How Tax Residence Impacts UK Savings And Pensions

Simply leaving Britain to live or work overseas for a stretch of time does not make you non-resident for tax.

That statement may come as a bit of a surprise, but expats do not decide to become non-resident, a set of rules decides the issue for them.

The rules are laid out in the statutory residence test.

The rule of thumb is if you are British and move overseas but keep a home, a passport, a driving licence and other connections, then you are an expat but you are unlikely to be non-resident for tax.

If you have broken all those connections and your permanent home is overseas, you are still an expat but are likely to be non-resident for tax.

What is an expat?

Technically, tax law ignores the term ‘expat’ but assigns a lot of meaning to the phrase ‘non-resident’.

Once the statutory residence test has placed you in the non-resident category, then wave goodbye to any tax breaks you can expect on your investments and savings in the UK.

Unfortunately, you no longer qualify for tax relief on an ISA or pension contributions, among other financial benefits.

You can continue to put money into them, but the main loss is any tax boost on what you pay into the pension.

As a non-resident, you keep these tax breaks, so despite living overseas, you still gain pension contribution relief, for instance.
As an expat expecting to return home, consider opening a SIPP pension and still pay into an ISA if you wish.


Non-residents gaining nothing from the UK should consider a local savings account where they live and maybe a QROPS offshore pension.

These work in much the same way as a SIPP in the UK, but come with a few supercharged options.

Most QROPS pay out up to 30% of the fund tax-free – more than the 25% tax-free lump sum offered by onshore pensions.

They also have a wider range of investment choices and pay benefits in a choice from several major currencies.

They can also come with flexible access on the same terms as the UK.

However, the UK government will slap a 25% overseas transfer charge on the fund if the expat saver does not live in the same financial jurisdiction as the QROPS is based, unless the pension is in Europe, where the provider and saver can live in different countries if they are both in the European Economic Area.

Further related articles can be found following the links below

Leave a comment