Do you have a UK registered pension and are you a tax resident in Tanzania?

If so, and your pension remains in the UK, you should be aware of your possible UK tax obligations. Furthermore, benefits could be available should you transfer these pension funds out of the UK to other secure jurisdictions under HMRC’s favourable Qualifying Recognised Overseas Pension Scheme (QROPS) regime.

If you leave your pension in the UK

If you leave your pension in the UK

From 6 April 2006 a single set of rules came into effect. Under this system, the tax treatment for all types of approved schemes, including occupational schemes, small self-administered schemes, personal pensions, self-invested pension plans and retirement annuity contracts have been amalgamated into the rules for Registered Pension Schemes. These can be either Defined Benefit or Defined Contribution (DC) Schemes.

Income Tax (UK) during the member’s lifetime

Income Tax (UK) during the member’s lifetime

From 6 April 2015, more flexibility was introduced in respect of how you can access UK DC savings. Generally 25% can be taken UK tax free and the remaining 75 % (whether income from an annuity, drawdown, or lump-sum) will be taxable at your marginal rate of UK tax (current top rate 45%).

UK residents are liable to UK tax on such income and, generally, non-UK residents are subject to UK income tax on UK source income too. Therefore, if you are non-UK resident and receive a payment from a UK Registered Pension Scheme, assuming the payment is not within your 25% tax free amount, it is liable to UK tax at your marginal rate, unless a Double Tax Agreement (DTA) with your country of residence and the UK provides exemption from UK tax on such income. Tanzania has no DTA with the UK.

Pension benefits

Pension Death Benefits Payment – UK Tax

From 6 April 2015, the UK tax treatment of benefits from DC schemes on death depends, amongst other things, on the age of the member at the time of death (i.e. pre or post 75). From this date, generally, there should be a lower UK tax cost on passing pension value to heirs on death. However, that said there is still a possible current tax rate of up to 45%.

For those that are non-UK resident and have a QROPS the UK tax cost on succession can be less.

Gibraltar QROPS

Gibraltar QROPS

Gibraltar has no DTA with Tanzania, therefore the QROPS pension payments to you would be taxable in
Gibraltar, currently at a rate of 2.5%.

No UK income tax if non-UK resident (for 5 tax years + or total withdrawals are below £100,000).

No Gibraltar Inheritance Tax.

Protection from UK IHT.

Protection from UK death benefit charges, if non-UK resident (and non-UK resident for the last 5 years + before payment).

Malta QROPS

Malta QROPS

Malta has no DTA with Tanzania, therefore the QROPS pension payments to you would be taxable in Malta,
currently at rates of up to 35%.

No UK income tax if non-UK resident (for 5 tax years + or total withdrawals are below £100,000).

No Maltese Inheritance Tax.

Protection from UK IHT.

Protection from UK death benefit charges, if non-UK resident (and non-UK resident for the last 5 years + before payment).

Tax Options

Leave the Pension in the UK

Leave the Pension in the UK

If the pension remains in the UK, then the UK pension income should be taxable in the UK (at up to 45%). No tax initially in Tanzania on payments, however once the total received in pension payments exceeds the total contributions made to the pension, Tanzanian tax (at up to 30%) may be due. Consideration may be given to not remitting the income to Tanzania as this could affect the tax basis. Furthermore, the fund remains exposed to the UK death benefit charges.

Gibraltar QROPS

Transfer to a Gibraltar QROPS

Transferring to a Gibraltar QROPS for non-UK residents (5 years +) can alleviate UK tax on payments (at up to 45%) with 2.5% Gibraltar tax on payments. No tax initially in Tanzania on payments, however once the total received in pension payments exceeds the total contributions made to the pension, Tanzanian tax (at up to 30%) may be due. Consideration may be given to not remitting the income to Tanzania as this could affect the tax basis. Furthermore, the QROPS can protect from the UK death benefit charges if non-UK resident (5 years +) and there is no Gibraltar IHT.

Malta QROPS

Transfer to a Malta QROPS

Transferring to a Malta QROPS for non-residents (5 years +) can alleviate UK tax on payments (at up to 45%) with up to 35% Malta tax on payments and no tax initially in Tanzania on payments. However, once the total received in pension payments exceeds the total contributions made to the pension, Tanzanian tax (at up to 30%) may be due. Consideration may be given to not remitting the income to Tanzania as this may be sufficient to relieve any tax burden. Furthermore, the QROPS can protect from the UK death benefit charges if non-UK resident (5 years +) and there is no Maltese IHT.

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This general information has been provided on the basis of our understanding of the current legislation in the UK, Gibraltar & Malta as of April 2015. Should any of the information provided be inaccurate, incomplete or misleading, we take no responsibility for any reliance placed on it. We recommend that individuals always seek specialist multi-jurisdictional (where relevant) tax advice so that their individual circumstances can be fully considered.