Yes!
By tax treaty between Canada and the UK, any Pension arising from a UK source and received
In Canada is fully taxable by CRA.
However, such pension is exempt from UK tax and the income should be treated with tax code NT by HMRC.
The above applies to both UK State Pension paid from Tyneview Park, and any private pension plan, for example BT pensions.
The above assumes you are Resident in Canada for tax purposes.
If you are referring to Pension Adjustment (PA) as in box 52 of your T4, this would not be affected.
However, Pension Credit can include Foreign pension amounts.
Yes!
By tax treaty between Canada and the UK, any Pension arising from a UK source and received
In Canada is fully taxable by CRA.
However, such pension is exempt from UK tax and the income should be treated with tax code NT by HMRC.
The above applies to both UK State Pension paid from Tyneview Park, and any private pension plan, for example BT pensions.
The above assumes you are Resident in Canada for tax purposes.
If you are referring to Pension Adjustment (PA) as in box 52 of your T4, this would not be affected.
However, Pension Credit can include Foreign pension amounts.
Can I include a British pension when calculating split-pension amount?
@West_123 It depends. If it is tax-free in Canada because of a tax treaty, then you can’t use it for pension splitting. But if you pay taxes on it in Canada, then you can use it.
Hi,
How would I claim pension splitting on U Pension in TurboT ?
I put this in Foreign income as a foreign pension but do not see how to include it in the splitting calc.
Peter
Is a UK Pension Commencement Lump Sum (PCLS) payment taxable in Canada if received by a Canadian resident who has never been a UK resident for income tax purposes?
Thanks,
Chuck
Yes, your UK Pension, or other foreign pension, can be used for pension splitting, if you otherwise qualify.
Only OAS, GIS and CPP payments are always ineligible for pension splitting.
Not quite the case, you pay tax on OAS and CPP but neither are eligible for pension splitting.
As stated, by treaty, UK pensions are taxable when received in Canada.
Yes,
In fact your foreign pension MUST be included. In the amount considered for pension splitting.
CPP, OAS and GIS cannot be included.
By treaty with the UK, recurring pensions are not taxed where they arise, and are always taxable in. Canada by CRA.
If I pay CRA tax on UK pensions am I eligible for the Canada tax-free allowance?
If you are referring to the up to $2000 Pension credit, yes foreign pensions including UK pensions are eligible amounts toward this credit. They are also eligible for Pension Splitting.
Sorry not to be clear Tony - and actually I don't know what the Pension Credit is!
I assume the pension income is taxed as income and I saw these two points online after a google search - no website for context or source. There are about the Tax Free Allowance and wondered about my situation when I return to Canada after many years in the UK. Most of my income will be UK pensions:
"Basically, you are allowed earn up to $12,069 tax free in the tax year if 90% or more of your total income was sourced in Canada"
"The tax-free allowance in Canada has been increased. Here's what you need to know. The basic personal tax-free allowance has been increased by $579 from $13229 to $13,808 in 2021. This means you can earn up to this amount without paying federal tax on your income"
It is referred to as Personal Amount by CRA and has a 2021 value of $13229, rising to $15000 in 2 years.
If you are Resident in Canada for tax purposes you get this credit, regardless of any pension, foreign or local.
If you are referring to the up to $2000 Pension credit, yes foreign pensions including UK pensions are eligible amounts toward this credit. They are also eligible for Pension Splitting.
Yes, Foreign pension amounts are considered when calculating the Pension Credit.
Bear in mind maximum credit is only $2000.00
This is a trifling amount unchanged since 2006. Complain.
also this buys you only $300 maximum federal tax paid,, and it is none-refundable.
When I lived in the UK, I set up a Personal Pension for my young daughter. We then moved to Canada and she is now an adult. The pension is not huge, but it is growing. Of course she cannot access it until she is 55. So how is it meant to be treated by Revenue Canada now? Does she say nothing and then report when she draws it out at 55, or does it have to be reported annually?
What if you are a dual resident and the funds from your UK State Pension stay in the UK? Does it make more sense just to include them as part of you general UK income?
Residence and citizenship aren’t the same. As I am, you can have dual citizenship, but essentially you must be resident in on place at a time for tax purposes.
If you are attempting to maintain UK residence in order to avail yourself of pension increases, you should expect to include this amount in your UK income and pay UK accordingly.The amount would be reportable on any return to CRA but under treaty would be exempt from tax in Canada.
Thank you I appreciate the response. I keep my dual residency because I still work in the UK and file dual returns. My challenge is how/where do I report my UK pension to the CRA on my return and indicate it is exempt from Canadian Tax? I am still working on my self employed return but as it stands at the moment it's including my UK Pension as taxable income.
You should determine your residence for tax purposes. This is decided by CRA, it’s not an arbitrary decision made by the taxpayer.
If you work and live in the UK it may be you are considered non/resident in Canada. Or the other way round. Either way you should be able to input foreign pension as exempt under treaty on your Turbotax file. I’ve never had to do that, but it is sn option on the foreign income page. Contact Intuit help if it’s not obvious.
( It is an option because some CRA filers eg from India will report exempt pension income as their treaty with Canada works differently from the UK Canada deal).
I believe that is true, and important. For tax purposes, you are resident in one place only and all worldwide income needs to be reported to that place. It's based on how long you reside, not your own choice to file UK income only to the UK. If CRA finds out you did not declare all your income, that's tax evasion and needs to be corrected.
In terms of pensions, note that a UK pension has to be a pension from a company. Like if you worked for a UK company and built up a pension they administer, then that's what the CRA considers a pension. What the CRA does not consider a pension is what in the UK is called a "personal pension". The kind that is much like an RRSP in Canada. That is, self funded and managed. That is not a pension to the CRA and has to be treated like any old investment.
If you sell holdings in a UK PP and buy other investments, that has to be reported to the CRA as a gain or loss every time and every year. If you hold on to the investment in your UK PP and never trade anything, when you sell it, the CRA will want every tax $ on the gains in one full swoop. So if you hold a UK PP worth say, $500k and it grows to a $1 million over a period of time, and then you sell it and cash out of your pension (being over 55) you will have to pay full Canadian capital gains tax on that $500k gain all at once. That's a big tax hit, so be careful how you manage your UK personal pension, if you have one, and if you are a Canadian tax payer.
Thank you. Nothing as grand as that unfortunately. Just an ordinary state pension paid monthly like CPP.