Osborne to go ahead with taxing expat pensions
|Published:||4 Apr at 6 PM|
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The Chancellor is now making it clear that expats must decide whether they are out or in the UK’s tax systems. They cannot, he said, expect to rely on the British government for favours concerning financial matters.
A consultation aimed at examining the possibility of scrapping personal tax allowances for UK citizens living overseas has taken place, with the tax-free allowance at present set at £10,000. An expat couple drawing income of over £10,000 from a private pension based in the UK, including their state pension, can expect to pay around £2,000 a year in income tax.
The result of the study is expected to be published along with the Finance Bill, with the definition of ‘expat for tax purposes’ clearly defined. At present, the revenue office is believed to class an expat as a citizen who has broken all ties with the UK and, if working, pays tax in another country.
It seems that UK residents and expats living overseas with ongoing economic connections in the UK may be allowed to keep their personal tax allowances. Those most at risk may well be those who cut all connections to the UK once they had emigrated overseas, according to Osborne’s comment that he will ensure the personal allowance is well-targeted.
Those who are able to switch their onshore pension to an offshore QROPS taxed in the expat’s tax resident country may be able to avoid paying tax in the UK. However, expat pensioners only drawing the UK state pension, especially those in countries where it’s frozen, may be faced with considerable difficulties should it be taxed at source.
Comments » There are 2 comments
Could you tell me if the government are shooting themselves in the foot. My wife and i live in spain and both recieve UK old age pension, i also recieve a pension from BP and a small military pension. We are Fully recident in spain, and i pay my tax here, under the UK/Spain double tax agreement. We have no property in UK. 1) Are they going to stop the double tax agreement. 2)As we have both payed for our Old age pension all our working lives, how can they tax just expats. This surly is ilegal. Also i will still be oblidged to pay spanish tax. More brits from here will go back to UK and claim all the benifits they can. Not us if we can help it.
In Thailand, retirees relying on their pension must have an income of at least 65,000 baht per month or about 14,700 pounds a year to obtain a retirement visa. If the personal allowance is chopped, then their income will go down to 12,700 pounds or 56,000 baht per month and they may be forced to go home and claim all the benefits they can in the UK. Also, all UK pensions here are frozen at the original rate. In my case, my measly pension of 10,000 pounds per year would be cut entirely by 20%, which could seriously affect me. I have a retirement visa through investment of at least 800,000 baht, but I might have to start spending it. There are old people living abroad who served their country well in wars, business, etc., and now they might be exploited.