Contributions to a UK pension while overseas

[SDN123]

Hi,

I have been living outside of the UK for 5 years now. Each year I have contributed £2,880 to my SIPP and got £720 “tax relief” from HMRC. (I have not been a UK income tax payer during the period.)

I believe that, as a non-UK tax resident, I gave now reached my limit, 5 years worth, of this “relief”. (I suspect that as long as just keep paying the £2880 each year the “relief” will keep being paid unless I tell my SIPP provider not to claim - but that’s not an issue just now.)

I do have UK income made of rental income, bank interest (very small!) and unsheltered stocks and shares dividends. The total income is less than the lowest UK tax threshold and so I don’t pay tax on it to HMRC (but I do pay nearly 50% locally as “overseas income” taxed at my marginal rate ).

My questions are:
- can i still contribute into my SIPP even if I don’t claim any tax relief?
- if that is possible, how much can I contribute each year? The options seem to me seem to be any one of…
a) zero
b) £3600
c) some parts of my UK income but maybe not all
d) the total of my UK income
e) £40,000

It might seem strange to want to contribute with no tax relief, but investments in my SIPP is not taxed here or in the UK making it cheaper and much simpler in terms of paperwork (even my UK ISAs are not recognized here and do I have to report on and pay tax on those investments here) .

It would be great if anyone knows the answer, or where to find an answer. (I prefer not to ask HMRC or my SIPP provider until I have at least some idea of what is possible.)

Thanks in advance if anyone can help,

SDN

[mc2fool]

In theory you can contribute as much as you like if you don’t claim any tax relief. That is, in theory, true for anyone, UK resident or not.

However, the problem that you may well come across is that as SIPP providers claim the tax relief (almost) automatically they just won't accept any contributions in excess of £2,880 or your relevant UK earnings (rental income, bank interest and dividends don't count, even if you paid any UK income tax on them) and, as you note, you've reached the 5 year limit anyway for contributions that do attract tax relief.

You'll either have to dig into your SIPP scheme's rules or ask the SIPP provider if they'll accept contributions that don't attract tax relief.

[stevensfo]

Are you sure that you 'have' to declare your ISAs? I always thought that because ISAs don't have to be declared to HMRC, then HMRC won't have a record of them, so they're more or less invisible.

Though I guess that if your ISA provider knows that you live abroad, they may be obliged to give all the info to HMRC who may then be asked for it by your local tax authority. Not 100% sure, but I think that's how it works.

If I'd worked hard scrimping and saving into an ISA, LBYM etc, I'd be mightily pi**ed off if I then had to pay tax on it!

Steve

[Lootman]

Are you sure that you 'have' to declare your ISAs? I always thought that because ISAs don't have to be declared to HMRC, then HMRC won't have a record of them, so they're more or less invisible.

Though I guess that if your ISA provider knows that you live abroad, they may be obliged to give all the info to HMRC who may then be asked for it by your local tax authority. Not 100% sure, but I think that's how it works.

I doubt that HMRC would show much interest in your ISA regardless of where you live, except about the annual subscriptions (no more than 20K a year if UK resident, and zero if not UK resident). I certainly cannot imagine them communicating with foreign governments speculatively.

Whether you have to declare your ISA to the government of another country where you live would depend entirely on the tax rules for that country. Issues that would arise are whether or not you are defined as tax resident in that other country, whether that country taxes residents on world-wide income, and how they would treat something like an ISA. Would they see it as a "black box", like a retirement account, where only withdrawals are taxable? I have no idea.

I doubt that many people here know the tax rules of many foreign nations, but I feel fairly sure that ISAs are theoretically taxable in at least some other countries. How you'd ever report them accurately is another matter given that such accounts do not produce tax statements. So if that really worried you then you would probably liquidate the ISA before you settled in your new country.

[mc2fool]

Are you sure that you 'have' to declare your ISAs? I always thought that because ISAs don't have to be declared to HMRC, then HMRC won't have a record of them, so they're more or less invisible.

Though I guess that if your ISA provider knows that you live abroad, they may be obliged to give all the info to HMRC who may then be asked for it by your local tax authority. Not 100% sure, but I think that's how it works.

I doubt that HMRC would show much interest in your ISA regardless of where you live, except about the annual subscriptions (no more than 20K a year if UK resident, and zero if not UK resident). I certainly cannot imagine them communicating with foreign governments speculatively.

Exchange of account holders' financial information with other countries' tax authorities isn't speculative, it is by treaty and is automatic. It's called Automatic Exchange of Information (AEOI) and it's been that way with at least "regular" accounts amongst EU countries (plus the Crown Dependencies) for at least 15 years and, under OECD agreements, has spread to lots of other countries since. Dunno if it applies to ISAs though.

