– Source : British Association of Former UN Civil Servants FUNCS INF 5 (May 2013)
Complex regulations may justify professional advice.
In the UK, the income tax position is related to residence and domicile status. If domiciled, assessed for income tax on worldwide income. If resident but not domiciled, assessed only on income remitted to UK.
Contact with HMRC can determine the UK residence and domicile status, before returning to the UK. Normally UK citizen returning after working for UN, is considered to be domiciled in the UK.
Monthly pensions are liable to UK income tax, after deduction of 10% allowance for pension income. Then the usual tax rate is applied as for normal income. Lump sum payments are usually not taxable. Tax free! Hooray!
Two exercises to reinforce the learning based on the same assumptions:
Employee contribution $100,000. UN contribution $200,000
Retired joint age 121-130. 310 months life expectancy
Monthly pension $1,000. US Monthly tax free computation 322.
EXERCISE 1 – no lump sum
UK: Taxable monthly pension $1,000 less 10% = £900 taxable as normal taxable income
EXERCISE 2 – with lump sum
UK maximum lump sum $100,000 (33% $300,000) , received. No tax due. Tax free! Hooray!
UK monthly pension $1,000 reduced by 33%, to become $667.
UK Taxable monthly reduced pension $667 less 10% = $600 as normal taxable income
