Lump Sum w/drawal for non-UK resident with 0% uk tax rate but still have UK pension contrib.

Hello, I`ve been a European tax resident for 10 years. I want to withdraw some cash as a lump sum from my pension(s) to help buy a property to live in. My SIPP provider sent me brochures saying any contributions would then be limited to £10,000. I am paid a disability insurance payout via a salary through my UK employer. I was intending to increase the amount paid into pension as a salary-sacrifice, the amount would exceed the £40,000 annual allowance. I don`t intend this to be a pension recycling, I am a tax rate of 0% in the UK so it makes no difference to HMRC if I take the salary as cash or the whole amount goes as a pension contribution. I have a rental property in the UK and that amount I pay tax on according the the UK marginal rate. Because I have a tax rate of 0% on my salary, will I have extra UK tax on the excess over £40k I salary-sacrifice into the employee pension fund? either now or when I do decide to take a pension? (that will be taxed in the European state per the DTA) I don`t contribute any pension to the SIPP but if I did, I imagine this would be limited to £10,000 SIPP contribution rather than being taxed at my marginal rate? Thank you!

Hi,

We can only provide general information and guidance in this forum. For an answer to a detailed question of this nature, you would need to contact our self assessment team below, or seek professional advice.

Self Assessment: general enquiries

Thank you.

Thank you. Is there an e-mail address or phone no. for the self assessment team?

Hello, I have been going through MPAA questions and I note HMRC Admin 19 gave Clarky55 an answer to his/her problem which was very similar, almost exactly like my question. Can you tell me the difference between your response to him and not being able to answer mine above? Thank you.

Hi ejc7691,
HMRC does not impose limits on the level of contributions that members can pay into registered pension schemes, but there are limits to the tax relief available.  
If you withdraw a lumpsum from your pension pot, the annual allowance for payments into the pension scheme will be reduced to £10000 for future tax years.  
Anthing you pay into your pension scheme in excess of the annual allowance, then needs to be declared in a self assessment tax return (box 10 of page Ai3 of SA101).  
(Additional information Tax year 6 April 2023 to 5 April 2024 (2023–24)).  
This excess figure is added to your taxable UK income and your tax liability calculated.  
If you do not qualify for the annual allowance, then the whole amount paid into the pension schemed should be declared and taxed accordingly.
Thank you.

Hello, I`m really sorry but I am confused between what you tell me and what the response to Clarky55 under `relevance of Annual Allowance and MPAA to non-residents contributing into UK Pension Schemes`where HMRC Admin 19 said: ……. Tax relief is only available if your are an active member of a registered pension scheme and are a relevant UK individual, in the tax year in which the contribution is paid. If you do not meet this criteria then there is no pension payment relief available. In my case, I am not entitled to any tax relief on relievable pension contributions because I am not a `relevant UK individual`as I have been living in Europe for 10 years but I am an`active member`of a UK registered Pension scheme, as is the case with Clarky55. I have a salary from the UK but it is taxed at 0% because it is subject to a DTAA and is entitled to be taxed in Europe only, not the UK https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100#relievable states that `Relevant UK earnings are to be treated as not being chargeable to income tax if by virtue of section 2(1) Taxation (International and Other Provisions) Act 2010 (double taxation arrangements), they are not taxable in the United Kingdom. To the extent that they are not chargeable in this way, they will also not count towards the annual limit for relief explained in Annual limits ……`. My proposal would be to increase the amount of contributions my employer makes which would exceed the Annual Allowance & MPAA as a salary sacrifice.My employers contribution is not deemed to be a relievable contribution per Sections 188(3)(b) and 201 Finance Act 2004 but does it become part of the Annual Allowance under s233 ? Money Purchase Annual Allowance (MPAA) would not apply, as the contributions are not eligible for relief. You can see guidance here: Abolition of Liftime Allowance and increases to Pension Tax Limits The essence of this statement on the tax return for Clarky55 indicated there was no need to complete SA101 questions 10 & 11 but looking at the form, the additional information notes, there is no detailed information on how this is calculated re: non a `relevant UK individual` etc. Is the difference in the response to me and the response to Clarky55 because my employer will make the pension contribution whilst Clarky55 made a pension contribution into his employers fund (there was no reference about if its his current employer)? This seems to be pedantic I realise but I need to understand:the logic how: - My employer makes salary sacrifice contributions to it`s pension fund for me which is in excess of the annual allowance & money purchase annual allowance, - I do not have a relievable pension contribution as I will not have paid anything - If the payment was taken as salary, I would be taxed in the UK 0% under the DTAA so there is no benefit to me of sacrificing it in the UK pension plan or as salary to me. - But despite this, your indication is that I will have to be taxed on the excess over the Annual Allowance and Money Purchase Allowance, essentially double taxing me in Europe and the UK because I am intending to use the existing employer fund. It doesn`t make sense to me?

Hi ejc7691

We can only provide general information/guidance in this forum.  
For an answer to a detailed question of this nature, you would need to contact our self assesment helpline on 0300 200 3310, contact our webchat facility at Contact HMRC or seek professional advice.

Thank you