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Pension Lifetime Allowance

How to stay within the limit to avoid a tax charge

If you’ve been diligently saving into a pension throughout your working life, you should be entitled to feel confident about your retirement. But, unfortunately, the best savers sometimes find themselves inadvertently breaching their pension lifetime allowance (LTA) and being charged an additional tax that erodes their savings.

If you are a high-income earner or wealthy individual, you could be putting too much into your lifetime pension and risk exceeding the pension lifetime allowance. The following questions and answers are intended to help you avoid this tax charge.

What is the lifetime allowance?

A: The LTA is a limit on the amount you can withdraw in pension benefits in your lifetime before you trigger an additional tax charge. By pension benefits, we mean money you receive from your pension in any form, whether that’s a lump sum, a flexible income, an annuity income or through any other method. This allowance applies to your total pension savings, which may be in different pensions.

How much is the lifetime allowance?

A: In the 2021/22 tax year, the LTA is £1,073,100. This allowance has now been frozen until April 2026.

What happens if you exceed the lifetime allowance?

A: Once you have received your full LTA in pension benefits, you will be required to pay an additional tax charge on any further benefits you receive. If you take your remaining benefits as a lump sum, you’ll pay a tax charge of 55%. If you take your remaining benefits as multiple withdrawals, you’ll pay a tax charge of 25% on each one.

How is the usage of your lifetime allowance measured?

A: Each time you access your pension benefits (for example, by purchasing an annuity, receiving a lump sum or establishing a flexible income), this is recorded as a ‘benefit crystallisation event’. There is an additional benefit crystallisation event when you turn 75, and finally, upon your death.

Is lifetime allowance protection available?

A: You can only protect your pension from the LTA if your savings were worth more than £1 million on 5 April 2016. You may be able to protect your pension savings up to £1.25 million, or up to the value of your pension on that date, depending on the type of protection you have.

Is it possible to avoid the lifetime allowance?

A: If you do not have LTA protection and you are approaching the limit, there are various actions you can consider. These include stopping your contributions (and, instead, investing your money into an alternative tax-efficient environment), changing your investment strategy or starting retirement earlier.

When should you seek professional advice?

A: The rules around the LTA are very complex and making the right decisions can feel difficult. Receiving professional financial advice will help to identify if you have a problem and offer different solutions to consider, based on a full review of your unique circumstances.

Let us help you make the most of your money – and your future

Everyone deserves a great retirement. Your goals and ambitions are unique to you and we want to help you get there. To discuss your retirement plans, please contact us. We look forward to hearing from you.

Peace Of Mind That You’re On The Right Track

How To Plan For A Confident Retirement To Live The Lifestyle You Want

Retirement might seem a long way off but the later you leave planning for it, the less chance you have of achieving the retirement you want. We all dream of how we’ll spend our retirement but that dream looks different for everyone.

Some people want to spend more time with their family, while others want to enjoy long holidays and see the world, or simply wish to be financially independent. No matter what your dreams are, they rely on having sufficient pension savings to achieve them and live comfortably.

Specific Retirement Goals

People who associate confidence with retirement are most likely to have specific retirement goals and know what steps they need to take to reach them. But sadly, some people don’t feel confident that they will have enough savings to live comfortably after they retire.

Many people have a fear of outliving their money, but most don’t have a clear idea of how much money they need during retirement. It’s important to remember that retirement doesn’t happen at a certain age, it happens when you have enough money to live on. And having this clear direction and understanding will give you peace of mind that you’re on the right track.

Do You Feel Confident About Your Retirement?

Pensions can seem complex and overwhelming, and there are many reasons you might lack confidence in your retirement plans.

  • You might be worried that you’re not saving enough, but don’t feel you can afford to save more
  • You might feel ready to retire now, but you’re not sure if you can rely on your current pension savings to provide enough money for the rest of your life
  • You might have experienced a change to your financial situation, including life events such as divorce, and have new concerns about whether you can save enough
  • You might have previously felt confident about your retirement plan, but the COVID-19 pandemic has derailed your savings

Don’t Suffer A ‘Horrible Shock’

Research shows that there is a significant difference in how confident people feel about retirement based on whether or not they have spoken to a financial adviser. 65% of UK adults who have obtained financial advice say they do feel confident that they will have saved enough for retirement, compared to only 41% of those who have not.