"If you are a UK tax resident and you hold an account in another country then HMRC will receive information about you. This will include details about account balances and sums paid to accounts (for example, interest and dividends, or from the sale of investments).
:
If you are a tax resident of another country with which the UK has agreed to exchange information then your account provider will forward information about your account to HMRC, and HMRC will pass the information to your country of tax residence."

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/782463/Quick_guide_-_auto_exchange_of_info_-_account_holders.pdf

The above link is to the quick guide for account holders (only 4 pages). Should anyone want to dig through to see if ISAs are included, the full HMRC manual on it is at: https://www.gov.uk/hmrc-internal-manuals/international-exchange-of-information

[SDN123]

Thanks for all of the replies so far.

Thanks to McFool for some great info which is very much appreciated.

I can confirm that nowhere else in the world knows or cares about ISAs - as far as they are concerned the lack of local (UK) tax is a local (UK) issue and investments within an ISA wrapper are just investments. Many countries have similar tax wrappers, similarly ignored by their peer tax authorities.

If I was planning to retire outside of the UK I would definitely liquidate the ISAs. However, I do plan to return and so I am keeping them. (Even if I moved the money locally I would have to invest in something likely to attract tax.) The country where I am a tax resident requires me to declare my world-wide income, although it does recognize UK pensions so I don’t have to report what’s happening inside them. Of course I could choose to lie to the local tax authority and not declare the contents of the ISAs. But that would be against the law and the consequences of being caught would be far more expensive than the taxes. Being a reasonably well paid foreign worker makes it (in my opinion) more likely that I’ll be investigated than many locals. Regardless of all of that, I’m grateful to my host country and wish to make my legal contribution (but no more!!)

So far it seems my best plan is to tax to my SIPP provider (YouInvest) and see if I can contribute without them claiming “relief”. I suspect it may be an uphill battle. I’ll report back here in case anyone is interested.

Any additional information or relevant experiences would be welcomed.

SDN

[seagles]

Just a thought. Any chance your company has a UK sub, if so can they pay a salary in UK? I say that as when I worked abroad I get paid both in the UK and where I was working, paid no tax in UK but was allowed to pay into pension fund and ni, although all income was taxed in the countries i was working.

[BullDog]

Thanks for all of the replies so far.

Thanks to McFool for some great info which is very much appreciated.

I can confirm that nowhere else in the world knows or cares about ISAs - as far as they are concerned the lack of local (UK) tax is a local (UK) issue and investments within an ISA wrapper are just investments. Many countries have similar tax wrappers, similarly ignored by their peer tax authorities.

If I was planning to retire outside of the UK I would definitely liquidate the ISAs. However, I do plan to return and so I am keeping them. (Even if I moved the money locally I would have to invest in something likely to attract tax.) The country where I am a tax resident requires me to declare my world-wide income, although it does recognize UK pensions so I don’t have to report what’s happening inside them. Of course I could choose to lie to the local tax authority and not declare the contents of the ISAs. But that would be against the law and the consequences of being caught would be far more expensive than the taxes. Being a reasonably well paid foreign worker makes it (in my opinion) more likely that I’ll be investigated than many locals. Regardless of all of that, I’m grateful to my host country and wish to make my legal contribution (but no more!!)

So far it seems my best plan is to tax to my SIPP provider (YouInvest) and see if I can contribute without them claiming “relief”. I suspect it may be an uphill battle. I’ll report back here in case anyone is interested.

Any additional information or relevant experiences would be welcomed.

SDN

Well worth talking to the SIPP provider. I have paid into a SIPP and not had the SIPP provider claim tax relief. I told the provider the contributions were employer contributions and not qualifying for tax reclaim (compay has corporation tax relief instead). So as instructed, the provider did not reclaim the tax. I believe you will be able to do as you wish. It's a slightly none standard variation on what happens but the mechanism is definitely there. Good luck I hope you enjoy your time abroad. The last 6 years or so before I retired were spent in various countries and it was almost like a long paid vacation. (I didn't contribute to my SIPP in that period, but absolutely did pay the voluntary NICs which to qualify for UK state pension are a bargain).

[SDN123]

Just a thought. Any chance your company has a UK sub, if so can they pay a salary in UK? I say that as when I worked abroad I get paid both in the UK and where I was working, paid no tax in UK but was allowed to pay into pension fund and ni, although all income was taxed in the countries i was working.

Nice idea but not an option for me I’m afraid.

[SDN123]

Well worth talking to the SIPP provider. I have paid into a SIPP and not had the SIPP provider claim tax relief. I told the provider the contributions were employer contributions and not qualifying for tax reclaim (compay has corporation tax relief instead). So as instructed, the provider did not reclaim the tax. I believe you will be able to do as you wish. It's a slightly none standard variation on what happens but the mechanism is definitely there. Good luck I hope you enjoy your time abroad. The last 6 years or so before I retired were spent in various countries and it was almost like a long paid vacation. (I didn't contribute to my SIPP in that period, but absolutely did pay the voluntary NICs which to qualify for UK state pension are a bargain).

