Q: Tax on SIPP for non-UK citizen who is no longer living in the UK

DUS_1895

Hi,

New user here and I hope I am in the right place to ask the question below. I am certainly greatly confused as to how HMRC will tax my SIPP when I can actually access it later this year. I would be grateful to hear your thoughts, comments, suggestions and, of course, advice. 

I am an EU passport holder who lived and worked in the UK fbetween 2008 and 2016. I then left the UK. As such, I am no longer a UK resident (for tax purposes) and I haven´t had any income deriving from the UK since I left for Asia in 2016. From my time in the UK, however, I still have a small SIPP account with HL. Total value as of today is around 20k. A few months ago, I contacted HL and asked what the process will be once I want to take out the money. Actually, my idea was to draw down an amount below the annual allowance to avoid being taxed on that amount. Well, given HL´s feedback, I was of course overly optimistic and they told me they will tax me based on my PAYG tax code at the time. Well, as you can guess from the above, as a non-resident I don´t have a PAYG tax code and HL told me that they will then apply an emergency tax code on any amount drawn down beyond the 25% tax free allowance for the SIPP account. They also told me that, depending on my tax status and income situation, I might claim back any overpaid tax. Lastly, the advised to contact HMRC. 

As a matter of fact, I did contact HMRC via their website to which I received the reply that the department I contacted was not in charge of pension and that I should contact another department, which I did a couple of months ago by post (as no email or online contact form was offered as an option). Suffice to say, I haven´t heard back from that department yet. :-)

Now, here´s where I would love to get some feedback and advice from you pros on what will happen if and when I access my SIPP and how to handle the drawdown in the most tax-efficient way possible:

1. Based on the assumption that my SIPP will hold an amount of 20k by the time I initiate a drawdown, if I take 10k out of the pot will 5k be tax free (25% of the 20k) and the remaining 5k will be taxed in the 2023/24 tax year? What is the "emergency rate" that will be deducted by HL?

2. Is there any option available to me to get a tax code from HMRC that avoids being initially taxed at the emergency tax rate? If so, I would appreciate any info on how to proceed. Thank you!

3. I am quite apprehensive at the thought of having to go through plenty of calls, emails and forms when I want to claim back any tax paid in 2023/24 and then 2024/25 again. To be honest, at the moment, when looking at the HMRC website I  don´t even know where to start when looking for claiming tax back, which form to use for my case, what supporting documents will be required etc etc. Being based in Asia and having to claim back tax in the UK as a non-resident sounds really scary to me. But is it? Could anyone please shed some light on how the whole process will work? Maybe I am too pessimistic and the process is at least a little bit easier than I now fear it is. Well, nothing is really easy and straightforward when talking about tax and dealing with HMRC, I guess. ;-)


Well, when I opened the SIPP back in 2008 I never expected not to be living in the UK by the time I hit 55 but here I am and now have to deal with the implications. I just would love this whole process to be as painless as it can possibly be. Therefore, any suggestions and info will certainly be greatly appreciated. Even if it is only intended to reduce my anxiety whenever I think of this topic. :-)

Sorry for this rather lengthy post and if you made it all the way here to the end: THANK YOU!

Cheers,

DUS_1895

DUS_1895

NoMore said:

May help.

Thank you! I will have a look! 

NoMore

Tax when you get a pension: Tax when you live abroad - GOV.UK (www.gov.uk)

may help, looks like you don't pay tax in UK but will be taxed according to your country of tax residency if a double taxation agreement in place between both countries

bostonerimus

Generally there will be no UK tax due on a SIPP if paid to a UK non-resident because of any applicable Double Tax Treaty between the UK and where you are tax resident. You will have to pay local tax according to tax rules of where you reside and you will have to fill out some forms to get your tax status correct. If you are a US citizen you will have to deal with US rules too.

So have a look at the applicable Double Tax Treaty and the HMRC tax treaty tax relief claim form DT-Individual

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1119722/Double_Taxation_Treaty_Relief_Form_DT-Individual.pdf

Albermarle

Based on the assumption that my SIPP will hold an amount of 20k by the time I initiate a drawdown, if I take 10k out of the pot will 5k be tax free (25% of the 20k) and the remaining 5k will be taxed in the 2023/24 tax year?

You can not just go on HL website and take £10K out. You will need to inform them what you want to do and answer a few questions. Your main options will be.

1) Take a UFPLS payment of £2.5K tax free and £7.5K taxable

2) Take the whole £5K tax free as one payment and then request a further payment of £5K taxable.

In the first case there will still be some tax free amount left for next time.