Tax on German pension

Is state pension from Poland also treated this same way as from Germany? I mean does it have to be declared on SA?

Is state pension from Poland treated this same way as from Germany? I mean, does not need to be declared on Self Assessment?

No. The UK/Poland treaty awards taxing rights over a Polish state pension, received by a UK resident to the UK, so it does need to be declared in your self-assessment tax return.

Pear to Pear .

Thank you, what amount shall I declare? Before NI contributions or just the amount I have received into my account between 06/04/2023 - 05/04/2024? I need to mention that financial year in Poland runs Jan-December, so I need to calculate according to UK dates?

Hi I am looking for some guidance on taxation of a German endowment policy. I am a UK citizen. I moved to Germany in 1994 and back to the UK in 2004. In 1998, I took out a ‘Kapitallebensversicherung‘ or ‘capital sum life insurance’, i.e. an endowment policy (but not linked to a mortgage). It is with Standard Life, but it is a German policy with the German arm of Standard Life. I paid premiums from December 1998 to April 2012 when I realised it wasn’t really a good investment. I paid total premiums of ~€22k. The policy is due to mature at 30.11.2031. The policy provides a life insurance element and will pay out ~€27k if I die. It has also been building up a capital value which is paid out at maturity or early surrender. It now has a guaranteed value of ~€22k (so will pay that even if the value of investments falls), or a current value of ~€29k which it would pay out now if I surrendered the policy. I am now considering surrendering the policy in the next year or so rather than waiting until 2031. I am assured that a payment would not be taxable in Germany. I think and hope that it may not be taxable in the UK, but I have heard conflicting views on this in the past. I believe this would count as a ‘qualifying policy’: It has a term > 10years. I paid premiums for >10 years (1998-2012) The life assurance value is >75% of premiums paid (€27k > 75% of €22k) If I surrendered now or in the future, the policy would already have run for >75% of the intended term. (1998-2024 = 26 years. Which is >75% of 1998-2031 = 33 years.) Does this mean it is a ‘qualifying policy’. And if it is, does that mean the surrender payment would not be liable to either CGT or income tax? Thanks for any tips and guidance.

Hi Monica Lewis,

You will first have to establish what type of German pension your mother receives, is it the German state pension, or does it relate to a German employment? The guidance below will then make clear whether the pension is taxable in the UK or in Germany:

DT7904 - Double Taxation Relief Manual: Guidance by country: Germany, Federal Republic of: Treaty Summary

Your mother should then contact our Income Tax team to pass on this information and check that her pension is being taxed correctly.                                                                             

Income Tax: general enquiries

Thank you.

Monica Lewis I don't work for HMRC but I do receive a German state pension and have looked in detail at the tax issues. It seems highly likely that your mother’s German pension is the social security “gesetzliche Altersrente”, or what we would call the state pension, administered by Deutsche Rentenversicherung (DRV). While she was working, subscriptions would have been paid monthly as a percentage of her wages but this would not make it an occupational pension or Betriebsrente. The pension is presumably paid to her by Deutsche Post Renten Service. You should of course check with the pension authority or payer but it seems highly unlikely that it would be a Betriebsrente without there also being a “gesetzliche Altersrente”. As you say, the amount of her pension is reported each year to the German tax office, but not, I think to the UK. Your mother will have started receiving her pension under the 1964 double tax treaty between the two countries. That was replaced by the current one in 2011 (you may recognise that year from your question). Under Article X of the 1964 treaty, a pension received from Germany was taxable only in the UK, so the treatment you describe would be in accordance with the old treaty – indeed all non-Government Service pensions were treated the same under the 1964 treaty. When the new treaty came into force the tax treatment of state pensions changed to them being taxable only in the paying country, so Germany, but Article 32(5) provided that if a person was already in receipt of pension payments covered by Article X of the 1964 treaty, they could elect for the old rules to continue to apply. Given that HMRC has been refunding tax annually, it seems they consider the pension to be a state pension, taxable now only in Germany under Article 17(2) of the new treaty, and consider that no Article 32(5) election has been made to continue the pre-2011 treatment. If correct, this means that the pension should have been taxed in Germany for the past 13 years and that there is no requirement to return it to HMRC as foreign income. If a UK tax return is otherwise required, a note to this effect should be added in the other information space as instructed in the Foreign Income guidance notes. If the above turns out to accurately describe your mother's situation, I wonder what HMRC's position will be on how to resolve matters...

