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Old 15.02.2021, 10:25
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UK pension

Hi everyone,

When we were taxpayers in UK, we paid into a UK pension. Now we are over 55 and want to withdraw a lump sum of 10 % (tax free). Do we needs to pay any tax in Switzerland, or notify the Swiss Tax Office on our Tax return.

Thank you very much.

Last edited by ncseng; 15.02.2021 at 10:36.
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  #2  
Old 15.02.2021, 15:13
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Re: UK pension

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Hi everyone,

When we were taxpayers in UK, we paid into a UK pension. Now we are over 55 and want to withdraw a lump sum of 10 % (tax free). Do we needs to pay any tax in Switzerland, or notify the Swiss Tax Office on our Tax return.

Thank you very much.
This thread is worth a read https://www.englishforum.ch/finance-...ithdrawal.html. It discusses the reverse situation, British resident looking for tax advice on a Swiss pension.

The following from the UK-CH bilateral agreement is key:

In particular, Article 18: Pensions
(2) Notwithstanding the provisions of paragraph (1), a lump sum payment derived from a pension scheme established in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in the first-mentioned State

Reading that I'd think it is taxable in the UK only. Thus, if you are a British citizen and have a basic allowance, you could draw it out slowly and avoid tax altogether I imagine. Unless the pension is very large and 12,000 a year wouldn't empty it.
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Old 15.02.2021, 15:54
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Re: UK pension

Hi, I also think only UK tax will apply.

Thank you very much HickvonFrick.
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Old 15.02.2021, 20:03
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Re: UK pension

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Hi everyone,

When we were taxpayers in UK, we paid into a UK pension. Now we are over 55 and want to withdraw a lump sum of 10 % (tax free). Do we needs to pay any tax in Switzerland, or notify the Swiss Tax Office on our Tax return.

Thank you very much.
If you are tax resident of Switzerland (or another country) is it tax free? I don't think so.
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Old 15.02.2021, 23:30
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Re: UK pension

I gather that you are talking about a private pension plan with a pension company in the UK.

Most of those pensions you can take out the lot when you reach 55 years old.
Most of the time you have to take the whole lot out.
The first 25% of it is tax free and the rest is taxable on what is termed a month 1 basis so can be at 20% and 40% tax.

This is an example of one that one of my clients cashed in last month:

Retirement Fund: 47,494.08
Tax-Free Element: 11,873.52
Balance subject to PAYE Tax: 35,620.56
Tax Deducted: 14,310.10

Total Payable: 33,183.98
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Old 15.02.2021, 23:59
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Re: UK pension

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I gather that you are talking about a private pension plan with a pension company in the UK.

Most of those pensions you can take out the lot when you reach 55 years old.
Most of the time you have to take the whole lot out.
The first 25% of it is tax free and the rest is taxable on what is termed a month 1 basis so can be at 20% and 40% tax.

This is an example of one that one of my clients cashed in last month:

Retirement Fund: 47,494.08
Tax-Free Element: 11,873.52
Balance subject to PAYE Tax: 35,620.56
Tax Deducted: 14,310.10

Total Payable: 33,183.98
Why do you "have to take the whole lot out"?

Also - why is your client paying 40% on the full 35k with no 20% band.

Last edited by HickvonFrick; 16.02.2021 at 00:09.
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Old 16.02.2021, 08:43
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Re: UK pension

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If you are tax resident of Switzerland (or another country) is it tax free? I don't think so.
If you are tax resident of Switzerland, income tax treaty between Switzerland and UK applies, which unambiguously says that lump sum payouts are to be taxed only by the source country. So it's tax free in Switzerland in OP's case, and what UK tax they have to pay it depends.

If you are a tax resident of another country, treaties with that other country should determine who gets to tax what.
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Old 16.02.2021, 11:45
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Re: UK pension

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If you are tax resident of Switzerland, income tax treaty between Switzerland and UK applies, which unambiguously says that lump sum payouts are to be taxed only by the source country. So it's tax free in Switzerland in OP's case, and what UK tax they have to pay it depends.

If you are a tax resident of another country, treaties with that other country should determine who gets to tax what.
It gets complicated. For the UK you are not a tax resident so will it be still tax free in the UK? I don't know. If somebody has done it he/she will tell us.
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Old 16.02.2021, 11:53
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Re: UK pension

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It gets complicated. For the UK you are not a tax resident so will it be still tax free in the UK? I don't know. If somebody has done it he/she will tell us.
UK citizens living abroad still get the basic allowance for, e.g. buy to let income.
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Old 16.02.2021, 12:15
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Re: UK pension

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I gather that you are talking about a private pension plan with a pension company in the UK.

Most of those pensions you can take out the lot when you reach 55 years old.
Most of the time you have to take the whole lot out.
The first 25% of it is tax free and the rest is taxable on what is termed a month 1 basis so can be at 20% and 40% tax.

This is an example of one that one of my clients cashed in last month:

Retirement Fund: 47,494.08
Tax-Free Element: 11,873.52
Balance subject to PAYE Tax: 35,620.56
Tax Deducted: 14,310.10

Total Payable: 33,183.98
If you transfer into a SIPP you can take any amount out at any time from age 55, or just take 25% of the fund as a tax free lump sum.

