Posted by Tax Innovations on 07 Sep 2018
Changes to the Taxation of QNUPS
HMRC has made changes to the taxation of Qualifying Non-UK Pension Schemes (QNUPS) but, if structured correctly to provide for your future and that of your family, a QNUPS remains an attractive retirement planning opportunity.
Taxation of QNUPS to be Brought Closer to UK Pension Schemes
A series of changes to the taxation of overseas pension schemes, including QNUPS, were introduced from 6 April 2017. These changes brought the taxation of Qualifying Non-UK Pension Schemes closer to that of UK pension schemes:
- Lump sums paid under QNUPS pension rights which accrued prior to 6 April 2017 remain fully tax free.
- Lump sums paid under pension rights which accrued on or after 6 April 2017 are tax free for up to 25% of the fund value as if they were paid from a UK registered pension scheme. I.e. they are tax free to the extent that they fall within the scheme beneficiary’s lifetime allowance.
- Any lump sum in excess of the lifetime allowance will be fully taxable, even if received by third parties following the death of the beneficiary.
- The long-standing 10% deduction available for pension income from overseas pensions was removed for payments on or after 6 April 2017, meaning that the full amount of pension income from a QNUPS will be taxable.
QNUPS Remain a Highly Flexible and Tax-Efficient Investment Environment
The changes to the taxation of payments from a QNUPS do not alter the fact that a QNUPS is a highly flexible and tax-efficient investment environment. A QNUPS can invest in a wide range of assets and, if structured correctly, there should be no tax on capital growth on those investments (other than UK residential property, and potentially all UK property from April 2019) and a maximum of 20% tax on UK investment income.
A QNUPS is Not a Short-Term Tax Planning Solution
Instead, the focus of a QNUPS should be to take advantage of the flexibility of investment options and the tax efficient returns on those investments. These allow your retirement fund to grow beyond what would be possible within a more restrained UK-based structure. In addition, by ensuring that your family are also members of the QNUPS there will be no need for a potentially taxed lump sum payment to be made on your death, allowing your family to retain control of how and when retirement benefits are taken.
Tax Innovations: The Effective Use of a QNUPS
Tax Innovations can advise on the effective use of a QNUPS to provide for your future, as well as on how the tax changes will impact existing structures.
If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or firstname.lastname@example.org.
- Property Partnership Incorporation and SDLT
- Tax Relief For Residential Mortgages
- Top 10 Expat Tax Tips for Individuals Moving to the UK
- Non-Resident CGT – April 2019 Changes
- Non-Resident Landlords – UK Tax Update