Overseas transfer allowance: does it apply to QROPS transfers?

Each QROPS transfer is tested against the overseas transfer allowance, usually £1,073,100: 25% is due on any excess, or on the whole sum if not exempt.

How much is the overseas transfer allowance for a QROPS?

GOV.UK gives the overseas transfer allowance as usually £1,073,100, and says it may be higher for someone with a protected allowance. HMRC's rates page lists the same standard figure for 2025 to 2026 and 2026 to 2027. The allowance arrived with the end of the lifetime allowance on 6 April 2024: Finance Act 2024 inserted the new rules for the 2024-25 tax year onwards, and only transfers made on or after 6 April 2024 are counted.

Matching earlier transfers and old lifetime allowance figures to the new limit is fiddly. An FCA-authorised adviser would begin from your dates and previous transfers on a free call that you can arrange using the form on this page.

The test applies to a transfer out of a UK registered pension scheme. AJ Bell's SIPP key features, for one, tell members that a test against the overseas transfer allowance must be carried out before a transfer to a QROPS is made.

What happens above the allowance: the 25% charge

GOV.UK says no tax is due if you live in the country where the QROPS is based and the transfer is within your available allowance. Otherwise, the charge turns on whether an exemption from the overseas transfer charge covers your move.

• Exempt, but over the allowance: 25% is charged on the excess above the allowance only.
• Not exempt: 25% is charged on the total amount you are transferring.

HMRC's Pensions Tax Manual adds that an excess is taxed at a rate of 25% "even in circumstances where the transfer is otherwise excluded from the overseas transfer charge". The scheme administrator should deduct the tax from your funds before the transfer, and you report the charge through Self Assessment even when it has already been paid. The charge is worked out on the "transferred value", which is not simply the total of what leaves the scheme. Everything else about the charge sits on HMRC's QROPS rules, and the QROPS guide covers the wider tax picture.

How much of your allowance is already used?

Your available allowance is the full allowance less the transferred value of earlier transfers to a QROPS, and it cannot fall below nil. At the first such transfer on or after 6 April 2024, HMRC's manual also takes off 100% of the lifetime allowance you had used before that date, again not below nil. The manual reduces that deduction in two cases: amounts tested at 75, if you reached 75 before 6 April 2024 and became entitled to no lump sum from then until 5 April 2024; and amounts designated to drawdown before the change (benefit crystallisation event 1), which can be taken off.

One worked example in the manual has Rakib using 60% of a standard lifetime allowance before the change: £643,860 comes off £1,073,100, leaving £429,240. After a £200,000 transfer, £229,240 remains. In a second example, Florence had used all her lifetime allowance, but £804,825 of that was money designated to drawdown, so £804,825 of her allowance is still available. Treat both as HMRC's illustrations of the method, not as forecasts for anyone.

Your scheme administrator must tell you how much allowance a transfer used up and whether a charge is due. Which of your old figures count is a question for your own records; the adviser can work through it when they ring after you send the form.

Does it use up your lump sum and death benefit allowance?

No, although the two are set at the same amount. The legislation says a member's overseas transfer allowance "is an amount equal to the member's lump sum and death benefit allowance", yet HMRC's Autumn Budget 2024 policy paper, setting out why the EEA and Gibraltar exclusion was ending, states: "The Overseas Transfer Allowance does not interact with the other allowances." Its concern was that a lump sum paid from a QROPS is tested only against that QROPS's own lump sum allowance, so a UK resident using an EEA or Gibraltar QROPS could benefit from more than one tax-free allowance.

The old lifetime allowance is the link that does carry over, through the deduction above. The lump sum allowance itself, £268,275 according to HMRC, is covered on QROPS tax-free lump sums, with the lump sum and death benefit allowance and the lifetime allowance and its replacement on their own pages.

What protections can lift the allowance?

Because the overseas transfer allowance follows the lump sum and death benefit allowance, a protection that lifts the second lifts the first. HMRC's manual says protections increase an individual's allowances above the standard figures. The types it lists are primary, enhanced, fixed (2012, 2014 and 2016) and individual (2014 and 2016) protection. It says protections or enhancements may also be available after a divorce where pension credit rights are acquired, in some international non-residence situations, and on transfers from a recognised overseas pension scheme into a UK registered scheme.

Read more on primary, enhanced, fixed and individual protection, one page each. For benefits taken under a protection, the manual says the scheme administrator may ask for a copy of your certificate, so keep it, or HMRC's reference number, with your transfer papers.

How the exemptions and the allowance work together

An exemption and the allowance do different jobs, so meeting one does not settle the other. Three points follow from that.

• The manual says the exclusion conditions do not apply if you did not give the required information before the transfer. Then the whole transfer is charged.
• An exempt transfer still counts towards the allowance used, because the legislation adds up every earlier transfer of this kind.
• If you move countries within 5 years, GOV.UK says you pay 25% tax on the transfer when you have moved away from the QROPS's country. If you become entitled to a refund of a 25% charge, the legislation then tests that transfer against your allowance, so any excess can still be charged.

HMRC's manual limits the old EEA and Gibraltar exclusion to a transfer completed before 30 April 2025 on a request made before 30 October 2024, so it cannot cover a transfer made now. Whether your own move is exempt is the point to check before money leaves; the conditions are on the HMRC rules page, and whether a QROPS is a good idea covers the wider decision.

What else readers ask about the QROPS allowance

Are QROPS subject to the lifetime allowance?

No. The standard lifetime allowance was abolished from 6 April 2024, according to HMRC's rates page. Lifetime allowance used before then still reduces the new allowance at a first transfer.

Is a transfer from my SIPP tested against it?

It is tested like any transfer from a registered pension scheme, and a SIPP provider such as AJ Bell says so in its key features. Ask your provider how it runs the test, and see what a SIPP is.

Is the allowance the same in 2026 to 2027?

HMRC lists £1,073,100 for both 2025 to 2026 and 2026 to 2027. Protections can make an individual's figure higher.

Can I split the allowance across several transfers?

Yes. Each transfer to a QROPS on or after 6 April 2024 uses part of it, and the legislation adds their transferred values together; what is left cannot fall below nil. Once nothing is left, an otherwise exempt transfer pays 25% on its whole transferred value.

Do the allowance rules apply to a transfer I made before April 2024?

Not as a transfer counted against it: the legislation counts only transfers made on or after 6 April 2024. Lifetime allowance you used before that date still comes off at your first new transfer, and an older transfer can still be charged if your circumstances change within its relevant period, which HMRC's QROPS rules explain.

Checking your own allowance before a transfer

Your allowance, any protection and where you live all feed in. For pensions with safeguarded benefits, the scheme has to confirm you received appropriate independent advice, except where their transfer value is no more than £30,000, and the FCA and The Pensions Regulator believe most people are better off keeping a defined benefit pension; final salary pensions are explained separately. Check any scheme against the FCA's pension scams page too.

Before any money moves, send in the form for the call-back, and keep your transfer history and protection papers to hand. For the basics of the tax rules, start with pension tax relief.