The Chancellor of the Exchequer announced the latest budget on 18th March. Few of the announcements will directly affect people who are not currently resident in the UK so in this post I would just like to comment on some of the changes and announcements that will affect expats. This time round there were few surprises…
As announced in the last Autumn Statement, the Personal Allowance for the tax year 2015/16 will be £10,600 and will increase further. For the 2016/17 tax year it will be £10,800 and for 2017/18 £11,000.
Although it has previously been mentioned in passing, there was nothing about reducing or withdrawing the Personal Allowance for non-residents.
This will allow basic rate taxpayers to earn interest of £1,000 on savings before being liable to tax with the allowance being £500 allowance for 40% tax ratepayers.
Capital Gains Tax
The only major issue for expats was confirmation of how the new capital gains tax rules will apply when selling homes in the UK after April 6 2015. This was covered in an article published in March:
National Insurance contributions
It was announced that Class Two National Insurance contributions for self-employed are to be abolished in the next Parliament. This is the class of contributions that is paid voluntarily by many expats in order to continue accruing qualifying years for the UK State Pension. This is a significantly lower amount than the Class Three contributions that are the other option.
The lifetime allowance for pension savings that can be accumulated free of tax will be cut from £1.25m to £1m from April 2016. The amount will then increase in line with inflation from April 2018.
The proposed “pension freedom” changes have now come into effect and this means there are far more options in respect of how people can take their pension benefits. Many people will have the right to take their pensions as a cash lump sum. This is more complex an issue than it initially appears as the money will not be free of tax and I will shortly be posting a separate article explaining the changes and implications.
It was announced that within the next five years tax returns as we know them will cease to exist. HMRC will collate everyone’s tax affairs in a single digital account which can be viewed and checked at any time. This is designed to reduce the time taken to deal with returns and so reduce costs as information will be collected automatically from employers, banks and insurance companies.
There will still be many people who will have to separately declare income from investment properties or freelance work.
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