A positive retirement experience begins with a plan designed to help you live life on your terms. Your adviser will ask questions about your finances, personal circumstances and retirement goals, and create a plan that’s unique to you and will help you
reach the retirement you’re aiming for.

Providing Answers To Your Planning Questions

People who know where they’re going and how to get there feel more confident in their retirement plan. Your adviser will be able to answer these key points.

What Do I Need To Know?

  • How much you need to save for retirement
  • How to save tax-efficiently for retirement
  • How pensions work
  • The type of pension you should choose
  • The right amount to contribute to your pension
  • How to boost your pension pot
  • How your pension should be invested
  • How to withdraw money from your pension

Need To Know All Your Pension Options?

When it comes to financial planning, we listen so that we can fully understand your unique needs. If you don’t feel confident about how your retirement looks, don’t delay. Speak to us to review your options.

Wealth Creation

Where can you turn if you want to invest tax-efficiently?

Tax-efficiency is a key consideration when investing because it can make such an enormous difference to your wealth and quality of life. If you have an income of over 50,000 it doesn’t just push you into a higher income tax bracket, it also means that you’ll pay higher tax on capital gains and dividend income from your investments. So, it’s important to choose a tax-efficient investment vehicle that is appropriate for your particular investments goals and tax position.

Individual Savings Accounts (Isas)

ISAs come in various forms, including the Stocks & Shares ISA, for tax-efficient investing. You can invest up to 20,000 a year (tax year 2020/21) in a Stocks & Shares ISA, and all capital gains, interest growth and dividend income from these investments are protected from tax. If you’ve used your ISA allowance, you may wish to consider paying into accounts for your partner (who also has a 20,000 annual ISA allowance in this tax year) and your children (who have a 9,000 annual ISA allowance in this tax year). Bear in mind that the money will be in their names and will legally be theirs.

Pensions

Pensions are designed primarily for retirement saving and can usually be accessed from the age of 55. Not only do pensions offer protection from tax on capital gains, interest growth and dividend income (like ISAs), but you’ll also receive tax relief on your contributions. Higher rate taxpayers receive tax relief at 40%, while additional rate taxpayers receive 45%.

There is a limit on the pension contributions you can receive tax relief on, which in the current tax year is capped at 40,000 a year (or 100% of your salary if your salary is lower). But if you have contributed less than your limit in recent tax years, you may be able to pay in more this year.

If you have an annual income of over 200,000, you may have a lower limit on contributions and should obtain professional financial advice to assess your options. If you are approaching your Lifetime Allowance on pension savings, currently 1,073,100 (tax year 2020/21), another investment vehicle may be more tax-efficient.

Alternative Tax-Efficient Schemes

Options include:
• The Enterprise Investment Scheme (EIS), for investment in early-stage companies not listed on the stock exchange.
• The Seed Enterprise Investment Scheme (SEIS), for investment in start-ups raising their first  150,000.
• Venture Capital Trusts (VCTs), for investment in small, expanding companies. These are listed on the London Stock Exchange.

HM Revenue & Customs offers tax incentives through these schemes, including income tax relief, to encourage investment in small businesses. The incentives vary and are only suitable for sophisticated investors. You should always obtain professional financial advice.

Tax-efficient investment schemes are some of the most effective ways for investors to save their funds, or re-invest them to generate greater returns or diversify their investment portfolios.

Responsible Investing

Invest Today. Change Tomorrow

Responsible, sustainable and environmentally friendly investing is here to stay. But, while demand is growing among all age groups, genders and income bands, some savers and investors are missing their biggest opportunity for responsible investing, which is through their pension.

We all want to make responsible choices as more of us are becoming aware of global challenges, such as environmental issues, human rights and climate change. We’re also starting to care more about how our behaviours affect the planet and society.

Future Success

Taking ESG (Environmental, Social and Governance) factors into consideration when investing is becoming more mainstream. It is acknowledged that companies that act responsibly to their employees, the environment and the public have a better chance of future success than those that don’t. Investing in these companies is a logical approach financially as well as ethically.

