There will now be a 25 per cent tax charge on QROPS transfers. There are, however, exceptions to the rule. You will be exempt from the charge if you fit the following criteria:
• The individual and the offshore pension scheme are in the same country
• The scheme is provided by the individual’s employer
• The individual and the scheme are both in the European Economic Area
If the above does not apply, then the government has stated that the 25 per cent charge will be made before the transfer by the administrator or manager of the scheme.
The HMRC added that “payments out of funds transferred to a QROPS on or after 6 April 2017 will be subject to UK tax rules for five tax years after the date of transfer, regardless of where the individual is resident”. The HMRC also predicted that, out of the 10,000 to 20,000 QROPS transfers made each year, only a minority would be affected by the new policy.
The charge is effective immediately. As a result of the sudden implementation, there is still uncertainty within the pensions sector and concern over the future of pension transfer options.
If you’re unsure about what the change means for you and want to know the best way to get tax relief on your pension fund, contact one of our financial advisers today.
Further measures introduced by the Budget
Other notable changes stated in the Budget included an extra £2 billion being put into social care (which has drawn criticism for not being anywhere near enough), the funding of the science and technology sector with £270 million (for research into advancements such as robots and driverless cars), and self-employed workers being required to pay more in National Insurance Contributions (the NI rate will rise from 9 per cent to 10 per cent in April 2018 and then to 11 per cent in April 2019).
The tax-hike for self-employed workers (which Hammond claimed was to make the tax system fairer, as there is a large difference between what the self-employed pay in tax and the amount employees pay), was arguably the most controversial change announced in the Budget, as it contradicts a Conservative manifesto pledge made during the 2015 general election.
Pensioners and investors who rely on dividend income also received some bad news, as the tax-free dividend allowance rate will be reduced from £5,000 to just £2,000 in April 2018. However, ISA accounts, which, from April 2017, will have an increased annual allowance of £20,000, can be used to protect investments from tax.
Stay on top of your financial planning with Blacktower
There will always be developments in the world of finance, and these affect millions of people.
Whatever your financial situation Blacktower financial advisers can provide expert guidance on the best application of your wealth – whether you need advice relating to the new QROPS rules or you’re concerned about how another aspect of the budget will affect your savings.
We can help you devise an effective financial plan. As well as being based in the UK, we operate in various international locations, so we can help you with your wealth management in Gibraltar, France, Spain, and many other places.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
Advice on buying overseas property from financial expert Simon Conn:
Over the years, the trend for South African nationals to seek out new lives and experiences in Portugal has continued to grow and grow; I myself made the move back in 1988 as a fresh-faced economics graduate from Witswatersrand University in Johannesburg, and I’ve never looked back. It’s easy to see the appeal for South Africans – the year-round sunshine and vast expanses of Atlantic coastline are a familiar part of daily life, just as they are back home – but the secure location and easy access to the rest of Europe is something really special. Being as there’s over 11,000 KM of distance between the two countries, a mere 12 hrs by plane give or take, there are going to be some big differences in the way of life, even if there are those obvious similarities. It’s probably advisable for any emigrant to arrive armed with a willingness to accept how things are done in their new home country rather than try to carry on as before and hope for the best. This is never more true than when dealing with your finances.