IHT on UK pensions: affect on expats

[Kantwebefriends]

The dawning realisation on the various budget/pension threads of the possible high effective tax rates on inherited pensions have been instructive and amusing. But nobody seems yet to have remarked on the possible effect on people living abroad. If someone inherits income payments from a British pension scheme what is the maximum income tax rate he/she might pay on it? Some answers are obvious e.g. Singapore 0%. But hold hard: presumably HMG would apply UK income tax before the money went abroad. And in some countries presumably even more income tax would be taken on the money as it arrived in Foreignland.

For instance I read that top rates include Denmark (55.9 percent), France (55.4 percent), and Austria (55 percent). Does this mean that a Briton tax resident in France might first face HMG taking up to, say, a 60% and thereafter a 45% income tax bite, followed by France taking a further 10.4% on top of that 45%? Is that how it works?

[Lootman]

The dawning realisation on the various budget/pension threads of the possible high effective tax rates on inherited pensions have been instructive and amusing. But nobody seems yet to have remarked on the possible effect on people living abroad. If someone inherits income payments from a British pension scheme what is the maximum income tax rate he/she might pay on it? Some answers are obvious e.g. Singapore 0%. But hold hard: presumably HMG would apply UK income tax before the money went abroad. And in some countries presumably even more income tax would be taken on the money as it arrived in Foreignland.

For instance I read that top rates include Denmark (55.9 percent), France (55.4 percent), and Austria (55 percent). Does this mean that a Briton tax resident in France might first face HMG taking up to, say, a 60% and thereafter a 45% income tax bite, followed by France taking a further 10.4% on top of that 45%? Is that how it works?

Good point, would the UK apply tax withholding? After all it forces PAYE onto UK-residents' receipts from occupational pensions.

And of course each other nation will have its own rules.

On the IHT side, note that RR's plan is to abolish tax domicile and use only residency for determining any IHT due. So that might be good news for you.

[Kantwebefriends]

On the IHT side, note that RR's plan is to abolish tax domicile and use only residency for determining any IHT due. So that might be good news for you.

Only if we go to live abroad. Would the Isle of Man or the Channel Islands count? Gibraltar? Bermuda? How about Portugal, I wonder? Pleasant people to be among, yer Portugeezers. But their top income tax rate is 53%. Others speak highly of Cyprus (35%). Prague is lovely and the top Czech rate is only 23%.

It would be rather ironic if the imposition of IHT on pension pots led to an exodus of well off but not really rich couples.

"RR's plan is to abolish tax domicile and use only residency for determining any IHT due": is that a bet that the wealth of rich foreigners resident here outweighs the wealth of Britons prepared to flee? It's an odd idea: surely anyone can flee who chooses to, British or foreign.

Oh well, maybe it's a cunning plan to "Save the NHS". Make the crumblies hobble away to escape death duties.

So where are inheritance/estate taxes low? 0% in Cyprus, apparently, and Czechia. 10% in Portugal. There's going to be lots of profitable work for financial advisors. Very beautiful, Tuscany.

[the0ni0nking]

Oh well, maybe it's a cunning plan to "Save the NHS". Make the crumblies hobble away to escape death duties.

That doesn't work the way I think you think it does. The S1 which you apply for if you are of state pension age and which is effectively used to "export your NHS benefits" to your new country of residence (in the EU at least) still means that the UK pays, it is just that UK govt pays the EU country for the services rather than the individual paying and getting reimbursed.

Outside of the EU/Switzerland etc, I imagine it all depends on the degree of any agreement between the two states in question.

[Sobraon]

"export your NHS benefits"

It seems that since Jan of this year S1 certificate holders resident overseas continue to have access to the NHS. "If you have a UK issued S1 which you've registered in the Member State you're now living in and are visiting the UK, from 1 January 2024 you can get free NHS treatment in England". Link here.

[the0ni0nking]

"export your NHS benefits"

It seems that since Jan of this year S1 certificate holders resident overseas continue to have access to the NHS. "If you have a UK issued S1 which you've registered in the Member State you're now living in and are visiting the UK, from 1 January 2024 you can get free NHS treatment in England". Link here.

Interesting, and not a change I was aware of. Although why anyone would want to access NHS services when it's likely waiting lists are shorter in their country of residence is beyond me.

I don't think it is right one should be able to "hedge ones bets" and basically be on a waiting list in both your country of residence and the UK - that just seems fundamentally wrong to me.

[Sorcery]

On the IHT side, note that RR's plan is to abolish tax domicile and use only residency for determining any IHT due. So that might be good news for you.

Only if we go to live abroad. Would the Isle of Man or the Channel Islands count? Gibraltar? Bermuda? How about Portugal, I wonder? Pleasant people to be among, yer Portugeezers. But their top income tax rate is 53%. Others speak highly of Cyprus (35%). Prague is lovely and the top Czech rate is only 23%.