Many pension holders understand this approach and see the value of it. In a recent survey, more than one-third of respondents said that the option to invest their pension only in sustainable companies is important to them. Nearly two-thirds said having clearly branded funds for investing in environmentally and socially responsible companies is important.

Pension Investments

The same survey suggests that pension holders feel that sustainable investing isn’t just important, but interesting. More than half of respondents said that a fund focused on clean energy and lowering carbon would make them more interested in their pension. A similar number felt that way about a zero-plastic fund.

But while pension holders feel these issues are important and interesting, that isn’t yet affecting the way they invest. Most people don’t manage their pension investments themselves, instead leaving their pension invested in the default options set by a provider chosen by their workplace. So, more than two-thirds of pension holders do not know how sustainable their pension is.

Environmentally Friendly

Many pension holders don’t know that they can choose their own funds, and therefore that they can choose sustainable or responsible funds. Around half are unaware of ways to ensure their pension is environmentally friendly.

Clearly, there is a large audience of individuals who would like to invest their pension more sustainably and responsibly but don’t know where to start. There are plenty of options, but without specialist experience, it can be difficult to select those that are truly responsible and environmentally friendly and will also deliver the financial return you’re seeking.

Investing With Purpose

Responsible investors essentially take responsibility for the impact that the companies they invest in have on the world. Speak to us about what responsible investing options are available in your pension scheme and for advice on how to help your money have the greatest impact. We look forward to hearing from you.

Reduce your Inheritance Tax Bill

Reduce your Inheritance Tax Bill

Even those who believe they have moderate wealth levels may still need to take action to minimise Inheritance Tax, particularly if they own property and have savings and investments.

Inheritance Tax is payable in the UK on death, and sometimes when you give away certain assets during your lifetime. It can be a great concern for individuals with wealth exceeding the current £325,000 nil-rate band (2020/21 tax year).

Naturally, you’ll want to pass on as much as possible to your loved ones, rather than paying 40% to HM Revenue & Customs (HMRC).

Are you worried your family could be left with an Inheritance Tax bill after you’re gone?

Here are 10 tips to pay less or avoid Inheritance Tax:

Potentially Exempt Transfers

One of the better-known ways to pass on wealth free from Inheritance Tax is to gift it more than seven years before your death. Of course, there is a degree of unpredictability in the outcome. If you were to die within seven years of making the gift, Inheritance Tax may be charged, though the rate will be reduced if more than three years have passed.

Personal Gifts

Gifts up to a certain value can be made free from Inheritance Tax, even in the last years of your life. Your allowance includes: large gifts totalling no more than £3,000; unlimited small gifts of up to £250; and wedding gifts of up to £5,000 for your children, £2,500 for your grandchildren, or £1,000 for others.

Gifts made within your regular pattern of income and normal expenditure (for example, quarterly payments towards a grandchild’s school fees from your annual income) can usually be made free from Inheritance Tax, although you may need to document this pattern for
three or more years.

Charitable Gifts

Gifts to registered charities can be made entirely free from Inheritance Tax, which can help you to reduce the size of your estate to within the Inheritance Tax threshold.

Additionally, if at least 10% of your total estate is gifted to charity, it will reduce the rate of Inheritance Tax payable on your remaining estate (above the nil-rate band) from 40% to 36%.

Insurance

It is possible to take out a life insurance policy written in an appropriate trust that can provide a lump sum on your death to be used to pay the resulting Inheritance Tax bill. If this policy is within a trust, the lump sum paid out will not count towards your estate.

Insurance can also be taken out when making large financial gifts to cover the Inheritance Tax bill if you were to die within the following seven years (for example, before they are excluded from your estate). This is called a ‘term assurance’ policy.

Pensions

Typically, though with some exceptions, pensions are excluded from the calculation of your estate and can be passed on free from Inheritance Tax. It is important to name a beneficiary to whom you wish to pass on your pension benefits.

It is also possible to make payments in your lifetime into another person’s pension, which will protect this money from Inheritance Tax. For example, you can set up a Junior Self-Invested Personal Pension for a grandchild under the age of 18 and pay in up to £2,880 a year. But they will not usually have access to this money until they reach age 55.

