As of 6 April, tax will be applicable to 100% of pensions paid from abroad to people living in Britain. Previously, the system only taxed 90% of the incoming pension which allowed for such expenses as exchange charges and international phone calls or travel to deal with the pension.
Reasons for the increase include simplifying the system – i.e. removing the need for self-assessment forms to be completed each year – and helping to prevent tax avoidance. I think the main reason though that the government has implemented this is to increase the revenue received by the Treasury. Personally, I’m not sure how significant this revenue will be, certainly nothing compared to the tax revenue received from the pension freedoms introduced in 2015. This move, announced by George Osborne in the 2015 budget, generated £1.5bn in 2015/16, while the latest estimate for 2016/17 is £1.1bn. Forecasts for 2017/18 are as much as £1.6bn.