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Paying tax on a private pension

Paying tax on a private pension

Old Sep 8th 2023, 12:02 am
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Default Paying tax on a private pension

I'm just in the early stages of thinking about drawing on a couple of private pensions and am unsure of the tax implications.
If I completely cash in a couple of dormant, small, UK private pensions will I have to pay tax on them and then claim the tax back? The total will be about £21,000. I understand the tax allowance is around £12,500 in the UK and pensions aren't taxed in Hungary. I am a UK citizen but a permanent Hungarian resident
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Old Sep 8th 2023, 9:18 am
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Default Re: Paying tax on a private pension

Originally Posted by PaulinEger
I'm just in the early stages of thinking about drawing on a couple of private pensions and am unsure of the tax implications.
If I completely cash in a couple of dormant, small, UK private pensions will I have to pay tax on them and then claim the tax back? The total will be about £21,000. I understand the tax allowance is around £12,500 in the UK and pensions aren't taxed in Hungary. I am a UK citizen but a permanent Hungarian resident
I might be wrong but I think when you cash in the pensions the Insurance Company will deduct any tax before paying them out to you. Try looking at the link below which hopefully you'll find useful.

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


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Old Sep 8th 2023, 11:18 am
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Default Re: Paying tax on a private pension

Thank you for your reply Sachina but my question was more about whether or not I have to claim tax back or not. As I live here in Hungary, my UK pension should not be taxable (as far as I'm aware) so will I get taxed by the pension company and then have to claim it back or will I just get the full, untaxed amount? I can't see the answer in that link you provided.
There must be plenty of members on here who are claiming a UK pension. How do you get yours? Taxed and claim the tax back or untaxed?
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Old Sep 8th 2023, 11:30 am
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Default Re: Paying tax on a private pension

You should be able to ask your pension holder to pay the pension without deducting tax and they should pay the pension gross.

When I have withdrawn from my pension it has been paid gross (after I told them this is how I wanted it as I am not a UK resident)
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Old Sep 8th 2023, 1:12 pm
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Default Re: Paying tax on a private pension

Originally Posted by PaulinEger
Thank you for your reply Sachina but my question was more about whether or not I have to claim tax back or not. As I live here in Hungary, my UK pension should not be taxable (as far as I'm aware) so will I get taxed by the pension company and then have to claim it back or will I just get the full, untaxed amount? I can't see the answer in that link you provided.
There must be plenty of members on here who are claiming a UK pension. How do you get yours? Taxed and claim the tax back or untaxed?
I have a UK Old Age Pension plus a small company annuity which both appear on my Personal Tax Account issued by HMRC.

I have just received a cheque from HMRC for the princely amount of £55.40 which is tax overpaid on (or more likely wrongly deducted from) my annuity.

I've been non resident in the UK for 40 years and tax has always been deducted at source ie by the Insurance company, from the time I first began to receive it.
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Old Sep 8th 2023, 1:27 pm
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Default Re: Paying tax on a private pension

Originally Posted by PaulinEger
Thank you for your reply Sachina but my question was more about whether or not I have to claim tax back or not. As I live here in Hungary, my UK pension should not be taxable (as far as I'm aware) so will I get taxed by the pension company and then have to claim it back or will I just get the full, untaxed amount? I can't see the answer in that link you provided.
There must be plenty of members on here who are claiming a UK pension. How do you get yours? Taxed and claim the tax back or untaxed?
You are tax resident in Hungary, you should be receiving your UK pension free of UK tax.
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Old Sep 8th 2023, 1:29 pm
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Default Re: Paying tax on a private pension

Also, do you receive any other income from or within the UK (don't answer that here), in other words do you have a UK tax code?
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Old Sep 8th 2023, 1:45 pm
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Default Re: Paying tax on a private pension

Originally Posted by Finknottle
You are tax resident in Hungary, you should be receiving your UK pension free of UK tax.
https://www.gov.uk/tax-uk-income-liv...ental%20income

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Old Sep 8th 2023, 1:58 pm
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Default Re: Paying tax on a private pension

Now that was my understanding, and I have been paying UK income tax...
My Hungarian accountant said recently that I should not be paying UK tax - thinking on I guess she is referring to the provisions of the treaty on (double) taxation.

Paul, disregard my previous!
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Old Sep 8th 2023, 4:52 pm
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Default Re: Paying tax on a private pension

My understanding is that pensions are taxed in the country in which they are received which means as pensions are not taxed in Hungary there is no tax to pay, this includes the OAP. The exception is pensions gained as a result of working for the (UK) state which means that state work related pensions are taxed by HMRC. (teachers, police, civil service etc.)

