Autumn Budget 2024 QROPS Qualifying Recognised Overseas Pension Scheme Transfers
Published / Last Updated on 12/11/2024
In Rachel Reeve’s first Budget, there was yet another tax grab and this time for transfers of UK pensions to HMRC approved (Qualifying) Recognised Overseas Pension Schemes (QROPS) within the European Economic Area (EEA) and Gibraltar (GIB).
Previously, if you transferred your UK pension scheme to a QROPS:
- Non-EEA/GIB Transfers – a 25% Overseas Transfer Charge was levied on the pension fund value if you were not resident in the country where the pension scheme was transferred to.
- If you are tax resident (non-EEA/GIB) where the pension scheme was transferred to, then no Overseas Tax Charge was applied or
- If you subsequently moved to that country within 5 years, then the 25% could be reclaimed.
- EEA/GIB Transfers – the 25% Overseas Transfer Charge was not levied even if you were resident in UK or not *resident in the EEA/GIB country where the pension scheme was transferred to.
From midnight 30 October 2024 the EEA/GIB concession was withdrawn meaning that:
- All pension transfers to QROPS in all countries including EEA/GIB are now subject to 25% Overseas Transfer Charge.
- The 25% Overseas Transfer Charge will not be levied on the QROPS if you can prove you are resident in the country the pension scheme was transferred to.
But the QROPS (now overseas) may still fall under UK worldwide inheritance tax rules on death unless you can prove you are not a UK Resident or deemed a “Long Term Resident”. The term Long Term Resident is a new residency test for taxes based upon the removal/abolition of domicile rules (in April 2025) and being replaced by UK Resident and “Long Term Resident” rules.
UK Resident v Long Term Resident (replacing domicile from 6 April 2025)
Unused pensions funds (both in UK and overseas) will now be included in your estate for UK Inheritance Taxes if you are deemed UK ‘Long Term Resident’: See vid 2050
- UK Resident: If you are still UK resident and have lived in the UK for at least 10 out of the last 20 tax years, both your UK and worldwide assets (including pensions) will be included in your estate for UK Inheritance purposes.
- Long Term Resident: If you have been UK resident for at least 10 out of 20 years and then you become non-resident and do not return to the UK before the chargeable event to tax (e.g., death) then you may fall into scope for both UK and non-UK assets being subject to UK inheritance Taxes as follows:
- If you have been resident in the UK for less than 10 years only UK assets and pensions will be included in the estate for UK Inheritance taxes.
- If you have been UK resident between 10 and 13 years of the last 20 years, and then leave the UK both your UK and worldwide pensions and other assets will be included in your estate for UK IHT purposes for a further 3 tax years.
- If you have been UK resident for more than 13 years (of last 20yrs), each additional UK resident year will mean another year after you have been non-resident to be within scope of UK IHT for both your UK and worldwide pensions and other assets as follows:
- UK resident 14 years (of last 20yrs) means 4 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets.
- UK resident 15 years (of last 20yrs) means 5 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets.
- UK resident 16 years (of last 20yrs) means 6 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets.
- UK resident 17 years (of last 20yrs) means 7 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets.
- UK resident 18 years (of last 20yrs) means 8 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets.
- UK resident 19 years (of last 20yrs) means 9 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets.
- UK resident 20 years (of last 20yrs) means 10 further tax years as non-resident and still within scope of UK IHT rules on worldwide pensions and other assets.
- After completing 10 consecutive years as non-UK resident, you lose the status of ‘Long Term Resident’ and revert to only UK assets and pensions being included in the estate for UK Inheritance taxes (unless of course you return to UK).
No increases in UK taxes on working people? We think not …