Good to know that this is at least possible.

And yes voluntary NICs are a “no-brainer”.

This is my second stint working overseas and I agree it’s an amazing experience and hard not to feel “on vacation” all the time. Not an option for everyone but, in my experience, well worth the risks if you get the chance.

[BullDog]

Well worth talking to the SIPP provider. I have paid into a SIPP and not had the SIPP provider claim tax relief. I told the provider the contributions were employer contributions and not qualifying for tax reclaim (compay has corporation tax relief instead). So as instructed, the provider did not reclaim the tax. I believe you will be able to do as you wish. It's a slightly none standard variation on what happens but the mechanism is definitely there. Good luck I hope you enjoy your time abroad. The last 6 years or so before I retired were spent in various countries and it was almost like a long paid vacation. (I didn't contribute to my SIPP in that period, but absolutely did pay the voluntary NICs which to qualify for UK state pension are a bargain).

Good to know that this is at least possible.

And yes voluntary NICs are a “no-brainer”.

This is my second stint working overseas and I agree it’s an amazing experience and hard not to feel “on vacation” all the time. Not an option for everyone but, in my experience, well worth the risks if you get the chance.

It's an especially good time to work abroad and be paid in currency other than GBP at the moment. When the Brexit referendum result was announced it resulted in an immediate 10 or 15% pay rise in GBP for me.

[SDN123]

Update: YouInvest say that they automatically claim relief on all contributions to SIPPs and therefore have no way to accept contributions from me if I do not wish to claim the relief. I’ve asked if they will consider adding the feature but so far I’ve just got (not exact quote) “please send that as platform feedback and we may consider it” - which is (sort of) understandable but not very encouraging.

Does anyone know of a platform that does allow contributions with claiming tax relief? (Or even better has someone managed this with YouInvest?) Even if such a platform exists I may not be able to transfer my SIPP there (not everyone excepts SIPP transfers from non-tax residents) however the information may be useful to other readers of this thread.

[puffster]

Update: YouInvest say that they automatically claim relief on all contributions to SIPPs and therefore have no way to accept contributions from me if I do not wish to claim the relief. I’ve asked if they will consider adding the feature but so far I’ve just got (not exact quote) “please send that as platform feedback and we may consider it” - which is (sort of) understandable but not very encouraging.

Does anyone know of a platform that does allow contributions with claiming tax relief? (Or even better has someone managed this with YouInvest?) Even if such a platform exists I may not be able to transfer my SIPP there (not everyone excepts SIPP transfers from non-tax residents) however the information may be useful to other readers of this thread.

FWIW I've done it with Youinvest (i.e. made a contribution without claiming tax relief) - this was done as an employer contribution (which AJ Bell treat as a gross contribution) so no tax was reclaimed. Use the SIPP Additional Contribution Form to indicate that this was an employer contribution. If you are making a personal contribution then my comment won't help...

Regards, Puffster

[ursaminortaur]

Update: YouInvest say that they automatically claim relief on all contributions to SIPPs and therefore have no way to accept contributions from me if I do not wish to claim the relief. I’ve asked if they will consider adding the feature but so far I’ve just got (not exact quote) “please send that as platform feedback and we may consider it” - which is (sort of) understandable but not very encouraging.

Does anyone know of a platform that does allow contributions with claiming tax relief? (Or even better has someone managed this with YouInvest?) Even if such a platform exists I may not be able to transfer my SIPP there (not everyone excepts SIPP transfers from non-tax residents) however the information may be useful to other readers of this thread.

FWIW I've done it with Youinvest (i.e. made a contribution without claiming tax relief) - this was done as an employer contribution (which AJ Bell treat as a gross contribution) so no tax was reclaimed. Use the SIPP Additional Contribution Form to indicate that this was an employer contribution. If you are making a personal contribution then my comment won't help...

Regards, Puffster

I haven't made any contributions to my Youinvest SIPP since 2016 but certainly when you made contributions then they asked what your salary was and, although I never used it, there was also an option to contribute without getting tax relief - this was online through the website.

[BullDog]

Update: YouInvest say that they automatically claim relief on all contributions to SIPPs and therefore have no way to accept contributions from me if I do not wish to claim the relief. I’ve asked if they will consider adding the feature but so far I’ve just got (not exact quote) “please send that as platform feedback and we may consider it” - which is (sort of) understandable but not very encouraging.

Does anyone know of a platform that does allow contributions with claiming tax relief? (Or even better has someone managed this with YouInvest?) Even if such a platform exists I may not be able to transfer my SIPP there (not everyone excepts SIPP transfers from non-tax residents) however the information may be useful to other readers of this thread.

