Expats warned about breaching tax allowance

Expats warned about breaching tax allowance

UK expats living in the Gulf are being urged to check if they are breaching the pensions lifetime allowance limit.

Financial advice firm Hoxton Capital Management, which has offices in London and Abu Dhabi, has found that a third of the clients its advisers speak to don’t know what the lifetime allowance is.

Chris Ball, Hoxton’s managing partner, explained that many expats in the United Arab Emirates work in sectors that traditionally have offered generous pension schemes back in the UK – for example, energy, construction and aviation – which makes them more likely to be affected by the allowance limit.

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People working for oil and gas companies could be the most at risk, Mr Ball warned.

The lifetime allowance – the limit on the amount of money that can be saved in a pension without triggering a tax charge - currently stands at £1,055,000 and increases yearly in line with inflation.

Mr Ball said: "Just under a third of the people we speak to know what the lifetime allowance is.

"Those who know what it is are typically aware of where they stand. However, we frequently speak to people in the oil and gas sector who have breached the lifetime allowance, some of whom have breached it by substantial margins."

According to Hoxton Capital Management, an estimated 350,000 UK expats currently live in the Gulf.

Mr Ball stated: "If an expat finds that they are already in breach of lifetime allowance relief, our advice is for them to check if they are eligible for protection."

This allows the saver to protect the allowance from further reductions, but the saver can no longer contribute to their pension or it becomes void. The current protection in place is from 2016 at £1.25m.

He added: "If they haven’t paid in to their pension since April 6 2016 they can apply to increase their lifetime allowance limit.

"Failing this, if they are within the European Union, transferring their pension to a Qualifying Recognised Overseas Pension Scheme could have potential benefits.

"If, however, an expat is not yet in breach but feels that they could become so, our advice is to stop paying in if they haven’t already done so, and again, if it is a viable option, to look at a Qrops to crystallise the benefits before they are in breach of the lifetime allowance."