Following the note entitled “where are you taxed on your pension” in the last member newsletter we have been contacted by a number of Members in various far flung places.
We cannot go further than we did then, and reiterate that you must take local qualified advice because the rules vary from place to place. A resume of the view of the UK tax authorities on what arrangements are in place with other countries can be found HERE. We have also received the following from a member concerning personal experience:
New Zealand. “I moved here 8 years ago and as a “new resident” was allowed to receive overseas income tax free for my first 4 years. After that, I had to pay NZ income tax on my British Army pension. So, had I opted to pay income tax to HMRC, I would also be paying income tax in NZ. An ex RN friend of mine was caught out by this, albeit for a short time.” UK /NZ Double Taxation rules can be found here, article 19 refers.
Tax Free Lump Sums. Apparently the tax authorities in several European countries (and perhaps elsewhere as well) have trouble in accepting tax free lump sums paid as part of your UK pension entitlement and therefore may seek to tax them, notwithstanding double taxation agreements on pensions. This could be a problem for anyone who has moved abroad and is expecting a tax free lump sum after having moved, but is most likely to affect those who have moved abroad since retiring and are awaiting a second EDP lump sum under AFPS 05. We do not have an answer to this other than be aware that this could be an issue, depending on where you live. So ensure you are not surprised, consult locally and resolve it if possible before it happens to you.