That's a pathetic response from AJB. Someone there clearly just can't be bothered.

I have had no trouble at all making gross pension contributions with II and with HL. There's going to be hundreds or possibly thousands of company directors all making gross contributions from their company bank account to AJB and not getting income tax relief.

I cannot believe that AJB have not got the mechanism in place for gross contributions to a SIPP.

Slightly off topic, but when I requested Close Brothers to make a small pot lump sum withdrawal from a SIPP that had £9999 in the account (limit is £10000) they said they couldn't do it. They claimed there was no such thing as a small pot withdrawal mechanism. When I complained that they were disallowing my statutory right to make a small pot withdrawal, they suddenly found a way to do it. After execution of the small pot withdrawal I closed the four ISA and SIPP accounts that we had in the family. It cost Close Brothers the ongoing fees on four accounts that are now with II.

I suggest a similar approach to AJB might be tried?

[SDN123]

FWIW I've done it with Youinvest (i.e. made a contribution without claiming tax relief) - this was done as an employer contribution (which AJ Bell treat as a gross contribution) so no tax was reclaimed. Use the SIPP Additional Contribution Form to indicate that this was an employer contribution. If you are making a personal contribution then my comment won't help...

Regards, Puffster

Thanks Puffster,

In my circumstances it would be a personal contribution and I don't have an employer in the UK, so I don't think this will work.

Simon

[SDN123]

I haven't made any contributions to my Youinvest SIPP since 2016 but certainly when you made contributions then they asked what your salary was and, although I never used it, there was also an option to contribute without getting tax relief - this was online through the website.

Thanks ursaminortaur,

I've just gone back and rechecked that option no longer seems to exist, the system just asks me for an amount of money and then tries to charge my debit card. Perhaps the option appears after the debit card has been charged, although that seems very odd, but I don't want to check it and then end up with "stray" money in my SIPP as I'm sure that will be a nightmare to remove.

Simon

[SDN123]

That's a pathetic response from AJB. Someone there clearly just can't be bothered.

Agreed !

I have had no trouble at all making gross pension contributions with II and with HL. There's going to be hundreds or possibly thousands of company directors all making gross contributions from their company bank account to AJB and not getting income tax relief.

Very good to know, I'll follow-up with both of those (and I already have a ISA with II, so I'll start with them.)

Slightly off topic, but when I requested Close Brothers to make a small pot lump sum withdrawal from a SIPP that had £9999 in the account (limit is £10000) they said they couldn't do it. They claimed there was no such thing as a small pot withdrawal mechanism. When I complained that they were disallowing my statutory right to make a small pot withdrawal, they suddenly found a way to do it. After execution of the small pot withdrawal I closed the four ISA and SIPP accounts that we had in the family. It cost Close Brothers the ongoing fees on four accounts that are now with II.

I suggest a similar approach to AJB might be tried?

If I find another solution with a provider that will allow me switch while overseas then I'll drop YouInvest quicker than you can say "Personal Pension".

Thanks again for the extra information.

Simon

[BullDog]

That's a pathetic response from AJB. Someone there clearly just can't be bothered.

Agreed !

I have had no trouble at all making gross pension contributions with II and with HL. There's going to be hundreds or possibly thousands of company directors all making gross contributions from their company bank account to AJB and not getting income tax relief.

Very good to know, I'll follow-up with both of those (and I already have a ISA with II, so I'll start with them.)

Slightly off topic, but when I requested Close Brothers to make a small pot lump sum withdrawal from a SIPP that had £9999 in the account (limit is £10000) they said they couldn't do it. They claimed there was no such thing as a small pot withdrawal mechanism. When I complained that they were disallowing my statutory right to make a small pot withdrawal, they suddenly found a way to do it. After execution of the small pot withdrawal I closed the four ISA and SIPP accounts that we had in the family. It cost Close Brothers the ongoing fees on four accounts that are now with II.

I suggest a similar approach to AJB might be tried?

If I find another solution with a provider that will allow me switch while overseas then I'll drop YouInvest quicker than you can say "Personal Pension".

Thanks again for the extra information.

Simon

II is ideal for you then. Flat fees and no need to be concerned about possibly paying HL it's outrageous 0.45% fee by buying funds. I guess you already know that at II monthly investments are no charge to buy. Hope that helps.

PS - As long as you maintain a UK mail address and a UK bank account, I wouldn't tell II (or any other broker) where you are day to day in the world.

[SDN123]

II is ideal for you then. Flat fees and no need to be concerned about possibly paying HL it's outrageous 0.45% fee by buying funds. I guess you already know that at II monthly investments are no charge to buy. Hope that helps.

Yes, I am with YouInvest because I moved there from HL when they introduced those ridiculous fees (ridiculous for customers, I’m sure it makes lots of sense to HL )