Overseas - frequently asked questions

Your questions answered.

Let's take employee contributions first. In the tax year she leaves the UK, she'll have relevant UK earnings up to the point she leaves the country. This means she can pay tax relievable contributions in the tax year up to the higher of those earnings and £3,600 (gross). For the next 5 tax years, she can continue to pay and get tax relief on her contributions up to £3,600 a year. After that, no further tax relief will be given. Some providers will not accept any personal contributions that aren't eligible for tax relief.

Employers get corporation tax relief by deducting their contributions from taxable profits. While Lexie's abroad, they'll continue to be able to do this so long as they can show that the contribution is still an allowable business expense for the company.

Yes, she can. In fact, for transfers received after 6 April 2006 and before 5 April 2024, if the transfer is from a qualifying recognised overseas pension scheme, she’ll get an enhancement factor on her lump sum allowance and lump sum and death benefit allowance.

The recognised overseas scheme transfer factor is calculated by dividing the amount of any sums and assets transferred by £1,000,000 at the date of the transfer. But if contributions made by or in respect of an individual to, or their accrual of benefits under, the overseas arrangement after 5 April 2006 received UK tax relief the amount transferred must be reduced by the relevant relievable amount.

For example: Francoise transferred £100,000 from a qualifying recognised overseas pension scheme on 5 March 2023. Her overseas transfer factor is therefore 0.1 (100,000/£1,000,000).

For transfers received after 6 April 2024, due to the abolition of the lifetime allowance, she cannot apply for an overseas transfer factor.

Please note:

  • The above assumes that none of the contributions to the French scheme attracted UK tax relief.
  • Pension providers are not obliged to accept transfers of overseas pensions; many do not.

HMRC Pensions Tax Manual - PTM103500: transfers to a registered pension scheme from a QROPS or former QROPS

HMRC Pensions Tax Manual - PTM175210 - Lump sum allowance and lump sum and death benefit allowance: Enhancement factors: Recognised overseas scheme transfer factor

A. Yes, she can. The Seafarer’s deduction means her earnings are subject to UK income tax but a deduction from the tax due can be made of up to 100%, depending on the length of time in the tax year that she’s away from the UK.

As the earnings are subject to UK income tax, they count as relevant UK earnings even although she doesn’t pay UK tax (or reduced UK tax). That allows the provider to claim basic rate tax relief from HMRC. No higher rate tax can be claimed by Maddie as no higher rate tax is paid.

Seafarers Earnings Deduction: tax relief if you work on a ship (opens in a new window)

EIM33053 - Seafarers’ Earnings Deduction: attribution of earnings: effect of other deductions - HMRC internal manual (opens in a new window)

Disclaimer

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.