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bigduckontax, Accountant
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I have been for many years an unpaid volunteer in a Charity,

Customer Question

I have been for many years an unpaid volunteer in a Charity, with reasonable financial needs met by the Charity, do not pay Income Tax, indeed have been told a few years ago by the Inland Revenue that I do not even have to fill out a tax return.
I have now reached the age of 65 and have accumulated a pension of about £67,000 with which I am intending to buy an annuity. Will my tax status change? Will my annuity be taxed?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

Your annuity will be subject to Income Tax. Providing it exceeds GBP 1000 per annum it should be taxed at source by the provider. However, if it is below the Personal Allowance (PA) and is the only source of your income you could elect to receive it un-taxed. There will be a longer term problem, when your State Pension kicks in it is taxable, but not taxed at source. If the combined pension income goes above the PA level then the position will have to revised and a tax code issued to the annuity provider. You will have to keep a beady eye on what is happening and check with both your tax office and your payers.
Customer: replied 3 years ago.

1. How much is the personal allowance?


2. I am of German nationality and have applied for a German state pension, with details also given to the UK Pension Office. It is


estimated at 380 Euros per month. Will my German state pension have any impact on the taxation of the annuity?

Expert:  bigduckontax replied 3 years ago.
Personal allowance is GBP 9440 this tax year (6 April 13 - 5 April 14) and 10K next. With annuities rates as low as they are at present you will almost certainly be below the UK tax threshold in any event so have the annuity paid tax free. Send them a form R85. However, you will have to go carefully. If you remain resident in the UK then your German pension would be taxable. If you go back to Germany then you come under their tax regime. In any event tax deducted in Germany or the UK is, by the double taxation treaty between the two countries, allowable as a tax credit against tax levied by the other country. However, it is only a tax credit and if the tax deducted is greater than the tax due the balance in the UK cannot be claimed through HMRC channels. I do not know if German State Pensions have taxes deducted at source.

Assuming you stay in the UK, to work out your total income add the annuity and the German income together, in GBP naturally, and the aggregated sum will tell you your position. If it is below the Personal Allowance you will not be subject to UK taxation.

If you go to live in Germany you should tell HMRC by means of a form P85. All these forms can be downloaded from the net.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3360
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.

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