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Paying tax on a private pension

Paying tax on a private pension

Old Sep 9th 2023, 9:03 am
  #16  
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Default Re: Paying tax on a private pension

Originally Posted by Sachina
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
Thanks Sachina! Unfortunately I have an inbuilt aversion to dealing with HMRC / DWP etc so will need a stiff drink (or 3) before embarking on this!
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Old Sep 9th 2023, 11:50 am
  #17  
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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!
Are you sure it was your personal allowance that reduced rather than your tax code
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Old Sep 9th 2023, 12:18 pm
  #18  
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Default Re: Paying tax on a private pension

Originally Posted by Peter_in_Hungary
Are you sure it was your personal allowance that reduced rather than your tax code
Ah, I think you're onto something here! Need to check, suspect it's the code!
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Old Sep 9th 2023, 1:03 pm
  #19  
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Default Re: Paying tax on a private pension

Excuse me butting in from Portugal but I may be able to shed a small amount of light on the subject.

Peter_in_Hungary's summary above is spot on - UK public sector pensions can only be taxed by the UK, other pensions taxed only by country of residence (as per the UK / Hungary Double Taxation Treaty, Articles 17 & 18).

This is not automatically actioned, though, by HMRC in terms of exempting you from UK tax on non public sector pensions, even when they have you in their records as residing abroad. There is a process which you have to initiate by completing and returning form DT-Individual, together with either a stamp and signature on that form from the tax authority in your country of residence, or a stand-alone certificate attesting to your tax residence in the event that they opt not to stamp and sign such forms.

When that process has been completed, you would get a NT tax code on any private pensions and the full personal allowance code on the public sector one.

If you haven't gone through that process, it's highly unlikely, in my opinion, that it would have just been done for you so that you're now paying the right tax in both places but (apologies for bluntness) that would be because of omission on your part as opposed to HMRC error.
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Old Sep 9th 2023, 1:22 pm
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Default Re: Paying tax on a private pension

Originally Posted by Red Eric
Excuse me butting in from Portugal but I may be able to shed a small amount of light on the subject.

Peter_in_Hungary's summary above is spot on - UK public sector pensions can only be taxed by the UK, other pensions taxed only by country of residence (as per the UK / Hungary Double Taxation Treaty, Articles 17 & 18).

This is not automatically actioned, though, by HMRC in terms of exempting you from UK tax on non public sector pensions, even when they have you in their records as residing abroad. There is a process which you have to initiate by completing and returning form DT-Individual, together with either a stamp and signature on that form from the tax authority in your country of residence, or a stand-alone certificate attesting to your tax residence in the event that they opt not to stamp and sign such forms.

When that process has been completed, you would get a NT tax code on any private pensions and the full personal allowance code on the public sector one.

If you haven't gone through that process, it's highly unlikely, in my opinion, that it would have just been done for you so that you're now paying the right tax in both places but (apologies for bluntness) that would be because of omission on your part as opposed to HMRC error.
Omission or not, it was done for me, some 3 years after arriving here.
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Old Sep 9th 2023, 1:27 pm
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Default Re: Paying tax on a private pension

Originally Posted by Finknottle
Omission or not, it was done for me, some 3 years after arriving here.
OK, but if your tax code on the other pension has changed and your personal allowance has been reduced, something's awry.

And if you didn't get a refund of tax paid on the private pension, that's not right either. Any current year payments when the NT code (that is what's showing on your private pension now, is it?) was allocated should have been paid back as a tax adjustment. Anything from previous years would be in the form of a sterling cheque from HMRC.
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Old Sep 9th 2023, 1:29 pm
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Default Re: Paying tax on a private pension

Originally Posted by Red Eric
OK, but if your tax code on the other pension has changed and your personal allowance has been reduced, something's awry.

And if you didn't get a refund of tax paid on the private pension, that's not right either. Any current year payments when the NT code (that is what's showing on your private pension now, is it?) was allocated should have been paid back as a tax adjustment. Anything from previous years would be in the form of a sterling cheque from HMRC.
Yes, NT code showing against the private pension.
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Old Sep 9th 2023, 1:30 pm
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Default Re: Paying tax on a private pension

Looks like another to add to my list of tasks for October!
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Old Sep 9th 2023, 2:23 pm
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Default Re: Paying tax on a private pension

Originally Posted by Red Eric
OK, but if your tax code on the other pension has changed and your personal allowance has been reduced, something's awry.

