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Pension income for 2023

Pension income for 2023

Old Dec 16th 2023, 10:29 am
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Default Pension income for 2023

Will this be taxed at 2023 rates or 2024 rates?
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Old Dec 16th 2023, 12:30 pm
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Default Re: Pension income for 2023

Originally Posted by wellinever
Will this be taxed at 2023 rates or 2024 rates?
Good question.
I would expect that as it is 2023 income, it should be taxed at 2023 rate but don,t know
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Old Dec 16th 2023, 12:41 pm
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Default Re: Pension income for 2023

Yes, income is taxed according to the year of receipt, as opposed to the year in which you submit the return.
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Old Dec 16th 2023, 2:27 pm
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Default Re: Pension income for 2023

Originally Posted by Red Eric
Yes, income is taxed according to the year of receipt, as opposed to the year in which you submit the return.
Thnks Eric. I thought that is how it was but not sure.

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Old Dec 16th 2023, 2:55 pm
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Default Re: Pension income for 2023

So using Hypo figures for 100% pension income (all taxable in PT) of say €20,000 gross I would work out tax in PT as follows for pension income paid in 2023: (using 2023 rates)
1) € 20,000 puts it in 28.5% tax bracket
2) € 4,104 is tax free.
3) € 15,896 is taxed at 28.5% = €4530.36
4) Less Parcela a abatar €1426.65
5) So net tax to pay would be............................... €3103.71, an effective rate of 15.5% on the €20,000
6) Then deduct any allowances for general expenditure, health etc where NIF was used.

Is that the correct methodology
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Old Dec 16th 2023, 4:48 pm
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Default Re: Pension income for 2023

Yes, that's all there is to it in such a simple scenario.

One small adjustment to the sequence, though. You first deduct the 4,104 from the gross to get taxable income, then find the appropriate band for % and parcela a abater.

On these figures it makes a very negligible difference but could be more significant in other cases, and if you want it right to the cent, that's the way it goes.
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Old Dec 16th 2023, 5:07 pm
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Default Re: Pension income for 2023

Cheers Eric. I had assumed that it was the gross that determined the tax rate and abater, but as you say in this scenario it makes virtually no difference
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Old Dec 16th 2023, 5:29 pm
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Default Re: Pension income for 2023

What is the situation regarding private pensions paid at fixed annual amounts coming from an UK Annuity Fund. Is it the full receipts are simply added to any other income or do they get taxed specially, as in effect you are only getting your own money back for considerable years.
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Old Dec 16th 2023, 8:43 pm
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Default Re: Pension income for 2023

Originally Posted by wellinever
What is the situation regarding private pensions paid at fixed annual amounts coming from an UK Annuity Fund. Is it the full receipts are simply added to any other income or do they get taxed specially, as in effect you are only getting your own money back for considerable years.
Ah but - the funds accumulated over the years into your private pension were probably untaxed at the time ?
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Old Dec 17th 2023, 6:47 am
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Default Re: Pension income for 2023

There is a provision in the tax code (Article 54), which allows for pensions satisfying certain conditions to be taxed on the basis that part of the payment is the return of capital, which can be ignored for tax purposes.

Where the capital element can't be determined, it can be assumed to be 85%.

Exactly what conditions need to be satisfied and how the income is declared and the concession claimed is beyond my ken, but it may be that wellinever's private pension could qualify. I'd guess he'd have to seek expert advice on the matter from one of the specialists in international tax affairs in order to be confident that it's available to him and properly declared.
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Old Dec 17th 2023, 8:51 am
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Default Re: Pension income for 2023

I had something in the back of my mind about this, that I had heard many years ago when a non resident, so took it no further then. But will ask around to see if I can get more light on it.

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Old Dec 17th 2023, 12:27 pm
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Default Re: Pension income for 2023

Originally Posted by wellinever
I had something in the back of my mind about this, that I had heard many years ago when a non resident, so took it no further then. But will ask around to see if I can get more light on it.
Be interested to have the full story and pics if you get to the bottom of it.

How would it be treated if you were UK resident?
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Old Dec 17th 2023, 2:01 pm
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Default Re: Pension income for 2023

Taxable by HMRC
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Old Dec 17th 2023, 3:55 pm
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Default Re: Pension income for 2023

Originally Posted by Red Eric
There is a provision in the tax code (Article 54), which allows for pensions satisfying certain conditions to be taxed on the basis that part of the payment is the return of capital, which can be ignored for tax purposes.

Where the capital element can't be determined, it can be assumed to be 85%.

Exactly what conditions need to be satisfied and how the income is declared and the concession claimed is beyond my ken, but it may be that wellinever's private pension could qualify. I'd guess he'd have to seek expert advice on the matter from one of the specialists in international tax affairs in order to be confident that it's available to him and properly declared.
I,ve been asking around for several years now regarding the 85% allowance issue but so far haven,t found an accountant who is fully aware of this - "muito complicado"!
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Old Dec 17th 2023, 4:17 pm
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Default Re: Pension income for 2023

Originally Posted by wellinever
Taxable by HMRC
Hmmmm ..... HMRC obviously doesn't think you're only taking money out that you put in, then.

Presumably Dafty's comment above about its not having been taxed as income prior to being invested has something to do with that?
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