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UK pensions, paid in Hungary - free of tax

UK pensions, paid in Hungary - free of tax

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Old Sep 26th 2018, 9:51 pm
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Default UK pensions, paid in Hungary - free of tax

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?
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Old Sep 26th 2018, 10:22 pm
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Default Re: UK pensions, paid in Hungary - free of tax

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.
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Old Sep 27th 2018, 7:17 am
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Default Re: UK pensions, paid in Hungary - free of tax

Originally Posted by Peter_in_Hungary View Post
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.
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!)
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Old Sep 27th 2018, 12:39 pm
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Default Re: UK pensions, paid in Hungary - free of tax

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.
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Old Sep 27th 2018, 1:54 pm
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Default Re: UK pensions, paid in Hungary - free of tax

I have two government pensions and these are theoretically paid net after tax. I have to complete tax returns every year so my tax code reflects the personal tax allowance which means that I pay no tax. You need to make sure you have the correct tax code to avoid paying tax. On my tax return I also have to state my residency situation.

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Old Sep 27th 2018, 5:15 pm
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Default Re: UK pensions, paid in Hungary - free of tax

Originally Posted by cathyg View Post
I have two government pensions and these are theoretically paid net after tax. I have to complete tax returns every year so my tax code reflects the personal tax allowance which means that I pay no tax. You need to make sure you have the correct tax code to avoid paying tax. On my tax return I also have to state my residency situation.

This would be correct. As I said above the exception to pensions being taxed in the country of your residency is any government pension. The state OAP however is/will be taxed in Hungary - which is not taxed.
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Old Sep 27th 2018, 6:07 pm
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Default Re: UK pensions, paid in Hungary - free of tax

Originally Posted by Peter_in_Hungary View Post
This would be correct. As I said above the exception to pensions being taxed in the country of your residency is any government pension. The state OAP however is/will be taxed in Hungary - which is not taxed.
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.
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Old Sep 27th 2018, 7:00 pm
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Default Re: UK pensions, paid in Hungary - free of tax

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.
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