And if you didn't get a refund of tax paid on the private pension, that's not right either. Any current year payments when the NT code (that is what's showing on your private pension now, is it?) was allocated should have been paid back as a tax adjustment. Anything from previous years would be in the form of a sterling cheque from HMRC.
Just to add HMRC only reimburse overpayment for the previous 7 years. Any payments you've made before that you can say goodbye to.
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Old Sep 9th 2023, 2:59 pm
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Default Re: Paying tax on a private pension

Thinking about it further I think my situation is, now, as it should be -

Pension 1
+ Pension 2
= Total income
- personal allowance
= Tax due.

If pension 2 is untaxed then the code applied to pension 1 must be reduced so as to ensure the original tax liability is fulfilled.

Also, I recall a small tax rebate a few years ago but didn't really connect it as it was made by the provider of pension 1. Can't recall but I suppose must have been in the same time frame as the change in the tax arrangements.

Sorry, Paul, seem to have hijacked your thread!
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Old Sep 9th 2023, 3:00 pm
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Default Re: Paying tax on a private pension

Originally Posted by Red Eric
OK, but if your tax code on the other pension has changed and your personal allowance has been reduced, something's awry.
.
AFAIK the only way to get your standard personal allowance reduced is to have a taxable income over 100K. (I wish !!)

It can go up from the basic e.g. married persons allowance or blind persons allowance or mortgage interest relief will increase your tax code and changes in such status would cause it to alter or drop back to the standard allowance.

Tax codes can go up or down because they reflect taxable income at a particular time. They are only applicable to PAYE income (which I think would include taxed at source pensions )
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Old Sep 9th 2023, 3:53 pm
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Default Re: Paying tax on a private pension

Originally Posted by Peter_in_Hungary
AFAIK the only way to get your standard personal allowance reduced is to have a taxable income over 100K. (I wish !!)

It can go up from the basic e.g. married persons allowance or blind persons allowance or mortgage interest relief will increase your tax code and changes in such status would cause it to alter or drop back to the standard allowance.

Tax codes can go up or down because they reflect taxable income at a particular time. They are only applicable to PAYE income (which I think would include taxed at source pensions )
The Personal Allowance reduces where the income is above £100,000 - by £1 for every £2 of income above the £100,000
State Pension: The income is taxable, but tax is not taken off the payments before they are paid to you. HMRC use the tax free allowance against your pensionso you pay tax on this.

Your tax code is worked out as follows

Personal Allowance £12,570 less State Pension £? which gives a total tax free amount of £? (£12570 less £?State Pension)

Private Pension - £?? If the amount received is more than the total tax free allowance then you're liable for tax. Your tax code depends on the amount when all deductions have been made.

Your tax code will alter each year due to any increase in the State Pension and Private Pension.
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Old Sep 10th 2023, 4:15 am
  #28  
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Default Re: Paying tax on a private pension

Thank you all for the information but especially Peter who pretty much gave me the answer that I was looking for ie because I am resident in Hungary, my pension provider can pay my pension into my bank account as a gross lump sum rather than deducting the tax and then me having to claim that tax back from HMRC.
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Old Sep 14th 2023, 5:15 am
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Default Re: Paying tax on a private pension

Having spoken to my pension provider yesterday, they insist on taxing me and me having to claim the tax back from HMRC
I also spoke to HMRC, and after an hour on hold, was told I needed to speak to one of their specialist...who wasn't available, so I'll get a call back back NEXT WEEK!
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Old Sep 14th 2023, 5:33 am
  #30  
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Default Re: Paying tax on a private pension

Originally Posted by PaulinEger
Having spoken to my pension provider yesterday, they insist on taxing me and me having to claim the tax back from HMRC
I also spoke to HMRC, and after an hour on hold, was told I needed to speak to one of their specialist...who wasn't available, so I'll get a call back back NEXT WEEK!
That's what I have always understood. In fact in the letter I receive from my pension provider each year informing me of my annual payments it states, and I quote ......

TAX

"The payment amounts we quote are gross figures (before tax). If you pay income tax we'll deduct from your annuity payment at the appropriate rate, before paying the remaining amount to you. This means you'll receive less than the amount stated above".

It stands to sense that neither the pension provider nor HM's government is going to pay out gross amounts of money and trust the recipient to be honest enough to pay back the tax on it.

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