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Expats could lose out on tax free cash due to A-day, says Clerical Medical

Britons working abroad may lose out on tax relief on their savings because of A-day changes, says Clerical Medical says.

Prior to A-day people saving for their retirement could take advantage of the basis year rule where pensions contributions could be based on earnings in the current tax year or any one of the previous five tax years.
But since A-day the basis years rule no longer applies and tax relief on personal contributions is only available on 100 per cent of taxable UK earnings for that tax year, or £3,600, whichever is the greater.
Clerical Medial Financial Planning manager Steve Meredith says many expats will be oblivious to the changes and continue paying the same contributions and believe they are eligible for tax relief on the full contribution.
He says: “Before A-day, many people paid contributions according to the basis year rule which no longer exists. Now the maximum contribution with tax relief is 100 per cent of UK relevant earnings so where there are no relevant earnings, tax relief equates to 100 per cent of nothing.”
“Additionally, not every working expat who has no UK taxable earnings can fall back on the £3,600 earnings threshold because in order to claim this for tax relief a pension scheme must have been in place prior to the individual leaving the UK.”
“Most people won’t realise there has been this change and may continue paying the amount they’ve always done. thinking they are eligible for tax relief on the full contribution.”
But Hargreaves Lansdown head of pension research Tom McPhail says: “This will only be relevant to those that have moved abroad in the last five years and have not been offered membership of an overseas pension scheme so I don’t think many people will be affected.”


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