Hi - have just read the new tax rules coming in this year and not sure how this works. If you are in receipt of a regular pension, this would appear to be taxed as income on the usual scales so that’s OK. However if you have a SIPP which is also a pension but you only take the growth element once a year in one payment is this classed as investment income taxed at 30%? Seems a bit unfair if that is the case or am I reading it incorrectly?
The answer Lynne is no to it being taxed as investment income, my pension here in France is financed by my Sipp and I change the amount that I withdraw to suit my gains or loses every year and I just enter it as Pension income.
Thanks Michael - but if your gain is more than you decide to take as pension eg the growth is 25k but you only decide to take say 18k to be tax efficient, do you have to declare the additional 7k as investment income?
No - because the 7k is simply an unrealised gain maintained within the fund. It doesn’t become taxable until withdrawal. The amounts of tax and social charge liability will very much depend on your overall tax set-up and residency status. You may find that a UK SIPP is not the most tax efficient vehicle for a French resident. Best to take some professional advice.
Out of interest - which new tax rules are you referring to?
Thanks Simon, that makes sense - just a bit confusing as the assurance vie contract gains are charged on the full amount of growth even if left in the contract. Have taken advice and they suggested the SIPP rather than a QROPS. The tax rules are the new level effective this January which include the new wealth tax regimes - I read them on the Connexion I think…
That’s wrong Lynne - AV gains are only taxable once realised / withdrawn - only the growth potion of any withdrawal is taxable (less any applicable abattements). Unless of course you’re talking about the now defunct wealth tax regs i.e. total fund values forming part of your total asset worth. Anyway - I suggest you go back to your tax / financial adviser - obviously some confusion somewhere!
No I wasn’t clear - social charges are paid on the growth element, appreciate tax is only charged when a withdrawal is made. I was just surprised that given this situation, that you don’t have to declare the full growth on a SIPP but happy if that is the case.
Lynne both income tax AND social charges are only paid on the growth element of AV withdrawals (less any applicable abattements). Nothing is charged on funds left untouched within AV policies - except under the now defunct ISF rules. Please go back to your financial bod for clarification. I think you may be getting confused with the new flat rate tax of 30% applicable from 1 Jan 2018 on growth withdrawals from AV funds invested after 27 Sep 2017 - again both individual and joint fund limits apply to the new taxation.
Also looked into transferring my SIPP funds into a QROPS, There are certain advantages but the biggest no-no was the administration charges which varied from 3.2% to 5%, compared to the 1.2% that I pay in the UK.
The other downside was the very poor choice of investment opportunities compared to the vast choices of a UK SIPP.
Defo paid social charges for last 2 years - what are the ISF rules please.
Lynne that’s a shame - you defo need to speak to your financial advisor. ISF (Wealth Tax) had been replaced by IFI this year and is well documented on line.