AFPS 75 Family Pension taxed where?
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AFPS 75 Family Pension taxed where?
Following my husband's death I have just been informed that I will receive a monthly payment under the above scheme. It is a UK Armed Forces pension, so some kind of employers pension. My husband already claimed this although on a higher rate. I need to find out whether my assumption that this is taxable in the UK and subject to Progressionsvorbehalt here is correct. I am a German national, live/work/pay taxes here . I also earn money from a UK rental and complete a UK tax return as well as a German tax return, the rental income is also subject to Progressionsvorbehalt under my German return. I also assume that I need to inform my health insurance and will have to pay full rate Beiträge for Kranken- and Pflegeversicherung on this AFPS 75 pension. Are my assumptions correct?
Re: AFPS 75 Family Pension taxed where?
Sorry for your loss.
AFPS75 is a Government Service pension in terms of the double taxation treaty, so taxable only in the UK and subject to Progressionsvorbehalt unless you have German citizenship, in which case it is taxable only in Germany and does not feature at all on your UK tax return. If the latter applies you will need to send a form DT Individual (Germany) to HMRC to enable the pension to be paid gross by AFPS, with no tax deducted.
If it remains taxable only in the UK it will be subject to PAYE to collect the tax and if you wish, and if the rental income is less that £12,570, you should be able to have that "coded out", i.e. set against your personal allowance so that something approaching the correct amount of tax on pension and rental income should be collected via PAYE by the end of the year.
e.g. if you do nothing in this regard, your widow's pension would get a PAYE tax code of 1257L, meaning the first £12,570 of that pension is not taxed and any pension above that is subject to PAYE at 20% (assuming that pension is less than £50,270 overall). Your UK tax return would then show the gross pension, tax collected under PAYE and your net profit from your rental. Additional tax would be shown as due in the tax return based on that rental profit. If you decide to have the rental income coded out, and if it's, say, £5,000, your tax code would reduce from 1257L to 757L, meaning that an additional £5,000 of your widow's pension would be taxed at 20%. Your tax return would look the same, except for the entry for the tax already paid, which would be £5,000 x 20% more because of the rental income being taxed via PAYE and meaning less tax to pay at the year-end. At the end of the day, the tax payable is the same, it is just spread over the year if collected via PAYE.
I'll leave others to comment on the KK position in Germany.
You may find this article about the AFPS75 widow's pension worth reading https://forcespensionsociety.org/2021/0 ... explained/
AFPS75 is a Government Service pension in terms of the double taxation treaty, so taxable only in the UK and subject to Progressionsvorbehalt unless you have German citizenship, in which case it is taxable only in Germany and does not feature at all on your UK tax return. If the latter applies you will need to send a form DT Individual (Germany) to HMRC to enable the pension to be paid gross by AFPS, with no tax deducted.
If it remains taxable only in the UK it will be subject to PAYE to collect the tax and if you wish, and if the rental income is less that £12,570, you should be able to have that "coded out", i.e. set against your personal allowance so that something approaching the correct amount of tax on pension and rental income should be collected via PAYE by the end of the year.
e.g. if you do nothing in this regard, your widow's pension would get a PAYE tax code of 1257L, meaning the first £12,570 of that pension is not taxed and any pension above that is subject to PAYE at 20% (assuming that pension is less than £50,270 overall). Your UK tax return would then show the gross pension, tax collected under PAYE and your net profit from your rental. Additional tax would be shown as due in the tax return based on that rental profit. If you decide to have the rental income coded out, and if it's, say, £5,000, your tax code would reduce from 1257L to 757L, meaning that an additional £5,000 of your widow's pension would be taxed at 20%. Your tax return would look the same, except for the entry for the tax already paid, which would be £5,000 x 20% more because of the rental income being taxed via PAYE and meaning less tax to pay at the year-end. At the end of the day, the tax payable is the same, it is just spread over the year if collected via PAYE.
I'll leave others to comment on the KK position in Germany.
You may find this article about the AFPS75 widow's pension worth reading https://forcespensionsociety.org/2021/0 ... explained/
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Kerfuffle
- Posts: 21
- Joined: Mon Nov 04, 2024 5:10 pm
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Re: AFPS 75 Family Pension taxed where?
Thanks for putting me straight on the DT treaty and yes, I see that I will be taxed on it here in Germany. The pension award is in line with AFPS widow's pension link you sent, so all is well in that respect.