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Certain locations are best for tax-free payouts, what about Dubai?
18 June 2014
| Last updated on 14 May 2018
However, with this new freedom, the tax bill for pensioners could be massive as HMRC stands to pocket 45% of everything over £150,000. So how can pensioners reduce the impact of tax on their pension pot? Is taking the pension offshore a viable option?
Experts believe transferring the pension pot offshore will allow the pensioners to have the funds almost tax-free. Certain locations are best for tax-free payouts, but is there a catch?
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Dubai – Sun, Sea, and Tax-free
If you take your pension to Dubai, the tax-rate is zero. With careful management of your pension fund it is possible to get access to your entire retirement fund tax-free. The use of phased drawdown and the UK’s high personal allowance makes that possible with a Self-Invested Personal Pension (SIPP).
Although this is a viable option, experts warn that there is no chance that HMRC will let you transfer the money offshore and take it tax-free if you plan on returning to the UK anytime soon.
This means that you will be charged the full amount of tax if you return to live in the UK at any time within the following five years.
If you move your pension to an offshore tax haven such as Dubai or Gibraltar, you will have to establish your residency there for a minimum period of five years.