Discretionary Trusts

A discretionary trust can help you to reduce your Inheritance Tax liability by holding money in the name of your beneficiaries while you retain control. You can use your nil-rate band to pay in up to £325,000, which will be excluded from your estate after seven years. Funds above the nil rate band may attract a lifetime tax charge.

Loan Trusts

If you would like to protect your money in a trust but need to know you can withdraw it if you need it, it’s possible to loan money to a trust. You will always have the option to withdraw the original capital you loaned, but any growth on that capital will be protected within the trust from Inheritance Tax.

Discounted Gift Trusts

If you would like to earmark some wealth to be passed to a beneficiary or beneficiaries on your death, but you want any income generated to be paid to you in your lifetime, you can do this through a discounted gift trust. This will exclude the contents of the trust from your estate for Inheritance Tax purposes but still provide you with regular payments from it.

Business Relief

Business assets can usually be passed on either in your lifetime or after your death with Inheritance Tax relief of up to 100%. A business, interest in business or shares in an unlisted company will usually qualify for 100% Business Relief. Land, buildings and machinery related to the business will usually qualify for 50% Business Relief, as will shares controlling more than 50% of the voting rights of a listed company.

Agricultural Relief

If you own agricultural property (land or pasture used to grow crops or rear animals as part of a working farm), this can usually be passed on in your lifetime or after your death free from Inheritance Tax.

Time to Plan your Estate?

Inheritance Tax planning can be a complicated process, especially as rules and legislation seem to change every year. But with the right forward planning, it is possible to significantly reduce or even eliminate a potential Inheritance Tax liability. To identify the best ways to protect your assets for future generations, don’t delay. Contact us to discuss your options.

Pension Lifetime Allowance

How to stay within the limit to avoid a tax charge

If you’ve been diligently saving into a pension throughout your working life, you should be entitled to feel confident about your retirement. But, unfortunately, the best savers sometimes find themselves inadvertently breaching their pension lifetime allowance (LTA) and being charged an additional tax that erodes their savings.

If you are a high-income earner or wealthy individual, you could be putting too much into your lifetime pension and risk exceeding the pension lifetime allowance. The following questions and answers are intended to help you avoid this tax charge.

What is the lifetime allowance?

A: The LTA is a limit on the amount you can withdraw in pension benefits in your lifetime before you trigger an additional tax charge. By pension benefits, we mean money you receive from your pension in any form, whether that’s a lump sum, a flexible income, an annuity income or through any other method. This allowance applies to your total pension savings, which may be in different pensions.

How much is the lifetime allowance?

A: In the 2021/22 tax year, the LTA is £1,073,100. This allowance has now been frozen until April 2026.

What happens if you exceed the lifetime allowance?

A: Once you have received your full LTA in pension benefits, you will be required to pay an additional tax charge on any further benefits you receive. If you take your remaining benefits as a lump sum, you’ll pay a tax charge of 55%. If you take your remaining benefits as multiple withdrawals, you’ll pay a tax charge of 25% on each one.

How is the usage of your lifetime allowance measured?

A: Each time you access your pension benefits (for example, by purchasing an annuity, receiving a lump sum or establishing a flexible income), this is recorded as a ‘benefit crystallisation event’. There is an additional benefit crystallisation event when you turn 75, and finally, upon your death.

Is lifetime allowance protection available?

A: You can only protect your pension from the LTA if your savings were worth more than £1 million on 5 April 2016. You may be able to protect your pension savings up to £1.25 million, or up to the value of your pension on that date, depending on the type of protection you have.

Is it possible to avoid the lifetime allowance?

A: If you do not have LTA protection and you are approaching the limit, there are various actions you can consider. These include stopping your contributions (and, instead, investing your money into an alternative tax-efficient environment), changing your investment strategy or starting retirement earlier.

When should you seek professional advice?

A: The rules around the LTA are very complex and making the right decisions can feel difficult. Receiving professional financial advice will help to identify if you have a problem and offer different solutions to consider, based on a full review of your unique circumstances.

Let us help you make the most of your money – and your future

Everyone deserves a great retirement. Your goals and ambitions are unique to you and we want to help you get there. To discuss your retirement plans, please contact us. We look forward to hearing from you.

