TAXATION CASE STUDY

Know Your Tax Obligations

The Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014

Pension funds in the UK are not taxed by the UK Government, and Brits can save up to £40,000 p.a. for their retirement from non-taxable income.  

If you are a British ex-pat, or a returning Kiwi, now that you are living in NZ your UK pension funds are called foreign investments and  are taxable after a four year transitional tax period. You must pay tax in NZ on your world wide income (including your UK pensions). 

The Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 was introduced to make the tax rules regarding UK pensions much simpler.   

YOUR OPTIONS:

  1. Do nothing and take a pension at retirement. Your pension funds will be fully taxable – 100%

  2. Transfer your pension and pay the required tax based on the IRD table below

Note:  It is important to talk with a pension transfer specialist, financial planner, and QROPS specialist in New Zealand (a Lyfords adviser) to understand your options. The pros and cons of transferring are not just about the tax issues. With 17 years’ experience in seamless UK pension transfers, we are well versed with the UK pension legislation and UK entitlements and HMRC QROPS changes

Are you a UK expat searching for pension advice in New Zealand? 

HOW MUCH TAX ARE YOU LIKELY TO HAVE TO PAY ON YOUR TRANSFERRED PENSION FUNDS?  HERE'S AN EXAMPLE:

Fred's pension

Fred has been living in NZ for 8 years and wants to transfer his pension. It has a value of $150,000

During the first four years, he was a a transitional tax resident and did not need to pay tax on his pension funds in the UK. He has a four year tax liability. The table below shows that the tax obligation for four years is based on 18.6% of the total amount of the transferred pension. $27,900 of his pension will be taxable at his marginal tax rate.

NOTE: If Fred waited until he retired and chose to receive a pension payable from the UK, he would have to pay tax on 100% of his pension funds. 

Do you need a specialist tax adviser?  Ask Lyfords - we can refer one to you.

Taxation Increments Table

Taxation+Increments+Table.png