Property is taxed in the country in which the property sits - So if you have a house in the UK rented out then even if you are resident in Hungary for tax purposes you pay UK tax on the rental income (but you get a personnel allowance)

I have both OAP and a work related pension and both have always been paid gross and neither HMRC nor the Hungarian tax authority show any interest in either.

The double taxation treaty gives an allowance for tax paid in another country if that income is also taxable in Hungary. e.g. I had a small number of US shares as a result of my work. The dividends were subject to US tax at 15%. Hungary also taxes dividends at 15% but because I paid US tax at15% there was no Hungarian tax to pay. If however Hungary charged 16% tax then I would have to pay 1% tax here.

Last edited by Peter_in_Hungary; Sep 8th 2023 at 4:58 pm.
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Old Sep 8th 2023, 5:41 pm
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Default Re: Paying tax on a private pension

Originally Posted by Peter_in_Hungary
My understanding is that pensions are taxed in the country in which they are received which means as pensions are not taxed in Hungary there is no tax to pay, this includes the OAP. The exception is pensions gained as a result of working for the (UK) state which means that state work related pensions are taxed by HMRC. (teachers, police, civil service etc.)

Property is taxed in the country in which the property sits - So if you have a house in the UK rented out then even if you are resident in Hungary for tax purposes you pay UK tax on the rental income (but you get a personnel allowance)

I have both OAP and a work related pension and both have always been paid gross and neither HMRC nor the Hungarian tax authority show any interest in either.

The double taxation treaty gives an allowance for tax paid in another country if that income is also taxable in Hungary. e.g. I had a small number of US shares as a result of my work. The dividends were subject to US tax at 15%. Hungary also taxes dividends at 15% but because I paid US tax at15% there was no Hungarian tax to pay. If however Hungary charged 16% tax then I would have to pay 1% tax here.
I have a UK Govt pension, taxed in the UK as described above, plus a UK based private pension. For my first few years in Hungary both were taxed in the UK. Then, suddenly, my private pension ceased to be taxed by HMRC - however my personal allowance was reduced by the value of my private pension, so actually I am, effectively, still taxed on it!
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Old Sep 9th 2023, 6:36 am
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Default Re: Paying tax on a private pension

Originally Posted by Finknottle
I have a UK Govt pension, taxed in the UK as described above, plus a UK based private pension. For my first few years in Hungary both were taxed in the UK. Then, suddenly, my private pension ceased to be taxed by HMRC - however my personal allowance was reduced by the value of my private pension, so actually I am, effectively, still taxed on it!
How did that work - because as far as I know the personal allowance is a fixed amount (currently 12,500 gbp ?) and applies to any UK taxable income. When I had a small uk rental income and my private pension the pension was under the Hungarian tax system and HMRC weren't interested in it and the rental income was below the personal allowance so no tax there and HMRC said as long as it was under the allowance I didn't have to submit an annual tax return. Happy days.
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Old Sep 9th 2023, 7:30 am
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Default Re: Paying tax on a private pension

Originally Posted by Peter_in_Hungary
How did that work - because as far as I know the personal allowance is a fixed amount (currently 12,500 gbp ?) and applies to any UK taxable income. When I had a small uk rental income and my private pension the pension was under the Hungarian tax system and HMRC weren't interested in it and the rental income was below the personal allowance so no tax there and HMRC said as long as it was under the allowance I didn't have to submit an annual tax return. Happy days.
The personal allowance for the year from April 2023 to April 2024 is £12,570.

You are correct in saying if you fall below the personal tax allowance you are not required to submit an annual tax return.

You do however receive an annual P800 tax calculation form from HMRC informing you of how much tax you've paid and whether you've under or overpaid.

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

https://www.taxrebateservices.co.uk/...rms/p800-form/


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Old Sep 9th 2023, 8:30 am
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Default Re: Paying tax on a private pension

I confess I don't know how it worked! I was getting the full personal allowance and paying tax on both pensions, and then the tax deduction on my private pension stopped and my personal allowance was reduced by exactly the amount of my private pension - happened automatically, without action or intervention by me!
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Old Sep 9th 2023, 8:57 am
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Default Re: Paying tax on a private pension

Originally Posted by Finknottle
I confess I don't know how it worked! I was getting the full personal allowance and paying tax on both pensions, and then the tax deduction on my private pension stopped and my personal allowance was reduced by exactly the amount of my private pension - happened automatically, without action or intervention by me!
I would advise you to write to

HM Revenue & Customs Benton Park View, Newcastle upon Tyne NE98 1ZZ, United Kingdom

to ask why this has happened,

I know from personal experience HMRC make mistakes. In my case fortunately after threatening me with a £100 fine for not
filling in tax returns they admitted they'd wrongly taxed me for over 7 years, I received a tax refund from them for over £3000.

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