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Glasgow
+44 (0)141 221 2984

Edinburgh
+44 (0)131 225 6366

Stirling
+44 (0)1786 451745

Dumbarton
+44 (0)1389 765238

Hamilton
+44 (0)1698 459444

French Duncan

MAY 2017 - Foreign Pensions

Position pre 6 April 2017

As a UK resident in receipt of foreign pension income whether it is a state pension or occupational pension an automatic deduction of 10% was available meaning only 90% of the foreign pension income was subject to UK income tax.

Under certain conditions lump sums from non-UK pension schemes could be taken wholly or partially exempt from UK tax depending on whether the benefits were accrued during a period of non UK residence.

Position post 6 April 2017

Finance Act 2017 includes provisions to remove the 10% reduction therefore the foreign pension rules and UK pension rules will be aligned. This means that in 2017/18 the whole foreign pension will be chargeable therefore individuals with foreign pension income will be subject to an increased tax charge on their foreign pension income.

If foreign tax has been deducted from the pension then relief will remain available in the normal manner ie either under the double tax treaty or via unilateral relief where the relief will be the lower of the UK tax payable or the foreign tax paid.

If a non-UK domiciled individual is in receipt of foreign pension income then this pension income can still be taxed on the remittance basis although this will have to be considered based on whether this is beneficial in light of a possible remittance basis charge and if you have chosen to retire in the UK whether you have gained a UK domicile of choice.

HMRC have also changed the rules for lump sum payments received from non-UK pension schemes and these payments will now generally be taxable however the exact tax treatment will depend on whether the scheme is registered with HMRC or not.

If you require any further information on the above please call your usual contact at French Duncan or click here to email us.