Double Taxation UK/Germany

You cannot get UK tax relief for German tax payable on your German pension as it is not taxable in the UK as HMRC has already said. You pay tax on it only in German, under German tax law. It does not feature at all in the calculation of your UK tax. When considering making an election, you look at your total taxable non-German income, not just your UK pension! The advantage of making an election for unlimited liability treatment is that your German tax will be lower because you have access to the Grundfreibetrag (and other allowances like Sonderausgaben). If your German pension is, say, 5,000€ and your income that is not taxable in Germany is 3,000€, then, absent an election you would pay tax in Germany on the full 5,000€.
If you use a tax calculator, like the one on the BMF website, you add that 5,000€ to the Grundfreibetrag and enter that amount as your taxable income. This is because the tax calculator assumes you would qualify for the Grundfreibetrag. This would give 938€ for 2024. If you make the election you use the Progressionsvorbehalt version of the calculator, like the one on the Bavarian FA website, and enter 5,000€ as taxable income and 3,000€ as income subject to progression. In this case, the total is less than 11,784€, so the tax is 0€.
If we use 10,000€ German income instead then without the election your tax would be 2,178€ and with the election it would be 163€. Keeping the same German income and 10,000€ UK income, the tax when making an election would become 879€, so you can see that as your UK income approaches the level of the Grundfreibetrag, the benefit of making an election diminishes. If you rely on your German-source income being at least 90% of your total income, you would need to enter your actual amounts to see how the numbers pan out.
Have a look at the German tax office calculators: * xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx You will have to remake the links, or search for them, as HMRC, understandably, does not allow links to be posted.

This is so complicated! I did not understand I could not get tax relief in the UK. I must have misunderstood some other questions on this page. I think I can ask the German authorities about this. I will find the BMF calculator and the Bavarian one. Of course I realize it is not just my UK pension that applies. If you are referring to one month, the German pension is roughly 1000€ and the UK one about 100€, and then I have some amount of interest and dividends. No other income, I am fully retired. In the years from 2017 on, I did have more income - but it was all made from German clients in self-employment, in a gradually decreasing amount. It's a question of earning less than the Grundfreibetrag, not the 90% of total income. I have no idea where Sonderausgaben would apply. Presumably only if I was still earning German income? I do get a few euros from VG Wort but these are a mystery to me, for various reasons. Thank you very much.

I found the BMF calculator but I don't understand it. Nor do I understand everything you have written although I appreciate it. I only have about 2 weeks to decide to elect, I'll just have to try to find a tax accountant. I did use a tax accountant in the UK but he did not know my pension was taxable in Germany, nor did I. I have no idea how they can write to me in October 24 and suddenly want so much back tax including interest. Not your problem, of course.

Apologies for posting again - I did find the sites and the Bavarian one gave me more tax with Progressionsvorbehalt than the BMF one when I included the Grundfreibetrag. I'm just writing this further reply to correct the last one.

It does look as though you can make an election unless your interest and dividends are substantial! This is because your UK income can be up to 11,784€ in 2024 and you can still make an election. For you, it will be, I think, based on the "income not taxable in Germany is less than the Grundfreibetrag" option, not the "90% of income arising in Germany" option because your UK pension plus investment income looks as though it is probably more than 10% of your income. If your only German income is your pension, I would expect you to be dealt with by FA Neubrandenburg (Rente-im-Ausland) (RIA). They have a lot of info about limited/unlimited liability on their website in both English and German.
Don't forget that not all of your German pension is taxable in Germany because of the change to "nachgelagerte Besteuerung" of the pension back in 2005. (Again, see the RIA website). Depending on the year in which your pension started, and to avoid domestic double taxation, a % is tax-free. This is because, before 2005 your pension contributions were out of taxed income, whereas now, they are out of pre-tax income but the new rules tax the whole pension, subject to that tax-free %. For pensions starting in 2017, 26% of the first full calendar year's pension is tax free. This amount is fixed for life. That tax-free element reduces by 2% for pensions starting in years up to 2020 when it is 20%, and by 1% for pensions starting in 2021 and so on, so those starting in 2024 have a 16% tax-free part. You also get a Werbungskostenpauschal fuer Rentner of 102€. Yes, complicated! That is why I have opted for Amtsveranlagung!
Turning to the calculators, the amounts you use are annual amounts, as the Grundfreibetrag is an annual allowance, and the tax calculators work on annual taxable income. So, with the BMF calculator, add your annual taxable amount of German pension to the Grundfreibetrag and pop that in as your taxable income. In the Progressionsvorbehalt calculator you put your annual taxable amount of German in the Zu versteuerndes Einkommen box (do not add the Grundfrebegtrag this time), and your annual UK pension income plus your interest/dividends, less the Sparer-Pauschbetrag (1,000€ for 2023 onwards and 802€ for earlier years) in the other box.
On the results page you are interested in the line "Einkommensteuer" above the line "Weitere Informationen". If you have 12,000€ taxable amount of German pension (after the tax-free amount and the 102€ are deducted) and, say 2,000€ UK pension and interest etc above the 1,000€ allowance then for 2024 you get: * limited liability tax (no election) 2,699€ * unlimited liability tax (election) 332€ (note - the Progressionsvorbehalt calculator doesn't appear to have been updated yet since the Government recently increased the 2024 Grundfreibetrag by a further 180€, so it gives slightly too high figure - how annoying!) Seems worth making an election in those circumstances but as you say, you may want to take professional advice as this stuff is a tad complicated. Hope this helps.

