This is just to warn people who might be starting to take a pension from the UK soon. Note that my comments only apply if you are tax resident in France.
Following two complicated phone calls with HMRC to find out why my partner’s newly started pension was taxed in the UK despite having had a zero tax code there for years, the situation seems to be this:
Once upon a time, there were a number of forms to fill in to establish with the UK authorities that you were tax resident in France once you were settled here. A zero tax code was produced, which was applied to e.g. pension income and you declared it on your French tax form and all was well (that is assuming of course that it’s the kind of pension that can be taxed in France).
Now it appears that, for each new pension or other source of UK income that starts, HMRC will reset your Tax code (currently to 1257 I think) so that means that your pension (including the lump sum if applicable!!!) is taxed at source.
This means that, in order to rectify the situation, you need to fill in a UK form DT-Individual no matter how many times you have filled this in before. It then has to be stamped by the tax authorities here and returned to HMRC
The nice lady at HMRC did suggest that it might be an idea to take them all out at the same time, if you have several, in order to avoid hassle, but that certainly isn’t possible for us.
I hope this post might save other people from the confusion we’ve just had!
So you have to keep filling out this form for each new source of income? Even though you previously filled out a form that notified HMRC you are no longer resident in the UK? That seems really weird.
Or is this HMRC holding on to as much of your money as they can for as long as they can?
Heaven knows, @KarenLot but the second person at HMRC my partner spoke to was quite clear that they would reset the code each time a new source of income kicked in. I honestly can’t see that the extra admin involved in processing all the forms would be worth the interest on the money withheld but then what do I know?
I have one minuscule pension left that I have been trying to sort out how to collect. I am looking forward to filling in the forms then driving down to Avranches for an appointment with the tax people in order to retrieve money that won’t cover the petrol costs…
I’m not sure that is entirely the position (as it was).
Both my wife and I have UK State pensions and UK Govt Service pensions. We have been been tax resident in France for a little over 10 years and filled in the original UK France-Individual form to notify HMRC. The form (then) was in 2 parts, one in English (returned to HMRC after stamping by your tax office) and the other in French, retained by the French tax office (presumably to confirm your status).
I have to say that, despite these forms (or is in spite?) being submitted, we have never been allocated a Zero tax code, only the basic tax code.
Now, the effect of this is that the UK State pension is taxable in France (as a French resident) and the UK Govt Service Pensions only in UK within the basic tax code (or whatever is set for the individual based on their circumstances.
Therefore, if the UK Govt Service pension exceeds the current Basic tax code free pay allowance, you will be taxed on it - no ifs, no buts. But - what then follows is that you are entitled to an allowance by the French fisc for any tax paid in the UK and you declare that on the French Tax return completed each year. In some rare cases where you pay a significant amount of tax to HMRC (lucky you - your income is substantiality more than ours!) you might not get back from the French all that you have paid to HMRC but don’t forget that pension income in France attracts a 10% “allowance” automatically given by the fisc - provided you declare the income in the correct way on the form. You don’t “take” the allowance yourself; the fisc calculate it in for you.
It is complicated for sure… but I thought I would outline my take on this and our current experience.
I think the difference with your situation, @graham, is that you have UK Government Service pensions which, of course have to be taxed in the UK. I was aiming my comments at people who were completely tax resident in France in that there was normally no tax paid at all in the UK. Sorry if my post was a bit ambiguous
Thinking about it, if you took an additional job in the UK whilst continuing your main one you had to declare this and HMRC would decide if they would issue a new tax code to each of your employers… I think. This would mean you wouldn’t get given the full taxfree allowance by each of your employers leading to a nasty shock when your total income was reviewed later and found to have been undertaxed.
This seems to be what’s happening here - HMRC has reviewed a new source of income notified to them (and also checked for other sources of income they know of for you, or asked you if there are any) and issued a new tax code based on your whole income.
If your tax residence is in another country and you’ve declared it then there should be a flag that says resident abroad in France ie this country with that Double Taxation Agreement. This, as you say should mean that even if HMRC would do a review process for any new source of UK income being paid to somebody, the flag should automatically produce a ‘not taxed first by UK’ code ie zero deductible. This is the bit that sounds not to be working and I would query it too.
Government pensions, broadly speaking public service occupation pensions, are agreed in the EU and under the DTA, which still continues after Brexit, to be taxed first by the country that pays them. But other pensions, including State pensions and private pensions, in the EU, and still in the DTA with France, are taxed in the country of residencw and not the country of issue.
Your case sounds like a mistake. Though a slight wondering, if you do have private pension pots in the UK each pot will have its own tax code issued to it by HMRC 2 weeks after it has first been accessed. I wonder if there is something like that affecting things.