Pear to Pear .

Hi Magda44

No. the Polish pesion is still liable in the UK if you are tax resident and domicile and needs to be declared

Thank you

Hi Gary Thanks for your comprehensive response. I can see from your responses to previous comments on this forum that you have an in depth understanding of what is definitely a complex issue! You are correct that her pension is administered by DRV and paid by Deutsche Post Renten Service and the last correspondence (which I translated using an online app) refers to ‘entitlement to standard old age pension’ so that does seem conclusive to me. I have seen that DRV will only communicate in German and unfortunately, although I do have a reasonable level of conversational German, I don’t think I would be able to speak to them to confirm this. I will try via email. I know that my Mum has never received any correspondence about the changes in tax treatment that you outline (she’s kept everything going back to 1997!) and she has zero knowledge of the Double Tax Treaty or any of its revisions so I’m at a total loss as to how pensioners of her age would be expected to know about these matters. Do you know whether an Article 32(5) election can be reinstated? It sounds like arrangements to pay tax via the German authorities can be problematic Thanks for your help in this matter

Hi HMRC Admin 19 Thanks for your response. I will confirm whether it is a state pension or related to German employment but am pretty certain it is a state pension. Are you able to confirm whether an article 32(5) election to be reinstated? Thanks

Hi Magda44,
You would declare the figure for January - December without apportioning them in the tax return, using the figure before NIC.
Thank you.

Hi Jea7,
Foreign income of any type and of any amount, is criteria for completing a self assessment tax return.  
Check if you need to send a Self Assessment tax return
Thank you.

Hi Dominic Harper,

We are unable to comment on future events as legislation and, or, plans may change.

Thank you.

Hi Admin 19 Thank you for your reply. Understand that legislation may change. If I surrender the poluicy today, is it correct that it would not be liable to tax under current rules? Thanks 

Name removed admin .

My husband has a German pension, Deutsche Rentenversicherung Knappschaft-Bahn See paid through the Deutsche Post. He is German resident in the UK and paid in from September 1967 to November 1982. He then worked in Austria Nov 1982 to April 1990 when he moved to the UK and worked until 2016. He has received his pensions from UK, Germany and Austria since October 2018. Since 2021 he has been paying tax on his German pension at a rate of 4.32%. Now HMRC are taxing him on this pension as well at 20%. Is this correct as we believed that a German state pension of 15+ years should not be taxed in the UK?

Hi Monica,
If a state pension it is only taxable in Germany.
Thank you.

HMRC Admin 20 Response If Monica's mother's pension started before the new treaty came into effect, then it would have been taxable only in the UK until the new treaty came into force. Her question was, given that her mother had continued to report the pension to the UK after that date, can, or should, an Article 35(2) election be allowed/inferred to continue to old tax treatment. After all, it seems that until this issue was raised, neither fisc was certain how it should be taxed.

Hi Dominic Harper,
For current guidance, please refer to:
HS321 Gains on foreign life insurance policies (2024) Updated 6 April 2024
Thank you. 

Hi 
Article 17 of the UK / Germany tax treaty covers state pensions:
Germany: tax treaties
When the UK/German tax convention was amended in 2010 it gave the German tax authorities the right to tax social security, what is in effect state pensions in Germany.
As a result the German tax authorities are exercising their right to recover tax that was not previously paid by UK resident individuals on their German state pensions.
The pension should not be declared in a Self Assessment tax return, as it is not taxable in the UK.
You should amend any tax returns 22/23 and 23/24 that include the Germans pension and submit an overpayment relief claim for 20/21 and 21/22 tax years.
For the 2 earlier years 19/20 and 20/21, you will need to make a claim under the MAP procedures as described in article 26 of the treaty.
Thank you. 

Hi suttmap Suttmann 4.3% German tax sounds wrong to me as non-residents do not qualify for the personal (or any other) allowance unless they can elect to be treated as resident for assessment purposes (a tax fiction) if, either, 90% of their worldwide income is from their German pension, OR, the income that is not taxable in Germany is less than the German Grundfreibetrag. See Section 1(3) EStG (German Income Tax Act) If an election is not possible, then I would expect the tax rate to be upwards of 14%, whereas if an election has been made the 4%+ could be OK.