Goals-Based Investing

Are you giving yourself the best chance of success?

Before you start, defining any goals you may have will help you plan, budget and choose the right investments. Your goals might be around enhancing your current lifestyle, planning for your family or your own retirement. The sooner you start investing, the better off you will be. Match your long-term investment goals with your short-term lifestyle aspirations. When you have created your goals and time frames, define your budget. Be realistic about what you can afford to put aside for your investments. To help you stick to your budget, look at your cash management and put strategies into place. It’s well worth taking the time to think about what you really want from your investments. Knowing yourself, your needs and goals, and your appetite for risk is a good start.

How to get started checklist:

1. GOALS
Be clear about what you’re investing for. Investing is generally most appropriate for medium and long-term goals (at least five years). If you want access to your money before that, you might want to think about saving instead.

2. PAYMENTS
Before you start investing, first make sure that you can afford your essential living costs, as well as any debts. It’s also a good idea to make sure you have some savings to cover emergencies.

3. INVESTMENT RISK
Have a think about how much risk you feel comfortable taking with your money. You should also consider your other financial commitments when deciding how much risk to take. If you don’t want to or can’t take any risk with your money, then investing may not be for you right now.

4. TIMESCALE
The longer your money is invested, the more opportunity it has to grow in value and reach your goal. Each year, not only will the money you invest potentially grow in value, you’ll also potentially get growth on any previous growth. This is commonly known as ‘compounding’, and over longer time periods it can make a significant difference to the value of your investments.

5. WHAT YOU’LL GET BACK
The final value of your investments will depend on three main factors: how much you pay in, how your investments perform, and how long you’re invested for. Generally speaking, the more you pay in, the better your investments perform. And the longer you can keep your money invested, the more you’re likely to get back at the end.

6. MIX IT UP
Putting all your money in one type of investment can be a risky strategy. You can help reduce. that risk by spreading your money across a mix of investment types and countries. Different investments are affected by different factors: economics, interest rates, politics, conflicts, even weather events. What’s positive for one investment can be negative for another, meaning when one rises, another may fall.

7. BE TAX-EFFICIENT
You can do this by putting your money into your pension or using up your Individual Savings Account (ISA) allowance.

8. REVIEW, REVIEW, REVIEW
Make time to regularly review your investments to check they’re on track to meet your goals.

Time To Determine Your Investment Objectives?

A sound investment plan begins by determining your objectives while understanding any limitations or constraints that may exist. While most objectives are long-term, a plan must be designed to persevere through changing market environments and be able to adjust for unseen events along the way. To discuss your options, please contact us.

Passing on Pension Benefits

Providing For Your Loved Ones After Your Death

If you have not yet accessed your pension, or you have made withdrawals from your pension but left some money invested, it can usually be passed to a beneficiary after your death. The specifics, for example, in what form they will receive these death benefits and whether they will pay tax, will depend on your individual circumstances (such as your age) and the scheme rules.

Annuity Death Benefits

If you have used your pension savings already to purchase an annuity, this can only be passed on to a beneficiary in certain cases, which must be established when the annuity is purchased. A typical lifetime annuity only provides a guaranteed income for the lifetime of the annuity holder, regardless of how long this is.

For your annuity income to go to a loved one after your death you must choose either an annuity with a guarantee period (which provides an income for a set period, whether you are still living or not) or a joint life annuity (which provides an income for life for whichever partner lives longest).

State Pension Inheritance

In certain circumstances, your partner can continue to receive your State Pension after your death. For example, if you’re a man born before 1951 or a woman born before 1953, and you’re receiving the Additional State Pension, this can be inherited by your partner (husband, wife or registered civil partner) after your death if they have reached the State Pension age.

Providing An Income Or Nest Egg For Your Loved Ones To Enjoy

You’ve worked and saved throughout your life so that your pension will provide you with enough to live on in retirement. Now, thanks to changes in the way that pensions are taxed, more of your fund can survive your death and provide an income or nest egg for your loved ones to enjoy, long after you are gone. Contact us to find out more.

Pension Options

Planning your financial future and how to get there

One thing retirement is not, is an age. Not anymore, anyway. Gone are the days of being told to stop working one day and pick up your State Pension the next.