It would be rather ironic if the imposition of IHT on pension pots led to an exodus of well off but not really rich couples.

"RR's plan is to abolish tax domicile and use only residency for determining any IHT due": is that a bet that the wealth of rich foreigners resident here outweighs the wealth of Britons prepared to flee? It's an odd idea: surely anyone can flee who chooses to, British or foreign.

Oh well, maybe it's a cunning plan to "Save the NHS". Make the crumblies hobble away to escape death duties.

So where are inheritance/estate taxes low? 0% in Cyprus, apparently, and Czechia. 10% in Portugal. There's going to be lots of profitable work for financial advisors. Very beautiful, Tuscany.

0% in the Channel islands, they just don't have IHT. They don't have VAT or higher bands of income tax either, maximum income tax rate is 20%. Free parking too. There are extra costs of living here because everything has to be shipped in, though. It's amazing what's possible when you don't have a myriad of taxes and a huge public sector.

[Lootman]

Only if we go to live abroad. Would the Isle of Man or the Channel Islands count? Gibraltar? Bermuda? How about Portugal, I wonder? Pleasant people to be among, yer Portugeezers. But their top income tax rate is 53%. Others speak highly of Cyprus (35%). Prague is lovely and the top Czech rate is only 23%.

It would be rather ironic if the imposition of IHT on pension pots led to an exodus of well off but not really rich couples.

"RR's plan is to abolish tax domicile and use only residency for determining any IHT due": is that a bet that the wealth of rich foreigners resident here outweighs the wealth of Britons prepared to flee? It's an odd idea: surely anyone can flee who chooses to, British or foreign.

Oh well, maybe it's a cunning plan to "Save the NHS". Make the crumblies hobble away to escape death duties.

So where are inheritance/estate taxes low? 0% in Cyprus, apparently, and Czechia. 10% in Portugal. There's going to be lots of profitable work for financial advisors. Very beautiful, Tuscany.

0% in the Channel islands, they just don't have IHT. They don't have VAT or higher bands of income tax either, maximum income tax rate is 20%. Free parking too. There are extra costs of living here because everything has to be shipped in, though. It's amazing what's possible when you don't have a myriad of taxes and a huge public sector.

Is there CGT in the Channel islands?

And is it hard to get residency there?

[BullDog]

Australia perhaps? No IHT, register for Medicare* the day you arrive there.

*Reciprocal health care agreement between UK and Australia.

[Sorcery]

0% in the Channel islands, they just don't have IHT. They don't have VAT or higher bands of income tax either, maximum income tax rate is 20%. Free parking too. There are extra costs of living here because everything has to be shipped in, though. It's amazing what's possible when you don't have a myriad of taxes and a huge public sector.

Is there CGT in the Channel islands?

And is it hard to get residency there?

No CGT either, deliberately left that one out because I didn't want to make it too attractive.
It's not hard, it's very similar to the UK, in that you go to an estate agent and ask to see open market properties (those are the only ones a purchaser from abroad can buy). Most of the housing stock is local market stock, reserved for locals or working people in hard to fill local jobs. Stamp duty on house purchases is very steep on near-to-London prices. You can buy local market after 5 years, so you could rent for the first 5 years and then buy local. Like everywhere else, lots of immigrants here, so companies must be sponsoring immigration to bring in staff, even for not normally well paid jobs like waiter-ing or working behind a bar. Ogier, Lovells and Cooper Brouard are the biggest estate agents but there are others.

Good for water sports, sailing, diving, water-skiing. You have an extra step for flying anywhere, though. London City, Manchester, Gatwick and Southampton are well served though by the local airline Aurigny. Probably best to explore on their web site, not all locations are served every day. Electricity is cheaper now than the UK, used to have diesel generators, now the cable to France has been fixed, it's all nuclear energy. Natural gas can be connected though mine isn't, I use oil for heating.

I chose Guernsey over Jersey because to my eye it's prettier and for Jersey you have to "promise" to pay £100k in tax per year. PWC advised that promises are not always kept, so you can turn up (I think) and say circumstances have changed after getting permission to move there.

Hope that helps, ask anything if you want to know more.

[Lootman]

Is there CGT in the Channel islands?

And is it hard to get residency there?

No CGT either, deliberately left that one out because I didn't want to make it too attractive.
It's not hard, it's very similar to the UK, in that you go to an estate agent and ask to see open market properties (those are the only ones a purchaser from abroad can buy). Most of the housing stock is local market stock, reserved for locals or working people in hard to fill local jobs. Stamp duty on house purchases is very steep on near-to-London prices. You can buy local market after 5 years, so you could rent for the first 5 years and then buy local. Like everywhere else, lots of immigrants here, so companies must be sponsoring immigration to bring in staff, even for not normally well paid jobs like waiter-ing or working behind a bar. Ogier, Lovells and Cooper Brouard are the biggest estate agents but there are others.

