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Summary

NT Tax Code HMRC: How To Apply NT Tax Code for Non-UK Residents

When it comes to making pension withdrawals from your UK pension scheme, there are certain steps you must follow with HMRC if you wish for your withdrawal to be paid to you in gross (i.e. non-UK income tax automatically applied). This is a question that many of our clients have. They want to know if their pension will be given to them in full while residing outside the United Kingdom. 

However, when you withdraw from an International SIPP or QROPS, the provider or trustee is required by law to apply tax on your withdrawal. If you are a non-resident of the United Kingdom, you will likely want to obtain an NT tax code on part or all of your UK income. Non-residency tax in the United Kingdom is complicated, and the laws differ based on where you live and several other reasons. 

However, if you are a non-resident of the United Kingdom, you will likely want to obtain an NT tax code (No Tax) on part or all your UK income. Non-residency tax in the United Kingdom can be complicated, and the laws differ based on where you live, along with several other reasons.

Before discussing further, our CEO and Independent Financial Advisor, Dominic James Murray, explains what is an NT tax code and how to apply one for non-UK residents in one of our YouTube videos below.

What Exactly Is The NT Tax Code?

NT Tax Code implies that there is no tax due on this withdrawal. Therefore, in general, HMRC has advised your employer, if you are still working, or the trustee or pension provider, if you have withdrawn the benefit of your pension pool, not to deduct any tax from this income source.

The P85 form can only be used if you lived and worked in the UK, left the UK and will not be returning, or plan to work abroad full-time for at least one full tax year. A tax year runs from April 6 through April 5 of the following year.

Why aren’t you paying taxes on this income? You were granted code NT because you disclose income in a way that HMRC has approved to, maybe because you live in a country with a DTA with the UK government.

Double Tax Agreements (DTAs) work as follows; You may be allocated code NT if you reside in a nation in which the UK has a double taxation agreement. This means you won’t have to pay tax in your home country and the UK on the same assets or income.

How Does The NT Tax Code Work?

The tax paperwork might be intricate, but in essence, it proceeds like that though: Pension income will be treated as income under the Pay As You Earn (PAYE) system; you may not pay the actual tax at the correct time; you may receive PAYE coding notifications from HMRC or papers (such as a P85) from your pension provider; you may need to claim a tax refund or pay more tax afterward, and HMRC may send you a tax calculation or Self Assessment tax return.

The PAYE system deducts tax at the point of purchase. For those of you who are or have been employed, you may be familiar with this as a method through which your employer deducts tax from your earnings or pay. However, the PAYE system deducts tax when applied to pension income – no NI payments are due on pension income.

Your pension payment’s taxation depends on whether you choose to accept part or all of your fund, have additional PAYE income, or get the state pension.

As previously stated, depending on how you decide to utilize your tax-free cash sum, just a portion of your pension payout may be taxable. The following considerations apply exclusively to the portion of the total that will be taxed.

The pension provider employs a PAYE code number, calculated on an ’emergency’ or month 1/week 1′ basis. It is not necessary to give a P85 for the tax year when you receive your pension, unless you choose to do so, in which case the pension provider should take the code number from the P85 and use it.

If you have quit working, you should receive a P85 from your prior employer or potentially from another pension provider if you have previously taken the whole amount out of another pension pool. A P85 reveals how much you’ve made and how much tax you’ve paid since April 6, as well as the code number your company has used.

However, there is an obvious process for obtaining this tax code, which allows you to have your pension contributions paid to your gross. Then it will be your responsibility to declare them on your tax returns in your country of origin. The form that is required is the P85 form, which must be completed and returned to HMRC.

How to Apply NT Tax Code

To begin, you must go to your local government office. Simply request the paperwork demonstrating that you are a local tax resident once you arrive. However, keep in mind that it is your obligation to report this income in the nation in which you work.

The next step is to fill out the P85 form on the HMRC website. You can find instructions for this already. This may be done online or by mail. Thereafter, you will be given your NT (Nil Tax) code. As a result, the gross amount is deducted from your pension from now on.

How Long Does The Process of Filling Up NT Tax Forms Take?

Unsurprisingly, it will not happen overnight with HMRC. The typical completion time is six to eight weeks. However, there have been times when it has taken much longer.

So, we suggest our clients start this process around six months in advance of when they are wishing to take UK pension income. Allowing sufficient time for the NT code to be applied when making withdrawals from your UK pension plan.

Get Your Free Initial Consultation on NT Tax Code for Your UK Pension Transfer at Cameron James

UK pension transfer involves a lot of work in terms of due diligence, paperwork, and the time consumed which could last up to eight weeks. Taxation, on the other hand, is one of the aspects that you have to consider, particularly if you are living outside the UK.

Applying for NT tax code is one of the things you should consider doing to avoid getting double-taxed on your income tax. At Cameron James, we have helped non-UK residents in numerous countries to successfully obtain their NT tax code when making withdrawals from the UK pension asset. As such, we are very well-experienced in this area and the hands-on process that goes with it.

However, it is important to note that we are not independent tax advisers, and should you ever wish to seek clarification on any tax issues, we advise you to seek independent and professional tax advice in your country of residency.

We are an FCA-regulated and well-regarded pension transfer specialist in the industry. We believe you have questions about defined benefit pension, especially if you are looking to transfer your UK pension overseas.

Click the button below to have a free initial consultation with one of our qualified independent financial advisor and get the best financial advice on your UK pension transfer.

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