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I have a pension from abroad. I have been a non-dom, but now

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I have a pension from abroad. I have been a non-dom, but now that status is ending. There seems to be a 90% rule about taxation of foreign pensions. Is that right? Carnie


When you say you were a non-dom, do you mean that you were a non-resident of the UK? It's not that easy to change your domicile which you can read about here. Are you a British national? How long did you live in the US? You say the pension is a US government pension. Who exactly is it paid by and what job did you do to secure that pension?

Customer: replied 4 years ago.

I am a UK resident, but not a citizenI am a US citizen. I have an indefinite leave to stay. I have had non-dom status for the last seven years of my residency which is allowed by HMRC. After seven years the law states that I have to declare all foreign income whether it is remitted to the UK or not. My US pension is from my employment as a diplomat for the US Department of State. I have reached the seven year point now and I want to know what to do regarding my US pension.


Leave this with me while I draft my answer.
Hi again.

Although you have now been resident in the UK for seven years, you are not necessarily now domiciled in the UK. You are still domiciled in the USA unless you seek to change that. All the seven year rule does is render those non-doms who live in the UK and who choose to be taxed only on remittances of non-UK source income to the UK (in addition to their UK source income of course) to the remittance basis charge of £30,000 per annum. You can read about domicile and the remittance basis of assessment here.

Paragraph 1a of Article 17 of the UK/US tax treaty here states that a pension payable to an individual will be taxed only in the country of residence of that individual. However, paragraph 2a of Article 19 of the UK/US tax treaty states that a government service pension will be taxable only in the paying country unless, as it states in paragraph 2b, the recipient is both a resident and a national of the other country. That means that your US government service pension will be taxable only in the USA. The 10% deduction would have applied had your pension been taxable in the UK.

I hope this helps but let me know if you have any further questions.
Customer: replied 4 years ago.

This sound like good news. I would like to change my non-dom status beacuse as a non-dom I don't get the personal allowance which all wage earners get.. Are you saying that I can change my non-dom status and not pay tax on my US pension provided that I don't take out UK citizenship?.

You are only denied the UK personal allowance if you have chosen to be taxed on the remittance basis as far as your non-UK source income is concerned and the unremitted foreign income is £2,000 or more per annum. Otherwise, you will be entitled to the UK personal allowance. The US government pension is not taxable in the UK simply because it is a government service pension and you are not a UK national.

If you change your domicile status and that is difficult to do, you will in effect become a UK citizen/national and you will be taxable on your worldwide income whether you remit it to the UK or not.

Customer: replied 4 years ago.

I don't think changing my domicile status will make me a citizen. To become a citizen I would have to reply to the Home Office. Take a test, have an interview and pay lots of money. HMRC has nothing to do with it. The tax form allows me to decide year by year whether to be domicile or not. I have always chosen the non domicile because I was mistaken in thinking that my US pension was taxable. I have never remitted any of it to the UK.

The UK tax form doesn't allow you to change your domicile year by year I'm afraid. It can take years to lose a domicile of birth and even then HMRC may challenge a UK domiciled individual's claim to be non-UK domiciled post death.


Can you tell me if you have any non-UK source income of £2,000 or more per annum that you don't remit to the UK other than your US government service pension.

Customer: replied 4 years ago.

I don't have any other income.

In that case, your domicile status is largely irrelevant. You are and have been entitled to the UK personal allowance since you arrived in the UK because you have had (I'm assuming here) no non-UK source income which you have not remitted to the UK of £2,000 or more per annum apart from your US pension which isn't taxable in the UK in any event.

See section 5 of the document here for information on domicile.
Customer: replied 4 years ago.

That's good to hear. So on my next return I I should tick box 28 "unremitted income and capital gains for 2012-13 is less than £2000? Can I claim back the tax I paid on the personal allowance over the last seven years?

Take a look at page FN10 of the notes here. You should amend your 2013 tax return and include a note that says something along the lines that by virtue of the UK/US tax treaty, your US government service pension is not taxable in the UK.

You normally have twelve months after the latest submission date for a tax return (31 January following the end of the tax year) to amend an incorrect tax return so you are out if date as far as the 2012 and earlier tax returns are concerned.

Unfortunately, you can only make a claim for repayment of overpaid tax by letter for tax years where it is too late to amend a return as far back as 2009/10 and that claim needs to be made by 5 April 2014 as you will read under the heading "What if it's too late to amend your return?" here.
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