand it as I do Pol, it's been on the news quite a bit.... If not a pensioner, section 6.5 is relevant and my understanding of it would be that by losing your personal allowance, you would then be liable for UK income tax.
Assuming you currently pay tax on your rental income in Hungary, you will not have had to claim double tax relief as, again an assumption, your income was lower than the personal allowance so you wouldn't have paid it in the UK. However, losing the personal allowance would mean you must now also pay income tax in the UK though relief can be claimed in Hungary but only if you are paying enough tax to do so.
Yes, that is how I understand it, I also found this article here
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Old Aug 13th 2014, 1:35 pm
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Default Re: Consultation on non residents tax allowance

Originally Posted by Rural Hungary
Assuming you currently pay tax on your rental income in Hungary, you will not have had to claim double tax relief as, again an assumption, your income was lower than the personal allowance so you wouldn't have paid it in the UK. However, losing the personal allowance would mean you must now also pay income tax in the UK though relief can be claimed in Hungary but only if you are paying enough tax to do so.
My understanding of the tax treaty between Hungary and the UK is that pensions (state OAP and private pensions), are taxed in Hungary and property income is taxed in the country in which the property is located. So UK property in taxed only in the UK and Hungarian property is taxed only in Hungary. (Government work related pensions are taxed in the UK)
Thus an ex pat. pensioner landlord pays Hungarian tax on their pension (currently zero rated) and UK tax on any UK property

From the consultation document Para 6.6
The government does not intend to raise taxes on vulnerable groups or in situations where the UK is the principal taxing authority and an individual has no recourse to relief as a result of the UK having sole taxing rights under a tax treaty. If the government were to restrict non-residents’ entitlement to the Personal Allowance, it would intend this to apply to types of income which are taxable both in the UK and overseas (such as that from immovable property) but to retain the Personal Allowance on income that is taxable exclusively in the UK.

From this as UK property income for those living in Hungary would be taxable exclusively in the UK then the personal allowance IMO would be retained.

Of equal concern is what happens if 'dear Nigel' get his way and the UK votes to leave the EU, would the State pension revert to the position it was prior to Hungary joining the EU (frozen at the amount they first receive with no increases) whereas those living - for example - in the old Yugoslavia countries got their annual increases.
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Old Aug 13th 2014, 1:46 pm
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Default Re: Consultation on non residents tax allowance

Does income from property not come under worldwide income Peter or is it treated differently?
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Old Aug 13th 2014, 4:17 pm
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Default Re: Consultation on non residents tax allowance

Originally Posted by Peter_in_Hungary
My understanding of the tax treaty between Hungary and the UK is that pensions (state OAP and private pensions), are taxed in Hungary and property income is taxed in the country in which the property is located. So UK property in taxed only in the UK and Hungarian property is taxed only in Hungary. (Government work related pensions are taxed in the UK)
Thus an ex pat. pensioner landlord pays Hungarian tax on their pension (currently zero rated) and UK tax on any UK property

From the consultation document Para 6.6
The government does not intend to raise taxes on vulnerable groups or in situations where the UK is the principal taxing authority and an individual has no recourse to relief as a result of the UK having sole taxing rights under a tax treaty. If the government were to restrict non-residents’ entitlement to the Personal Allowance, it would intend this to apply to types of income which are taxable both in the UK and overseas (such as that from immovable property) but to retain the Personal Allowance on income that is taxable exclusively in the UK.

From this as UK property income for those living in Hungary would be taxable exclusively in the UK then the personal allowance IMO would be retained.

Of equal concern is what happens if 'dear Nigel' get his way and the UK votes to leave the EU, would the State pension revert to the position it was prior to Hungary joining the EU (frozen at the amount they first receive with no increases) whereas those living - for example - in the old Yugoslavia countries got their annual increases.
Thanks Peter. This agrees with my limited understanding of the situation in that I should pay UK tax on any income earned in the UK via our property. I am just about to complete my UK tax return as a non resident landlord. Anything I earn in Hungary i pay tax etc according to the laws here.
From what I can glean from this consultation they are proposing to look at the amount of income you are getting overall and if your main source of income is in the UK and meets a certain percentage then you will be entitled to your personal allowance. An administrative nightmare I should think.
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Old Aug 13th 2014, 8:24 pm
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Default Re: Consultation on non residents tax allowance

Originally Posted by Rural Hungary
Does income from property not come under worldwide income Peter or is it treated differently?
It's okay Peter, I found it - article 6 paragraph 1 of the double taxation agreement, in case anybody needs it.
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Old Aug 13th 2014, 9:13 pm
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Default Re: Consultation on non residents tax allowance

Cathyg
The norm for non resident landlords is that the tax is deducted at source by the letting agent, rent collector or tenant and forwarded to HMRC with the landlord reclaiming as appropriate at the end of the financial year. At least this was the case when I set up my arrangement in 2006. You can get 'Non-resident landlords scheme - Approval to receive rental income with no tax deducted' from HMRC, I did in 2006 and have heard nothing since to make me believe the situation has changed. I am still liable for any tax due on over the personal allowance (I should be so lucky) but this would be my responsibility to pay, not the rent collector paying tax and then a reconciliation at year end - a real pain. Whilst I don't know your situation, if you are not approved for this scheme it may be worth looking into. I certainly find it much easier.

Whilst I agree with your interpretation of the consultation document
"From what I can glean from this consultation they are proposing to look at the amount of income you are getting overall and if your main source of income is in the UK and meets a certain percentage then you will be entitled to your personal allowance."
The document also provides for exceptions such as pensions and immoveable assets (property) and these may still get a personal allowance (see para 6.6)

As always the devil will be in the detail when the regulation is passed.

Unfortunately whilst they have issued a 'consultation document' I wonder how much notice they will take when non of the 1.2 million ex pat pensioners can vote in the UK!! After all there are over 500,000 ex pat pensioners with frozen pensions and successive governments fail to listen to their complaints, hence my concern if the UK opt out of the EU.
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