104. NT Tax Code Rejections: Why HMRC Is Making Pension Relief Harder for Expats

For British expats in America drawing income from a UK pension, the NT tax code has long been a straightforward, if slow, way to avoid being taxed at source in the UK on income that should only be taxable in the US. But something appears to be changing at HMRC, and what was once a simple administrative process is becoming unpredictable, inconsistent, and in some cases, actively obstructed.

In this From the Trenches episode of Expat Wealth, Richard Taylor, Chartered Financial Planner and founder of Plan First Wealth, and business partner James Boyle share three real client cases that have taken them by surprise. The first involves a client who applied for an NT tax code over two years ago and has since had it granted on two of his three UK pensions, with no explanation as to why the third was excluded. The second is a case where HMRC outright rejected an application, claiming the pension in question was not a registered pension scheme, despite it clearly being one, an apparent administrative error that now requires a drawn-out correction process.

The third case, and perhaps the most concerning, involves a client who followed expert advice to the letter. Working with a US-UK cross-border tax advisory team, he took small, regular UFPLS withdrawals from his SIPP, a strategy designed to have pension income treated as ongoing payments rather than a lump sum. Despite the amounts falling well below HMRC's own published thresholds, the claim was rejected on the basis that the payments constituted a lump sum, a position that surprised even the specialist tax advisers involved.

Richard and James discuss what these cases might signal about a broader shift in HMRC's stance, particularly in light of recent guidance clarifying how lump sums from UK pensions are defined and taxed. They stress that while the US-UK tax treaty should ultimately protect expats from double taxation, the mechanics of resolving these disputes can be time-consuming, expensive, and deeply frustrating.

Whether you hold a UK SIPP, are considering applying for an NT tax code, or have already hit a roadblock with HMRC, this episode offers a candid look at a process that is no longer as routine as it once was, and why having the right cross-border tax advice matters more than ever.

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Expat Wealth is supported by Plan First Wealth. Plan First Wealth is a Registered Investment Advisor serving fellow expatriates and immigrants living across the US on matters such as retirement planning, inves