UK Expats: A new tax is in the workson Thursday, 14 August 2014. Posted in Financial Advice, Tax Advice
The UK treasury is considering removing any personal tax allowance for expats earning abroad and at home. This hasn’t gone through yet, but if you’re a UK expat, expect Osborne’s new tax plans to take a chunk out of your income, properties and pensions if they go forward. Here are the details.
The scope of those potentially affected is wide; as many as 400,000 people who live abroad but claim the personal allowance in the UK could expect to see a rise in their tax bill of as bad as £4,000 in some cases. Unless you live in a high tax paying country where your income is enough to offset your UK tax bill, expect to feel the brunt as your after tax income would become taxable under these proposed rules.
Your properties won’t be safe
If you were one of the 175,000 Britons living abroad who earned a rental income from your UK property, you’ll know how valuable the £10,500 (or £21,000) tax free allowance is to you. These new changes would spell trouble for those of you who are retired abroad and relying on this income to help make ends meet. The proposed changes would see you needing to find potentially an extra few thousand a year to cover these new costs.
On top of this, from next April expats will also be liable to rates of capital gains tax on their UK properties. This will mainly affect future retirees, those of you who were planning to keep your houses when you move abroad as these new proposals will leave you getting double hammered on your rent when you own it and the profit you make when you sell it. So if you are thinking of selling your property and live overseas, now could be the time.
Your pensions won’t be safe either
Earnings generated from pensions, state or private, count as income and are therefore taxable. Fortunately, most pension incomes are only taxable in the country of residence, but for those of you who fall out of this category of pension, expect your income to take a nosedive. This definitely won’t help those who rely on their hard earned pension to live a well-deserved retirement in the sun and, combined with the real possibility of your property income being snatched away, Osborne’s plans would be sure to put a ding in your retirement plans.
Indeed these proposals aren’t all that fun, but they’ve been designed to crack down on what’s seen as inequality in the UK tax system, where migrant workers and non-residents are entitled to the same benefits as UK residents. In fact, these proposals would actually ‘normalise’ Britain and put it in line with the majority of other countries. Australians for example already have no tax free threshold on Australian based income.
The bottom line here is that these proposals (though they seem a good chance, since politically, this tax chance is less offensive to domestic voters so it has a good chance of passing) could see even more expats lose connection with the UK. It’s usually the case that holding property and pension in the UK has had its advantages, but if this allowance is scrapped it will remove any tax incentive to invest in the UK whilst retiring, leaving expats to look to put their money elsewhere.
Certainly an area worth keeping an eye on.Advice, British Expat, British tax, Caterer Goodman, China, China Expat Money, Expat, Financial Advisor, Investment, Owen, Owen Caterer, Shanghai, Taxation, UK, UK Tax