Tax relief on contributions to overseas pension schemes

If you pay tax in the UK and pay contributions to an overseas pension scheme you could be entitled to tax relief. This guide explains how you qualify for relief and how to claim relief on contributions to an overseas pension scheme.

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What qualifies for tax relief

Tax relief may be given to:

  • you on your contributions
  • your employer on their contributions

There are three types of tax relief:

  • relief under a double taxation agreement
  • Migrant Member Relief
  • Transitional Corresponding Relief

Tax relief on member contributions is limited to the same amount a member of a UK pension scheme can get.

Tax relief on employer contributions to an overseas pension scheme is given on the same basis as employer contributions to a registered pension scheme.

Tax relief on pension contributions - Limits on tax relief

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Relief under a double taxation agreement

If you've come from overseas to work in the UK you can get tax relief on contributions made to a pension scheme set up outside the UK if both of the following apply:

  • HM Revenue & Customs (HMRC) has a tax treaty with the country where the pension scheme operates that includes a pension contributions provision
  • the conditions specified in the pension contributions provision are met

Double taxation agreements - an introduction

Tax treaties

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Migrant Member Relief

To qualify for this relief your pension scheme must be an overseas pension scheme that meets certain qualifying conditions. If you don't know if your scheme is a 'qualifying overseas pension scheme' (QOPS) you should ask your pension scheme manager or financial adviser.

The following must also apply:

  • you must be living in the UK when you make the contributions or when they're made on your behalf
  • you must have employment or trading income that is subject to UK Income Tax
  • you must have told the manager of your qualifying overseas pension scheme that you intend to claim Migrant Member Relief
  • you must have joined the scheme before you arrived in the UK and still be a member when you arrived in the UK
  • your scheme manager must tell you that they'll give HMRC information about the amount of lifetime allowance used up by payments from your pension pot
  • you were entitled to tax relief on pension contributions made by you or your employer either:
  • in the country you were living in immediately before arriving in the UK
  • in any country where you were living in the ten years before you arrived in the UK

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Transitional Corresponding Relief

If you had Corresponding Relief in 2005-06 for contributions to an overseas pension scheme you can continue to get this relief on contributions in later years providing all the following conditions are met:

  • the contributions are made to the same pension scheme
  • any changes to the scheme rules made after 5 April 2006 correspond with the conditions for a scheme to be a registered pension scheme
  • the overseas pension scheme manager has agreed to tell HMRC how much of the lifetime allowance the member has used up when their pension savings are tested against the lifetime allowance

If you no longer qualify to get relief under the Transitional Corresponding Relief rules you may still be able to qualify for tax relief under the Migrant Member Relief rules.

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How to claim tax relief on pension contributions

If you complete Self Assessment tax returns you'll have to claim tax relief through your return. If you don't complete tax returns or you don't want to wait until the end of the tax year to get tax relief you can make a claim to HMRC.

Tax relief during the tax year

If your employer has agreed with HMRC to operate a modified PAYE agreement for their 'tax equalised' employees, you'll be getting tax relief when the contributions are made. You don't need to claim tax relief during the tax year. You'll still need to claim relief on your tax return as your relief using the modified PAYE agreement will be an amount estimated by your employer. Ask your employer if you're not sure if they operate a modified PAYE agreement.

If your employer doesn't operate a modified PAYE arrangement you'll need to make an in-year claim so that your tax code is changed to give you tax relief.

Completing a Self Assessment tax return

If you complete Self Assessment tax returns you'll need to claim relief under the 'Paying into registered pension schemes and overseas pension schemes' section. You should do this even if:

  • you've been given relief under a modified PAYE agreement
  • your tax code was changed during the tax year in response to an in-year claim

See form SA150 Tax Return Guide for guidance on completion.

Reclaiming tax if you've overpaid through your job

Find form SA150 How to fill in your tax return

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UK tax charges relating to overseas pension schemes

The following payments can be subject to UK tax:

  • unauthorised payments
  • trivial and winding up lump sum payments
  • serious ill health lump sums paid to a member age 75 or older
  • short service refunds
  • certain lump sums paid following the member's death

Tax on these payments will only be due if you're UK resident at the time of the payment, earlier in the same tax year or in any of the five previous tax years.

The exception to this rule is if the unauthorised payment was due to investment in taxable property.

The annual allowance and lifetime allowance rules apply to pension savings in the overseas pension scheme that qualifies for UK tax relief whether or not the member is UK resident.

Understanding annual allowance for pension schemes

Understanding the lifetime allowance for pension schemes

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More useful links

Technical guidance on migrant member relief

Technical guidance on double taxation agreement relief

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