Hi Margaret Marks,
As previously advised, the German State Pension is no longer taxable in the UK and you should now write to us to have this removed. This will then mean that no UK tax is due on the income and so no Foreign Tax Credit Relief is due.
Thank you.

HMRC: Thanks, I do realize that and I have written to you.

Gary C: Many thanks your all your information. I will investigate the calculations in due course. I spoke to the German authorities at Neu Brandenburg and they were very helpful. In case this helps anyone else: the German tax year 2020 equates to the UK tax year 2020-21. This means that I do not have to revise all my interest payments to fit calendar years - the German authorities are happy with the April statement. The lady also said that I have until January 27 2025 to appeal, i.e. two months after the five tax statements were sent, rather than one month as it appears on paper. They are used to correspondence with other countries taking more time. She advised me to apply to be subject to unlimited tax liability in Germany. Obviously I have a few weeks to consider this. You are right of course about Amtsveranlagung - I never considered anything else, if I do pay in future. How far the nachgelagerte Besteuerung bit affects me I don't know. I haven't paid into my pension since 2002. The five tax statements give full details of how the tax on my pension is charged, including steuerfreier Teil der Rente, Werbungskosten-Pauschbetrag etc. so all that is clear.

You're welcome. All sounds like good news, and thanks for sharing the bit about RIA's acceptance of the UK tax year for non-residents. I'm afraid that the nachgelagerte Besteuerung applies in full to everyone and is why you get the tax-free element of your pension. We stopped paying into our pensions in the 1980s. There has been a case about domestic double taxation because of the 2005 change going through the constitutional court but it seems to be down to the taxpayer to demonstrate that they have suffered double taxation, despite the tax-free element. Quite how one could do that is unclear, even for those who only paid in under the old system. If memory serves, your assessment will make reference to the issue. Anyway, your tax-free amount is the relevant percentage of your first part-year's pension, then that percentage of the first full calendar year's pension with that amount then being fixed for life. The Amtsveranlagung is also available even if you have no net tax liability because you make the election. That is (or was when relevant to us) not that well explained on the RIA website but they were happy to provide that service.

Hi HMRC or Gary C! (who I think I recognise from Toytown :). I am filing my UK tax return, as a British citizen, resident in Germany. I've received conflicting advice on whether to declare UK bank interest, which I received in two forms: a) £1296 from personal bank accounts b) £13814 from my late mother's estate / bank accounts - this is net of estate tax already paid The software I use does not seem to understand UK bank interest is taxable only by Germany (UK-Germany DTA Article 11, I believe) even though I state my German residency. It automatically chooses the best option between a) keeping the personal allowance of £12570 but taxing all the UK interest or b) not taxing the interest as 'Non-Resident's disregarded income' and cancelling the personal allowance - in my case, the former works out best. I spoke to an adviser for British Expats in Germany filing UK taxes, and my own German tax adviser. Both advise I do not need to declare the UK interest income at all, solving the problem. If HMRC questions, I can cite the DTA and my German tax returns. Can you please confirm I do not need to declare either chunk of UK interest? Additionally: - I receive UK rental income, will declare that. - do I still get the Personal allowance as a UK citizen? - should I write in the return notes 'received UK interest but according to Article 11 of DTA, not declaring it as will be taxed in Germany'? Thank you for your help! I was thinkin in the notes, I could write that I received UK interest but refer to the German DTA.