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Sam, Accountant
Category: Tax
Satisfied Customers: 14164
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I am uk resident working overseas on Expat contract subject

Customer Question

I am uk resident working overseas on Expat contract subject to Tax equalisation (Hypo tax)
I have deferred my UK state pension for 3 years 5 months but am now considering taking the pension plus lump sum. What are the UK tax implications
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.
Thanks for your question.
Whether you are in fact UK resident or not, then your lump sum of deferred state pension will be subject to UK tax, and the weekly pension will be treated as taxable income.
But you may have your personal allowances to offset against this state pension (if you are being treated as not resident for UK tax purposes, which would see you living and working out of the UK for at least a full tax year, with visits back to the UK not in excess of 91 days each tax year)
Customer: replied 3 years ago.

Are the pension and lump sum payments made gross and taxation applied via my annual self assessment. This way my employer carries my taxation liability as per my TE agreement

Expert:  Sam replied 3 years ago.
Hi John
Thanks for your response
For the weekly state pension tax is calculated through the self assessment, as whilst state pension is a taxable income, it cannot have tax deducted from it directly.
(So in essence is paid as a gross amount every 4 weeks)
However the lump sum is taxed at your highest rate of tax by the DWP and you are only paid the net amount.
If this tax is more than required then HMRC will repay you back any tax overpaid after the self assessment tax return has been filed for the appropriate tax year.
Expert:  Sam replied 3 years ago.
Hi John

I hope the information was useful in determining your tax position - let me know if you had any follow up questions on my response.