Andrew Baker - Taxation Consultant
www.baktax.com
UK tax advice for residents worldwide – including Non-Resident Landlords, Pilots, Aircrew, Seafarers, Yacht Crew and Non-Doms
Telephone:
+44 (0)1243 582926
Mobile: +44 (0)7795671536
Email: baktax@aol.com
Pensions
Pension Contributions
Although not-resident, it may still be possible to contribute into a UK personal pension scheme. This applies where there has been relevant UK earnings in the tax year concerned i.e. in the tax year of departure or where the individual has been UK resident at some point in the preceding 5 tax years and was resident when membership of the pension scheme commenced.
Tax relief can be obtained on gross contributions of up £3600 per year, or where applicable 100% of the relevant earnings, if greater.
Receiving a UK Pension whilst Not-Resident
If you have retired abroad and maintain a non-resident status, it may be possible to have your UK-based pension from your former employer and your state retirement pension exempt from UK tax.
However, for this to be achieved the following should be noted:
Firstly
- Where your occupational pension has been earned whilst you have had substantial overseas service with that employer, there is no obligation for the pension to have tax deducted under PAYE by the pension payer. However, the pension remains subject to UK tax under self assessment.
Secondly
- There needs to be a clause contained within the double taxation agreement between the UK and the country where you reside for the pension to be taxable in your country of residence. This may apply to both occupational and state pensions. Consequently, the pensions will be declarable in your country of residence, however, this can be advantageous if you live within a low tax regime e.g. Cyprus, where the tax rate on pensions is only 5%.
Another advantage is where you may have other income in the UK e.g. from letting property. Rather than having your tax allowances absorbed by your pension, they will become available to reduce your tax liability on your other UK income.
Receiving an Overseas Pension whilst UK Resident
If you are resident in the UK and in receipt of an overseas pension, up to 5th April 2017 a 10% foreign pension allowance can be claimed, so that effectively only 90% of the gross pension is taxable in the UK, with credit being given for any overseas tax paid on that pension. However, with effect from 6th April 2017 this has been abolished bringing the tax treatment of foreign pensions more closely aligned with UK pensions.