Today you have new pension freedoms to decide when and how you retire.

Pension freedoms in 2015 fundamentally changed the rules for cashing in your pensions. Current rules allow you far more freedom and flexibility over how to take your pension than in previous generations.

If you’ve saved into a defined contribution pension scheme during your working life, you’ll eventually need to decide what to do with the money you’ve saved towards your pension when you retire, or at age 55, whichever is sooner.

Leaving your pension invested

At the other end of the scale, you have the option to withdraw all the savings in your pension at once. But this option has serious drawbacks, as clearly you won’t be able to take an income from your pension if you’ve withdrawn all the money. You may also receive a significant tax bill
to pay. While the first 25% of your pension can be taken tax-free, you’ll pay income tax on the rest. It would be unwise to do this without obtaining expert professional financial advice.

Withdrawing your entire pension

At the other end of the scale, you have the option to withdraw all the savings in your pension at once. But this option has serious drawbacks, as clearly you won’t be able to take an income from your pension if you’ve withdrawn all the money. You may also receive a significant tax bill
to pay. While the first 25% of your pension can be taken tax-free, you’ll pay income tax on the rest. It would be unwise to do this without obtaining expert professional financial advice.

Withdrawing a portion of your pension

You can withdraw a lump sum from your pension and leave the rest invested to continue growing. Up to 25% of the lump sum will be tax-free and the rest will be taxed as income. So, the amount of tax you’ll pay will depend on your other sources of income.

Buying an Annuity

An annuity is a guaranteed income for life (or for another set period). The income you’ll receive depends on how much you have in pension savings with which to buy an annuity, as well as some other factors, such as your health. If you choose to buy an annuity, you can also take up
to 25% as a tax-free lump sum when you start your retirement.

Taking a Flexible Income From your Pension

Finally, you can take a regular income from your pension while it remains invested and has the opportunity to grow. You can take this income at whatever rate you want, but you are responsible for ensuring it lasts throughout your retirement years. Your professional financial adviser will help you establish a sustainable withdrawal rate and make sure that the rest of your pension is invested appropriately.

Understanding Your Options

If you have a defined contribution pension, at some point you’ll have to decide how you’re going to take it. But if you’re still working in your 50s or 60s, now’s the perfect time to make sure your retirement savings are on track to provide you with the sort of lifestyle you want when you stop work. To find out more, please contact us.

Citizen vs Resident – Understanding the difference

The contrasts between citizenship, residency and tax residency arent always obvious. However, they can make a profound difference to your living costs and security as an expat.

Lets clarify each status and the associated rights they afford.

Defining Citizenship Rights

As a UK national, youll have automatic British citizenship. In essence, your allegiance is to your country of birth, which has several rights (and an obligation or two).

British citizens can:

  • Leave and re-enter the country whenever they wish, without needing a permit.
  • Vote, and hold positions in public office.
  • Claim rights to things like social security benefits and healthcare.

We mentioned obligations, and as a citizen, you can be called on to serve on a jury. Aside from the need to comply with laws and national regulations, there arent any other fundamental requirements.

Citizenship by Naturalisation

You can hold a passport for a different country from the one you were born in by applying for citizenship through naturalisation or investment.

Citizenship is usually granted because:

  • You have lived in the country for a minimum number of years.
  • You have been a permanent resident for a requisite period.
  • You have family members who hold citizenship.
  • You have been granted citizenship through an investment programme.

Many countries require citizenship applicants to take a language test or pass examinations in local history or customs. You can also be asked to attend an oath swearing ceremony. Once you have become a citizen, its unlikely that status could ever be taken away – unless you renounce your citizenship or commit a serious crime that gives the government a reason to strip your rights.

The Difference Between Residency and Citizenship

The most significant contrast between residency and citizenship is that you dont have a second passport as a resident. There are limitations on things you can do. For example, a resident cannot vote or hold public office positions, but a citizen can. However, an expat living in another country as a permanent resident has pretty much the same freedoms as citizens, and can work, live, start a business and use all public services.

Permanent residency is often available after five to seven years of living in the country. Youre still a resident, as opposed to a citizen, but wont need to renew your permit.

