Pilis Nemzeti Park Fella

I'm checking out whether UK pensions, paid to UK nationals resident in Hungary, will be free of tax in both UK & Hungary. Both private pensions & UK state pension.

Some sites seem to indicate this is the case.

Anybody got good information?

Peter_in_Hungary

Correct !
The rules that affect several on this forum are
Pensions are taxed in the country in which they are received (your residence for the purpose of tax) Hungary currently does not tax pensions and pensions are outside taxable income calculations. In the past pensions have been in the taxable income but zero rated which had the effect of pushing up the marginal rate of tax. The exception to this is any work related pension from a government body (e.g. teachers or civil servants) which is taxed in the UK but with the benefit of the personal allowance . Note this is NOT the state OAP which is paid tax free.

Rental income is taxed in the country where the property is situated. So rent from UK property is taxed in the UK but you get a UK personal allowance and deductibles and UK rent is not declared to Hungarian tax authorities.

Pilis Nemzeti Park Fella

Cheers. So are state/ private pensions initially taxed in the UK,- but the UK national resident in Hungary claims back the tax? Or do the pensions get transferred to you tax-free right from the beginning?

Does this also mean that if you had a private pension where you can decide how much to take out in a year, you could withdraw 100% and not pay any tax at all? (Punitive tax rate if you do this in UK!)

Peter_in_Hungary

Pensions are paid gross - so no deductions and nothing to claim back. I am not sure about withdrawing the whole pension pot and getting it tax free.

cathyg

Peter_in_Hungary

Pilis Nemzeti Park Fella

Peter - are you quite sure that what you & I would both mean by 'residence' is the same? Ie are we singing off the same hymn sheet?

Once I become resident in Hungary - >183 days' residence in a year & I declare to HMRC that I am non-UK-resident - will my private pension still get taxed in UK (because it is a UK company pension) & I have to claim back the tax from HMRC? Or do you think the pension administrators will accept my information that I am resident in Hungary & pay it gross?

I seem to remember I read that the UK pension administrators will automatically treat me as UK resident & apply UK tax laws, so as a resident of Hungary, I have to claim back the tax paid in the UK later.

Peter_in_Hungary

You have to be resident in Hungary for tax purposes. Assuming that HMRC accept that you are non UK resident then you should contact your pension provider and tell them that you are resident in Hungary and that your pension should be paid gross. If your pension is handled through an IFA as SIPPs and you are getting draw down pension then talk to your IFA. I am in this position and recently my IFA had a query to my pension provider and as a by product they confirmed my pension was suffixed (NT) i.e. 'no tax' so my SIPP provider (Standard Life as it happens) knows that I am not resident in the UK for tax purposes and my pension is paid without tax deducted.

Pilis Nemzeti Park Fella

Thanks. So I'll get my UK state pension & company pension paid tax free in Hungary, provided I am tax resident in Hungary?

Peter_in_Hungary

Correct (ish) The UK state OAP and your company pension should be paid gross if you are a resident of Hungary for tax purposes. Both will be subject to Hungarian tax - which currently is zero. At times the Hungarian tax system has counted pension income within the taxable income but at a zero rate which had the effect of pushing up the marginal rate pensioners paid on other income. At the moment pension income is ignored for the purposes of calculating income tax and does not have to be declared.

If you are about to get your UK OAP and are involved with the Hungarian pension office they will offer to liaise with the UK pension office and arrange for your UK OAP through the Hungarian pension office. The general advice is to decline this offer as it removes a layer of bureaucracy and it keeps the Hungarian authorities nose out of your UK pension business. (although I believe the UK pension office still inform the Hungarian office of the fact of your pension, but your dealings are direct with the UK office).

Pilis Nemzeti Park Fella

I could start drawing my company pension but am still a long way off UK state pension. Still need to get 2 of our 3 kids through secondary school so I can't see a way to get 186 days a year in Hungary for now, best I could possibly manage would be about 120 days and that would be pushing it. So residency not on for now, I'm looking at about 2022/23.