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TonyTax
TonyTax, Tax Consultant
Category: Tax
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UK Tax lawI am a British ex ***** *****ving and working in Saudi

Customer Question

UK Tax law
I am a British ex ***** *****ving and working in Saudi Arabia for the last 17 years. I declared myself a non resident for tax purposes when I came here in 1998
I have no income generated in the UK; Our UK home is not rented out. I am paid in Saudi Arabia in Saudi currency.
I have 3 small UK pensions due to pay out from June 2015 when I am 60. These have been "frozen" since I've been an expat as I am not allowed to contribute to them as a non resident for tax purposes.The regular monthly pensions that will commence are of course generated in the UK and will attract UK income tax.
I wish to work out what I will receive net (after tax) but I am unsure what rate of tax will be applied. I think it will be either 10% or 20%?
I have previously fully paid up my National Insurance contributions. Please therefore also confirm that the pension payments will not be deducted any National Insurance payments.
We are not planning to return to the UK for several more years.
I will be an expat
I am trying to work out
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

You should not have to pay any UK on your pensions unless they are derived from what are called government service jobs, ie Civil Service, Ministry of Defence, some local authority pensions, teachers pensions etc. There is a list of such pensions here.

Assuming your three pensions are not derived from government service jobs, you should contact the pension payers and tell them of your circumstances and that they should operate NT (No Tax) codes. You don't pay NIC on pension income. They may ask you to complete a form to certify that you are non-UK resident. Articles 18 and 19 of the UK/Saudi Arabia tax treaty here deal with pensions.

If you return to the UK permanently, you will pay UK tax on your pensions subject to the deduction of personal allowances.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Thanks.

I have been told from one of the Pension suppliers (Not government service jobs) that as the income is from the UK then tax is payable. As we have no UK income and that the income will be approx 15,000 pounds per year I am told the tax will be at the basic level.

Evidently it is irrelevant I am a non UK resident now - the pension income is taxable due to its UK mainland source.

Could you re check your answer as i'm getting more and more confused. I'm not doubting you but it contradicts what i have been told from various sources before.

Expert:  TonyTax replied 2 years ago.
You are non-UK resident for tax purposes. Only UK source income is taxable in the UK but that is subject to the double tax treaty. If you look at Article 18, you will see that it says "Subject to the provisions of paragraph (2) of Article 19 of this Convention pensions and other similar remuneration paid to an individual who is a resident of a Contracting State shall be taxable only in that State".

The "Contracting State" of which you are resident is Saudi Arabia.

If you are still non-resident when you draw any UK state pension you may be entitled to, that will also not be taxable in the UK subject to the tax laws in place at the time of course.

What pension payers know about tax for non-UK residents can be written on the back of a stamp, with respect. I've been dealing with this type of question throughout my 35 years in tax so I'm 100% confident in my answer.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

Thanks for that. It would appear I may have a battle on my hands with Lloyds/HSBC and Legal and General!

Even I wasn't aware of the double Tax treaty with us Saudi expats and the UK so many thanks for supplying that.

Thanks for an excellent reply; I just hope it's going to save me some Tax

Best wishes

Anthony

Expert:  TonyTax replied 2 years ago.
The pension payers will operate whatever tax code is issued to them by HMRC. If when they start to be paid, you find that tax is being deducted, call the tax office on the number here, explain your situation and aks for NT codes to be issued.

You will find that most non-government service pensions are not taxable in the UK for non-UK residents. Some foreign countries even tax UK government service pensions.

Thanks for accepting my answer.
Customer: replied 2 years ago.

Dear ***** Tax

I'm not sure if you remember this query but you did a great job.

I followed up with the Tax Authorities on my case and they sent a very good response.

Their response is slightly different to the one you gave me, with more details on the agreement with UK/Saudi Arabia. If you give me an e mail address I can send it to you as it may help other ex pats.

Let me know if this interests you

Regards

Anthony XXXXXXXXXXXXX

Expert:  TonyTax replied 2 years ago.
Hi.

I would be interested in reading the letter. I cannot give out my email address I'm afraid. You can either scan the letter into your computer and copy and paste the text here or upload a scan of the letter itself.