If I move abroad... Where do I pay tax on my annuity?

Privilege435

I'm in receipt of an annuity and am thinking of moving abroad. Will tax still be deducted at source by the provider or will it be paid gross and I then pay tax in my new country of residence? I suspect I know the answer but just want to check. TIA 

Marcon

Privilege435 said:

I'm in receipt of an annuity and am thinking of moving abroad. Will tax still be deducted at source by the provider or will it be paid gross and I then pay tax in my new country of residence? I suspect I know the answer but just want to check. TIA 

Where will you be resident for tax purposes?

bostonerimus

The exact details will be governed by any applicable tax treaty, but generally if it's an annuity from non-governmental sources you'll pay tax where you are resident and will have to make sure no tax is withheld in the UK using a form DT Individual. 

Privilege435

Thanks both. Initial thought is Spain as I have a house there that I'm currently unable to use as much as I'd like thanks to you know what. The annuity was purchased with money from a defined contribution private pension fund. I'd become tax-resident in Spain and I'd probably qualify for their new Digital Nomad visa as I'm one of the un-retired who can work remotely. 

bostonerimus

Privilege435 said:

Thanks both. Initial thought is Spain as I have a house there that I'm currently unable to use as much as I'd like thanks to you know what. The annuity was purchased with money from a defined contribution private pension fund. I'd become tax-resident in Spain and I'd probably qualify for their new Digital Nomad visa as I'm one of the un-retired who can work remotely. 

Why doesn't anyone want to mention Brexit? 
If you can arrange to wrap up all your finances and taxes before moving to Spain it will be easiest ie sell your UK property before moving to Spain.

nigelbb

bostonerimus said:

Privilege435 said:

Thanks both. Initial thought is Spain as I have a house there that I'm currently unable to use as much as I'd like thanks to you know what. The annuity was purchased with money from a defined contribution private pension fund. I'd become tax-resident in Spain and I'd probably qualify for their new Digital Nomad visa as I'm one of the un-retired who can work remotely. 

Why doesn't anyone want to mention Brexit? 
If you can arrange to wrap up all your finances and taxes before moving to Spain it will be easiest ie sell your UK property before moving to Spain.

Brexit has no effect on personal taxation which is governed by the relevant Double Taxation Treaty. There is generally a period of a year or more when sale of your primary residence in your former country can overlap with tax residence in your new country & still not be liable to CGT. There may be specific actions required to minimise tax eg drawdown of 25% pension TFLS before leaving UK.

VXman

nigelbb said:

bostonerimus said:

Privilege435 said:

Thanks both. Initial thought is Spain as I have a house there that I'm currently unable to use as much as I'd like thanks to you know what. The annuity was purchased with money from a defined contribution private pension fund. I'd become tax-resident in Spain and I'd probably qualify for their new Digital Nomad visa as I'm one of the un-retired who can work remotely. 

Why doesn't anyone want to mention Brexit? 
If you can arrange to wrap up all your finances and taxes before moving to Spain it will be easiest ie sell your UK property before moving to Spain.

Brexit has no effect on personal taxation which is governed by the relevant Double Taxation Treaty. There is generally a period of a year or more when sale of your primary residence in your former country can overlap with tax residence in your new country & still not be liable to CGT. There may be specific actions required to minimise tax eg drawdown of 25% pension TFLS before leaving UK. 

Brexit doesn't really come into this - except that the reason the OP is thinking of becoming resident in Spain is because Brexit restrictions of the amount of time the OP is allowed to spend abroad has made him think about moving over there more permanently.

Albermarle

bostonerimus said:

Privilege435 said:

Thanks both. Initial thought is Spain as I have a house there that I'm currently unable to use as much as I'd like thanks to you know what. The annuity was purchased with money from a defined contribution private pension fund. I'd become tax-resident in Spain and I'd probably qualify for their new Digital Nomad visa as I'm one of the un-retired who can work remotely. 

Why doesn't anyone want to mention Brexit? 
If you can arrange to wrap up all your finances and taxes before moving to Spain it will be easiest ie sell your UK property before moving to Spain.

Because it always causes an argument, with no positive result regardless of which side you are/were on.

Privilege435

Ok, so it has pretty much been confirmed that if there is a Double Taxation Treaty in place then the rules of my new country of tax residence will apply.

However, I'm still not sure if the treatment of an annuity might be different. My reason for thinking annuities might be different is because pensions are tax-deferred, not tax-free. So I'm wondering if HMRC might demand that annuity payments are made at least UK basic rate tax-paid rather than paid gross. I have absolutely no basis for making this assumption as I can't find any info on .gov websites. I suppose I could just ask my annuity provider but life is too short to wait on their phone line if I don't have to. 

bostonerimus

Privilege435 said:

Ok, so it has pretty much been confirmed that if there is a Double Taxation Treaty in place then the rules of my new country of tax residence will apply.

However, I'm still not sure if the treatment of an annuity might be different. My reason for thinking annuities might be different is because pensions are tax-deferred, not tax-free. So I'm wondering if HMRC might demand that annuity payments are made at least UK basic rate tax-paid rather than paid gross. I have absolutely no basis for making this assumption as I can't find any info on .gov websites. I suppose I could just ask my annuity provider but life is too short to wait on their phone line if I don't have to. 

Annuities and pensions are covered in the UK/Spain Tax Treaty and once you become a Spanish resident they will be taxed in Spain and not in the UK, same goes for your UK state pension. If you have a UK Government pension there are different rules. See Article 18.

"Article 17 PENSIONS
Subject to the provisions of paragraph 2 of Article 18, pensions and other similar remuneration paid to an individual who is a resident of a Contracting State, shall be taxable only in that State. "

You file form DT Individual to notify HMRC.

bostonerimus

Albermarle said:

bostonerimus said:

Privilege435 said:

Thanks both. Initial thought is Spain as I have a house there that I'm currently unable to use as much as I'd like thanks to you know what. The annuity was purchased with money from a defined contribution private pension fund. I'd become tax-resident in Spain and I'd probably qualify for their new Digital Nomad visa as I'm one of the un-retired who can work remotely. 

Why doesn't anyone want to mention Brexit? 
If you can arrange to wrap up all your finances and taxes before moving to Spain it will be easiest ie sell your UK property before moving to Spain.

Because it always causes an argument, with no positive result regardless of which side you are/were on.

Interesting and sad as ignoring it won't bring about it's best implementation. Brexit is of consequence to the OP as it changes immigration and makes financial life a bit trickier if they have UK accounts and investments, but it won't change the bilateral tax treaty or how the OP is taxed.