Budget 2017 QROPS 25 Per Cent Tax

Budget 2017

QROPS 25% Tax

The budget confirms a 25% tax charge will be applied to UK pension transfers overseas to Qualifying Recognised Overseas Pension Schemes (QROPS).

This is an attempt to stop people transferring their ‘taxable’ pension funds in the UK overseas perhaps a jurisdiction with lower taxes.

Whilst not know yet, the Budget confirms that for special circumstances and exceptions will apply with tax free transfers if there is a ‘genuine need to transfer’.

In addition, if the transfer is for an individual based in Europe and the pension is being transferred to a Europe based pension scheme, this may still be allowed tax free.

Comment - Shock but fair

This is a shock for foreign workers in the UK and British expats abroad, both at some point looking to transfer their schemes overseas.

That said, it is British tax relief that has been granted to both you and your employer when pension contributions were paid in.  Your pension fund was also allowed to grow tax free, so why should the British Government tax you when you withdraw it.  This is fair in our opinion.  If you stayed in Britain it would be taxed as income.  If you do not live in Britain now but you leave your pension fund in Britain then there are favourable tax treaties with many countries e.g.  the USA where USA residents do not pay income tax in the UK on their pension income, it is taxed as income in the US.

In the US, you can face tax penalties if you withdraw your £401k early.  If you live in Australia you are not allowed to transfer your Australian ‘Super Ann’ overseas.

Britain is doing nothing more than protecting UK accrued wealth from flowing overseas tax free and tax relief has been granted.

State Pension Age

Council Tax

Stealth Tax

Personal Allowance

Self Employed

Savings Bond

QROPS Tax

Dividend Tax