If the UK is effectively operating a withholding tax on income (or could just be the default 20% basic rate withhold that every UK private pension provider is required to do and then the person deals with HMRC at the end of the year on any under/overpayment presumably taking the foreign resident status into account at that time) then this is bad news as the taxfree personal allowance of about £12570 is frozen till at least 2026. This means that any pensioner receiving inflationary increases may reach that amount and have more tax withheld sooner than they think.
Like you, I don’t think this is correct. I think even if reviewed by HMRC as a new source of income the result should have been a tax code saying the rate of tax by the UK on this is 0.
I agree that, logically, this shouldn’t be the case, but I have been assured that it is! The double taxation form has to be completed every single time you have a new source of UK income even if you are very firmly tax resident in France with an existing not-resident-in-the-UK code. The HMRC person assured my partner that they knew he was tax resident in France and shouldn’t be paying tax but “thems the rules”
The official title of such a tax code in the UK is NT, the effect of which of course is “no tax”.
The original DTA was amended by Gordon Brown which skewed the cosy little arrangement that non residents had at the time IIRC
We had something similar some years ago now when, without warning, both Vanessa and I starting paying tax to HMRC on our UK Govt Service pensions. The UK State pension tax position is settled at the end of the tax year but both Govt Service providers were told new tax codes, so tax was deducted when it clearly should not have been.
I contacted HMRC to remind them that we had completed and returned the Frace-Individual forms and that we should not be paying any tax. The telephone operative I spoke to about both our files admitted that there was a mistake and indicated that they would correct the position with the pension providers (they duly did). I had the temerity to ask how this had happened and was told that it automatically expired after a set period (set by them) but they would mark the files forward to prevent this happening in the future and all has been good since.
Had we not taken action, our UK State pensions would have started to be taxed in the following year and thereafter as both pensions (in both cases) together exceeded the basic tax allowance at the time.
Just went to prove to me how important it is to keep a close tab on pension expectations from any source and to act swiftly to have errors corrected.
In both cases, HMRC adjusted the tax codes and at the next payment date, the tax taken was refunded by the providers (as it was in the same tax year, this was the most effective way of dealing with it). Had we left it to the tax year end blissfully unaware (at that stage) that we had inadvertently paid tax or were just lazy about our affairs, we would have had to make the claim to HMRC direct on the appropriate form - with all the mess that would entail.
You’re quite right there @graham! Fortunately that never happened to me with my existing pensions as (presumably) my file is marked. However, with new sources of income, it’s not a mistake, it’s a policy I realise it won’t apply to many people but there are some of us who have fragmented pensions that kick in at different times, so best to be warned, I think
Very interesting. I have a uk state pension taxed here in france, also a small income from investments. The capital gains on this, if there are any! manifests itself as “parts social”. Nothing is taxed in the uk. I’m not well off, so pay no french income tax after allowances. So far, no change.
Really helpful posts. Does anybody have any experience of how French tax offices react to being asked to stamp the DT Individuals form that appears to be wholly in English (unlike the previous version, which I recall was bilingual?). I assume - and hope - they simply stamp it…?
Had an extremely positive reaction last year.
Filled out the forms, sent them to Impots for our region with letter attached, in French, explaining what was required.
Received the stamped and signed document back within 10 days.
Sent the form to HMRC who took 5 months to process!!
All sorted eventually after me sending 2 complaints to HMRC which prompted them to ring me.
I discussed these issues with an HMRC foreign tax person - I got put through when I rung to enquire when chasing our first DTT forms. So from the horses mouth -
Any new pension source taxable in France needs a DTT form. EXCEPT state pension.
Incudes any personal pension taken as a lump sum - need to take the lump sum, get the PAYE identifier on the form, have it stamped and send to HMRC.
The state pension isn’t taxed at source - there’s no tax code. No need for a DTT form. Evidently if there is other income one has to fill in a form to adjust the tax code or put it on the SA return.
I can see why if there’s other UK taxable income they would / could adjust the tax code on the other income - but that can be fixed by ringing and asking them to change the tax code on the other income? - I think it can even be done online…
Thanks for letting me know that the tax office here is happy to stamp forms! Did you take yours, or post/email it? (It’s a long way from here!)
Apart from that, your understanding exactly matches the two conversations that my partner had with HMRC foreign tax people, so that is very reassuring to hear
I took ours in. We’d first gone during the pandemic, and were ‘assigned’ a tax inspector. So after doing the returns I took them to the office and the inspector, who knew by then what it was about, asked us are we now resident, - I showed him my CdS and he signed and stamped both.