Good for water sports, sailing, diving, water-skiing. You have an extra step for flying anywhere, though. London City, Manchester, Gatwick and Southampton are well served though by the local airline Aurigny. Probably best to explore on their web site, not all locations are served every day. Electricity is cheaper now than the UK, used to have diesel generators, now the cable to France has been fixed, it's all nuclear energy. Natural gas can be connected though mine isn't, I use oil for heating.

I chose Guernsey over Jersey because to my eye it's prettier and for Jersey you have to "promise" to pay £100k in tax per year. PWC advised that promises are not always kept, so you can turn up (I think) and say circumstances have changed after getting permission to move there.

Hope that helps, ask anything if you want to know more.

Thanks, very interesting. I have been on holiday to Jersey and liked it. But Guernsey sounds nicer and at least it also has an airport although I note that only turbo-props and smaller jets like an E90 can use that runway, apparently.

If you have an ISA would that be taxed there?

[Sorcery]

No CGT either, deliberately left that one out because I didn't want to make it too attractive.
It's not hard, it's very similar to the UK, in that you go to an estate agent and ask to see open market properties (those are the only ones a purchaser from abroad can buy). Most of the housing stock is local market stock, reserved for locals or working people in hard to fill local jobs. Stamp duty on house purchases is very steep on near-to-London prices. You can buy local market after 5 years, so you could rent for the first 5 years and then buy local. Like everywhere else, lots of immigrants here, so companies must be sponsoring immigration to bring in staff, even for not normally well paid jobs like waiter-ing or working behind a bar. Ogier, Lovells and Cooper Brouard are the biggest estate agents but there are others.

Good for water sports, sailing, diving, water-skiing. You have an extra step for flying anywhere, though. London City, Manchester, Gatwick and Southampton are well served though by the local airline Aurigny. Probably best to explore on their web site, not all locations are served every day. Electricity is cheaper now than the UK, used to have diesel generators, now the cable to France has been fixed, it's all nuclear energy. Natural gas can be connected though mine isn't, I use oil for heating.

I chose Guernsey over Jersey because to my eye it's prettier and for Jersey you have to "promise" to pay £100k in tax per year. PWC advised that promises are not always kept, so you can turn up (I think) and say circumstances have changed after getting permission to move there.

Hope that helps, ask anything if you want to know more.

Thanks, very interesting. I have been on holiday to Jersey and liked it. But Guernsey sounds nicer and at least it also has an airport although I note that only turbo-props and smaller jets like an E90 can use that runway, apparently.

If you have an ISA would that be taxed there?

You would pay a tax on dividends on naked share portfolios but that would be it. I don't know much about ISA's, I was to busy with my company to ever invest in one out of salary. When my company was sold the sale price was so much in excess of ISA possible contributions that I went straight to a naked share portfolio. I am not sure whether an ISA is possible here. There is another slight problem if you are USA share orientated, the UK has a double taxation agreement with Guernsey, but the US doesn't. So the USA docks dividends for tax and that is not counted by Guernsey, that is you do get double taxation of dividends. But USA shares are not great dividend payers anyway so maybe moot. My income generating shares are thus UK based.

[Lootman]

You would pay a tax on dividends on naked share portfolios but that would be it. I don't know much about ISA's, I was to busy with my company to ever invest in one out of salary. When my company was sold the sale price was so much in excess of ISA possible contributions that I went straight to a naked share portfolio. I am not sure whether an ISA is possible here.

I am guessing that ISAs would be taxable there in the same way as any other sharedealing account. But with no CGT that might be fine.

There is another slight problem if you are USA share orientated, the UK has a double taxation agreement with Guernsey, but the US doesn't. So the USA docks dividends for tax and that is not counted by Guernsey, that is you do get double taxation of dividends. But USA shares are not great dividend payers anyway so maybe moot. My income generating shares are thus UK based.

Yeah, that doesn't worry me as my US portfolio only has a tiny yield anyway, and I do not invest for income.

[Sorcery]

You would pay a tax on dividends on naked share portfolios but that would be it. I don't know much about ISA's, I was to busy with my company to ever invest in one out of salary. When my company was sold the sale price was so much in excess of ISA possible contributions that I went straight to a naked share portfolio. I am not sure whether an ISA is possible here.

I am guessing that ISAs would be taxable there in the same way as any other sharedealing account. But with no CGT that might be fine.

There is another slight problem if you are USA share orientated, the UK has a double taxation agreement with Guernsey, but the US doesn't. So the USA docks dividends for tax and that is not counted by Guernsey, that is you do get double taxation of dividends. But USA shares are not great dividend payers anyway so maybe moot. My income generating shares are thus UK based.

Yeah, that doesn't worry me as my US portfolio only has a tiny yield anyway, and I do not invest for income.

Had a thought about the airline, trips to the UK and back are very short. Less than an hour even if it's propeller driven. It's time travel to the airport and the time to check in an hour before that makes it longer.