Your comment is very misleading, it sounds like you are a 'professional', so it would appear you are not giving 'your clients' 'Best advise.'
As a non resident gets a UK tax free allowance, the entire sum could be received free of tax over 3 tax years or over 14 months starting from today.

Tax free lump sum 11,873
Taxed @ 0% today 12,500
Taxed @ 0% 7/4/21 12,500
Taxed @ 0% 7/4/22 Balance

Last edited by fatmanfilms; 16.02.2021 at 19:08. Reason: mistake on date 7/4/22
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Old 16.02.2021, 18:55
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Re: UK pension

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UK citizens living abroad still get the basic allowance for, e.g. buy to let income.
But do they have to add the buy to let income in their tax return in the country they live in? For example, if they live in Canada this b-t-l income will be taxable at their marginal tax rate.
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Old 16.02.2021, 19:09
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Re: UK pension

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But do they have to add the buy to let income in their tax return in the country they live in? For example, if they live in Canada this b-t-l income will be taxable at their marginal tax rate.
If they are taxed on worldwide income yes, if only on remitted income then yes if remitted.
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Old 16.02.2021, 19:17
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Re: UK pension

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But do they have to add the buy to let income in their tax return in the country they live in? For example, if they live in Canada this b-t-l income will be taxable at their marginal tax rate.
I thought Switzerland treats UK property income as pertaining to the country it is situated in and presumably vice versa.
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Old 17.02.2021, 07:13
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Re: UK pension

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If they are taxed on worldwide income yes, if only on remitted income then yes if remitted.
So Switzerland doesn't tax worldwide income or is it only with the UK that they have this agreement? However, Switzerland wants you to report property abroad, pension plan values etc for the purpose of calculating wealth tax rate, right?
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Old 17.02.2021, 08:43
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Re: UK pension

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So Switzerland doesn't tax worldwide income or is it only with the UK that they have this agreement? However, Switzerland wants you to report property abroad, pension plan values etc for the purpose of calculating wealth tax rate, right?
Here is the UK-Switzerland bilateral agreement https://assets.publishing.service.go...s_in_force.pdf

My understanding is that Switzerland doesn't tax UK property wealth and income per se but that it does adjust the rate you pay on your taxable income and wealth.

Article 6
Income from immovable property
(1) Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the Other Contracting State may be taxed in that other State.

If my understanding is correct, I have no idea if the same applies to other countries.

Afaik pensions are properly non taxed. See https://www.englishforum.ch/finance-...n-uk-sipp.html

Last edited by HickvonFrick; 17.02.2021 at 09:25.
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Old 17.02.2021, 09:23
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Re: UK pension

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So Switzerland doesn't tax worldwide income or is it only with the UK that they have this agreement? However, Switzerland wants you to report property abroad, pension plan values etc for the purpose of calculating wealth tax rate, right?
https://www.canada.ca/en/department-...1997-2010.html

Here is the Switzerland-Canada tax agreement. It's a literal copy and paste from the uk agreement (or vice versa)

Article 6
Income from Immovable Property
1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

So buy to let income from Canada is not per se taxable in Switzerland.
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Old 18.03.2021, 00:02
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Re: UK pension

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1. Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.
I have always understood the "MAY BE Taxed in the other state" clause in tax treaties to mean that the second state can also tax it.

In other clauses of the treaties, it often says "May ONLY be taxed in that other state."

I have read somewhere, possibly in the OECD commentaries, that only the second phrase protects you from tax in both states (the MAY ONLY) wording.

The fact that many countries do not implement that taxing right, doesn't mean they cannot. It usually means that they still use the income to set tax bands, or personal allowances. So that is where a tax advisor who knows the local law in the OTHER state comes in. To check with them that this indirect way of clawing tax back will not apply in your circumstances.
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Old 19.03.2021, 12:42
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Re: UK pension

"Personal Allowance

"You’ll get a Personal Allowance of tax-free UK income each year if any of the following apply:

"you hold a British passport
you’re a citizen of a European Economic Area (EEA) country
you’ve worked for the UK government at any time during that tax year
You might also get it if it’s included in the double-taxation agreement between the UK and the country you live in."

Thus two of my children living in the USA have UK rental income. Both are Swiss and U.S. citizens, one is British as well. Only the British one gets a personal allowance. But that probably makes little difference. The IRS, but not California's FTB, will grant a foreign tax credit. Both have substantial years of credits towards a U.K. State Pension: this will be taxed only by the country of residence. (The U.S. Social Security Administration imposes a "Windfall Elimination Provision" that may or may not take a U.K. pension into consideration depending on the scale of FICA or SET contributions.) On the other hand, government-service pensions are taxed only by the country paying them, and the U.S. "savings clause" (worldwide taxation pre-empting most tax treaty clauses) does not apply in either case, per the US-UK Treaty.

It seems that the GFA and the Ireland Act 1949 do not change the above for persons holding Irish but not British nationality; but the HMRC advice (EEA citizens) has not, or not yet, changed since Brexit.
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Old 08.05.2021, 13:06
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Re: UK pension

UK Pension link:

https://assets.publishing.service.go...1DXy960iAHkRLk
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