IHT and Tax on Pensions for Expats

[Countdown]

If and when I retire, and me and Mrs C decide to move to sunnier climes am I right in thinking that

1. I don't need to pay income tax on my UK pension (since I'm not resident in the UK)
2. My UK assets wouldn't be subject to IHT (since I'm not resident in the UK)
3. My foreign assets wouldn't be subject to IHT either

[uknick]

Not quite that simple for IHT as domicile comes into it;

https://www.gov.uk/guidance/inheritance-tax-deemed...

[dingg]

All depends on the dta between the uk and where you are resident

Most income (including pension) is taxed on a ww basis by your country of residence.

Seek advice before you fall between the cracks imo

Edited by dingg on Thursday 16th December 17:34

[Carbon Sasquatch]

Last time I looked it was complicated.

I only really looked at pensions, but very much country specific.

If there's a dual tax arrangement, then taxed in the country of residence, otherwise taxed at source in the UK and MIGHT also be taxable in country of residence.

State pension is also frozen (as in no annual increase) if you are resident in some countries & not others

You may escape UK IHT based on domicile, but that really means having no UK assets (to demonstrate no intent to return) but then would be liable for IHT wherever you were domiciled

[eyebeebe]

From memory and right now (as countries change their rules), Italy (but only certain regions in the south, where you probably wouldn’t want to live) and Portugal (but now excluding the Algarve) have the most favourable taxation rules for foreign pensioners. Malta has a res non dom scheme, but you need a certain amount of income for it to make sense.

IHT and gift taxes across Europe are complicated. As we don‘t have any heirs it‘s not something I‘ve really looked into.

Beyond the taxes though you need to be really careful, at least in Europe, with the order of beneficiaries. In napoleonic law based countries the order of beneficiaries is very strict and often cannot be changed without the notarised consent of the beneficiaries. For example here in Switzerland when the mother or father dies, the kids are due their share of the estate and can force the surviving parent to sell up to give it to them (unless they sign those rights away). I‘m pretty sure this is what happened with the place we bought! Likewise my partner doesn‘t have any rights to my estate, so it would go to my parents and sister. If we had kids I think it would all go to them. Solution is not to become Swiss and have a will that states that I want my will treated under the law of my nationality and then give everything to my partner. Basically don‘t assume that the law as you know it is the same everywhere. If you have anything of value, seek local/specialised legal advice.

ETA if you find somewhere sunny with a decent healthcare system that is willing to be generous regarding taxation of your foreign pension and/or assets/capital gains and isn‘t a speck of land in the sea, please do share. Western European language a major plus. My current plan is the nice part of the Costa Blanca, but I‘m open to suggestions! Tax situation isn‘t ideal, but so far seems to be the best trade off for our particular situation.

Edited by eyebeebe on Thursday 16th December 22:25

[dingg]

eyebeebe said:

ETA if you find somewhere sunny with a decent healthcare system that is willing to be generous regarding taxation of your foreign pension and/or assets/capital gains and isn‘t a speck of land in the sea, please do share. Western European language a major plus. My current plan is the nice part of the Costa Blanca, but I‘m open to suggestions! Tax situation isn‘t ideal, but so far seems to be the best trade off for our particular situation.

Edited by eyebeebe on Thursday 16th December 22:25

Portugal, nhr used to be free of any tax on pension income, now 10% (for 10 yrs) no iht, Algarve included btw
Health service is comparable if not better than the UK

[eyebeebe]

dingg said:

Portugal, nhr used to be free of any tax on pension income, now 10% (for 10 yrs) no iht, Algarve included btw
Health service is comparable if not better than the UK

Thanks. I thought I'd read something about it not being valid in the Algarve anymore, but maybe that was a golden visa programme. Saying it's comparable to the NHS isn't doing it any favours! 10% for 10 years is great if you're income rich, but I intend that it will be far longer than 10 years between giving up work and having a pension. The NHR rules aren't quite so generous for capital gains. Nice property in a good spot on the Algarve is bloody expensive too.

[Burwood]

Countdown said:

If and when I retire, and me and Mrs C decide to move to sunnier climes am I right in thinking that

1. I don't need to pay income tax on my UK pension (since I'm not resident in the UK)
2. My UK assets wouldn't be subject to IHT (since I'm not resident in the UK)
3. My foreign assets wouldn't be subject to IHT either

You should take proper advice. There is a multi tiered test to be classed a non dom for tax. It will 'look' at where your main home is, family ties, how often you visit etc. The rules changed in 20017 around deemed domicile.

[Carbon Sasquatch]

Domicile & residence are different things. Residence is for income & CGT and much easier to change. Domicile is for IHT and much harder to change - you basically have to 'prove' no intention to ever return to the UK - so sever all ties.

[Cheib]

Carbon Sasquatch said:

Domicile & residence are different things. Residence is for income & CGT and much easier to change. Domicile is for IHT and much harder to change - you basically have to 'prove' no intention to ever return to the UK - so sever all ties.

Yes….and it’s not always easy to change income and CGT. You can’t just move off shore and realise a big capital gain. That stopped about 20 years ago.

Also regarding IHT lots of countries don’t have IHT but instead they tax the beneficiaries so when you read a country doesn’t have IHT that can be half the story.

Also i think Greece is another country where you can move to with favourable treatment. Who would ever think the Greek’s would encourage people to live there and not pay full tax !

[Burwood]

Cheib said:

Carbon Sasquatch said:

Domicile & residence are different things. Residence is for income & CGT and much easier to change. Domicile is for IHT and much harder to change - you basically have to 'prove' no intention to ever return to the UK - so sever all ties.

Yes….and it’s not always easy to change income and CGT. You can’t just move off shore and realise a big capital gain. That stopped about 20 years ago.

Also regarding IHT lots of countries don’t have IHT but instead they tax the beneficiaries so when you read a country doesn’t have IHT that can be half the story.

Also i think Greece is another country where you can move to with favourable treatment. Who would ever think the Greek’s would encourage people to live there and not pay full tax !

NZ has no IHT, no CGT on investments of almost any kind. It's the land of the free