Tax Free Lump Sum
Posted: 17 Jul 2019 18:47
Hi All,
We are hoping to retire to Cyprus in the next few years.
The plan is to establish residency before BREXIT.
Get our MEU1 while renting, then buy a place when we have explored all the areas of the country.
My wife to be plans to retire by the time we buy the property.
I plan to carry on working a few more years and will commute back to the UK to work.
I will probably spend more time in the UK.
The plan is to carry on working, then using some of my current Defined Contribution pension + a small RAF pension to tide me over until I am 65.
I am almost 54 and plan to work until at least 57, more probably 60.
As I understand it, you automatically become Tax resident in Cyprus if you spend 183 days there.
I can currently take 25% of my pension as a tax free lump sum (U.K. tax rules).
If I am a Cypriot tax payer, this is no longer possible, so I am paying tax when I do not need to.
So I imagine the way forward is to avoid spending 183 days in Cyprus prior to drawing the 25% ?
I can then use my cash in the bank + the U.K. tax allowance of £12,800 to perhaps give me an annual income of £19,000 (so draw £12,800 out of my pot and top up £6,200 from savings in bank until I hit 65).
But my next dilemma comes at 65 - I plan to defer my old Final Salary pension until 65 (my normal retirement date), otherwise I lose value by drawing early.
But I put a lot of money into AVC contributions, with the aim of taking a Tax free lump sum on this.
If by 60, I am classed as a Cypriot Tax payer, can I spend less that 183 days in Cyprus and more than 183 in the U.K. (Long holiday) and become UK Tax resident again for one tax year ?
Then draw the 25% tax free lump sum, before moving back to normality and the house in Cyprus.
Unfortunately the AVC's and pension are linked, so I cannot take the AVC'S earlier.
My only other option is never to spend more than 183 days in Cyprus between turning 59 and 65.
Surely people must move back and forth between tax regimes.
Hoping someone can advise
We are hoping to retire to Cyprus in the next few years.
The plan is to establish residency before BREXIT.
Get our MEU1 while renting, then buy a place when we have explored all the areas of the country.
My wife to be plans to retire by the time we buy the property.
I plan to carry on working a few more years and will commute back to the UK to work.
I will probably spend more time in the UK.
The plan is to carry on working, then using some of my current Defined Contribution pension + a small RAF pension to tide me over until I am 65.
I am almost 54 and plan to work until at least 57, more probably 60.
As I understand it, you automatically become Tax resident in Cyprus if you spend 183 days there.
I can currently take 25% of my pension as a tax free lump sum (U.K. tax rules).
If I am a Cypriot tax payer, this is no longer possible, so I am paying tax when I do not need to.
So I imagine the way forward is to avoid spending 183 days in Cyprus prior to drawing the 25% ?
I can then use my cash in the bank + the U.K. tax allowance of £12,800 to perhaps give me an annual income of £19,000 (so draw £12,800 out of my pot and top up £6,200 from savings in bank until I hit 65).
But my next dilemma comes at 65 - I plan to defer my old Final Salary pension until 65 (my normal retirement date), otherwise I lose value by drawing early.
But I put a lot of money into AVC contributions, with the aim of taking a Tax free lump sum on this.
If by 60, I am classed as a Cypriot Tax payer, can I spend less that 183 days in Cyprus and more than 183 in the U.K. (Long holiday) and become UK Tax resident again for one tax year ?
Then draw the 25% tax free lump sum, before moving back to normality and the house in Cyprus.
Unfortunately the AVC's and pension are linked, so I cannot take the AVC'S earlier.
My only other option is never to spend more than 183 days in Cyprus between turning 59 and 65.
Surely people must move back and forth between tax regimes.
Hoping someone can advise