This post breaks down what you need to know about the new 25% QROPS tax charge and answers your burning questions.
For pensioners, March 8th’s announcement by HM Revenue & Customs (HMRC) was the shot heard ’round the world. 2017’s Spring budget includes provisions for a 25% tax charge on pension transfers going into a QROPS. It’s a financial move that should, according to the government, net the Treasury £60 million by 2022.
But, as is often the case, what benefits the Treasury doesn’t necessarily benefit consumers. Taxes have a funny way of turning out that way, and this time its pensioners living abroad who are feeling the crunch of the tax man.
Does the new tax get levied on all QROPS Pension Transfers?
The situation may seem grim, but there’s hope because certain conditions must apply for the 25% tax to go into effect.
According to government documents, exemptions from the tax may be made in some cases. If one or more of the following exemptions apply to your particular pension scenario, you may be exempt from the 25% transfer tax:
- you and your QROPS reside in the same country
- you and your QROPS reside in different countries but both lie within the European Economic Area (EEA)
Will the UK tax my QROPS payments?
Yes, beginning 6 April 2017, QROPS payments will be taxed by the UK no matter where you live in the world. This will occur for five years after you’ve transferred your pension into the QROPS.
While we cannot give a blanket statement covering what this means for all pensioners living inside the U.S., we can evaluate individual accounts. The best way to find out what these new rules mean for you is to call Tim Carroll here at UK Pension Transfers LLC.