Expat returning to the UK? – Here’s what to consider

You’ve spent some time living and working abroad but now you wish to return to the UK. What about your pensions and investments? Here’s the essentials you need to know.

Overseas pension transfers

If you have overseas pensions, when you move back to the UK you may be taxed on them as overseas income, unless you transfer them into a UK based registered pension scheme.

This type of pension transfer will not affect your UK annual allowance (currently £40,000 per annum[1]), though depending on the overseas scheme it may have a bearing on your lifetime allowance (currently £1,073,100[2]).

If you have a recognised overseas pension scheme you can apply for what is known as an enhancement – this means your lifetime allowance may not be penalised by bringing your overseas pension savings to the UK.

You’ll need to tell all of your pension providers about your intended move, so allow time for this. The paperwork for doing this is broadly similar to making a UK to UK pension transfer, though there may be extra anti-money laundering checks.

Pension freedoms

Back in the UK you will have access to pension freedoms which means you can take up to 25% of your pension tax free[3].

You may not want to withdraw everything in one go. It can be prudent to keep some invested and growing from which you can withdraw a regular income or perhaps consider buying an annuity with some of what’s left to provide a guaranteed sum every month to pay for essential fixed bills.

State pension

Inform the International Pension Centre (or the Northern Ireland Pension Centre) you are returning to the UK to ensure you start or continue receiving your state pension. It’s also important to notify HMRC.

Your UK state pension will be based on your UK National Insurance record. You need 10 years of UK contributions to be eligible for at least some of the new state pension, but you may be able to use time spent abroad to make up the qualifying years.[4]

If your state pension hasn’t been rising while you’ve been abroad, after you remain in the UK for six months it will be increased to the current rate and increase again each year.

Investments

If you return permanently to the UK but plan to retain investments abroad, you may need to pay UK income tax on your foreign income. This includes dividends and savings interest, and rental income on overseas property. You may be able to claim tax relief if you’re taxed in more than one country.

If you have overseas assets, for example property, and you intend to sell, it’s worth getting some professional advice on capital gains tax before you arrive back in the UK.

On returning to the UK after having previously ceased UK residence (meaning you were not ordinarily resident in the UK), you may be able to bring savings into the country without incurring a UK income tax charge.

There can be some exceptions, for example if you have been an expat for less than five years any gains you realised during your absence could be taxed on your return to the UK.

Financial advice

As you can see, there are many different and complex areas to consider ahead of repatriation to the UK. It’s a good idea to consult with a UK tax advisor to ensure you make the right decisions.

Keeping your pension on the same investment platform is something Brite Advisors can facilitate so you know that, wherever you go, a simple retirement solution is available. Contact us for more details.

[1] https://www.gov.uk/tax-on-your-private-pension/annual-allowance

[2] https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance

[3] https://www.gov.uk/tax-on-pension/tax-free

[4] https://www.gov.uk/new-state-pension/how-its-calculated

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