If you wanted full citizenship rights, including a domestic passport, youd need to apply for citizenship after a minimum number of years.

The Difference Between Being a Resident and a Tax Resident

To complicate matters, you can be a tax resident in two countries or hold a residence permit without being considered a tax resident. Tax residency is a technical definition used to determine which country you are obliged to file returns and pay taxes in.

As a rule of thumb, you become a tax resident if:

  • You live in a country for 183 days (six months) or more in the year.
  • Your primary residence or business is in the country.
  • Your income derives from work of trade within the same country.

Now, its worth pointing out that you can be a tax-resident in two countries simultaneously. Say you have a primary home in two places and spend an equal six months in each; you could potentially fit the criteria for tax residency in both.

In that situation, your tax position will depend on factors such as:

  • Double tax treaties – many countries have bilateral agreements not to tax the same individual twice on the same income or activities.
  • Tiebreaker rules – these look closely at your activities and income structure to make a call on which country you are a tax-resident of if you meet the criteria for both.

Understanding your tax residency status is crucial for expat financial planning.

If you intend to live in a country most of the time and wish to take advantage of beneficial tax regimes, its worth seeking guidance to ensure you fit soundly within the rules. You may also have to continue filing returns with HMRC in the UK and can be liable for British taxes on some income, depending on the nature of the revenue and where it originates.

Residency in Multiple Countries

Just as expats can be dual tax-residents, they can also be dual residents and dual citizens – although not all at once.

  • Dual citizenship means you hold two passports. Most countries recognise dual citizenship, although some dont permit foreign nationals to enter with two passports.
  • Dual tax-residency means you meet the rules for tax-residency in two countries, and therefore need to apply double tax treaty rules to establish the right place to declare and pay your taxes.
  • Dual residency means you hold two simultaneous resident permits for two different countries.

Note that understanding tax treaties can become highly complex, so you should seek professional advice to ensure your affairs are properly managed.

The Rules on EU Travel as a UK Citizen

One of the common questions the Lawsons Equity team deals with is confusion over travel permits, tourist visas, residency rights and long-term citizenship eligibility for EU countries. The good news is that if you were lawfully resident in a European country before Brexit, you have ongoing rights protected by the Withdrawal Agreement. However, you may need to re-register for residency or apply for a permit, even if you havent been required to carry one before.

Now, the Schengen area offers short-term travel access with the same rules across the bloc. You can travel to an EU member country for up to 90 days of any 180, without needing a visa or tourist permit. That 90-day limit applies throughout the participating countries, so a series of shorter trips would all count towards the limit.

However, you will need a residence permit to move to the EU from now on. As a UK citizen, you arent an automatic EU citizen anymore, so that would involve a longer process, which well run through below.

Securing Citizenship Rights as an Expat

If youre interested in the typical system to progress from residency through to citizenship, this is how it usually works:

  • An expat applies for a residency permit to live in another country for a fixed number of years.
  • That permit is usually renewable and can be transferred to a permanent residency permit after a set period.
  • Usually, after five years or more, a permanent resident can apply for full citizenship.

Long-term citizenship rights are the most secure, but if you arent sure whether you intend to live permanently in another country, permanent residency affords most of the rights and entitlements available. If you are keen to apply for citizenship status, a final option is to look at citizenship by immigration programmes. You can obtain a second passport by donating a value to the government or investing in real estate or business over a threshold – depending on where you wish to live.

The Portuguese Golden Visa is one such initiative, offering a renewable residency permit for two years with an investment of €500,000 (depending on the area). After five years, permit holders can apply for permanent residency and citizenship, although the latter requires evidence of ties with the country and basic language abilities.

Understanding your position as a tax resident, resident or citizen can be crucial when looking at factors such as inheritance planning. If youre in any doubt, its essential to review your current visa or permit and look at the available options. For help, support and advice on any aspect of trustworthy and reliable financial support, get in touch with our team at Lawsons Equity today.

Lawsons Equity – Financial Advisors Malta

As a privately owned firm with no ties to any products or providers, accredited and regulated to the highest of standards, Lawsons Equity provides tailored, transparent advice for expats.

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here.

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