The UK Chancellor of the Exchequer, George Osborne, presented the UK Autumn Statement and Spending Review to Parliament on 25^th November. This is a comprehensive, and lengthy, report so I have picked out a number of the points which may affect expats and these are explained below.

Increase in Stamp Duty on buy-to-let and second properties

There will be an increase of 3% on top of the standard stamp duty levied on both second homes and any property to be let so this will affect any expats who buy their first property in the UK with the intention of renting it. This means that even properties that previously were not liable for Stamp Duty, those with a purchase price below £125,000 will be charged 3% and this extra amount will be added to the existing charge levels. The tax does not apply to properties purchased for less than £40,000 – if such a thing even exists in the UK.

The system was overhauled in the 2014 Autumn Statement and the levels are shown in this article UK Autumn Statement 2014 . Following on from the reductions in the tax relief available on rented properties in the July 2015 budget (UK budget July 2015 ) it seems that the UK government is determined to remove many of the benefits of owning a second property. No doubt this will mean that fewer people will purchase second homes as a long term investment and the increase in stamp duty, removal of landlords’ benefits and the capital gains tax liabilities in sale will see people looking at alternative investments.

If you are considering buying a property in the UK for investment purposes it will be advantageous to complete the purchase before 5^th April 2016. My in-house mortgage department can assist and smooth the process. (UK Mortgages for UAE expats)

As things stand when you sell an investment property it is possible to offset purchase costs against any eventual capital gains tax, and that includes stamp duty, but I wouldn’t be surprised if this particular loophole is closed at some point.

Council tax

The social care precept will give local authorities the option to increase Council Tax by up to 2% above the existing threshold but it is understood that the proceeds must be used specifically for social care.

Income tax

The government has committed to increasing the Personal Allowance (the amount that can be earned in the UK before liability to income tax) to £12,500 by the end of the current Parliament with the higher rate threshold to increase to £50,000. The Personal Allowance will increase to £11,000 for the 2016/17 tax year.

 Capital Gains Tax

Capital Gains Tax (CGT) on properties that are not a principal private residence was introduced without exception from April 2015 (CGT changes for non-resident UK property owners)  and the Government plans to raise significant funds by reducing the payment window for Capital Gains Tax  on residential property. At the moment the tax is being paid anything between 10 and 22 months after a sale but from April 2019 CGT must be paid within 30 days of the completion of a sale.

UK Pension Reform

The Summer 2015 budget announced a consultation on the system of pension tax relief to establish whether the current system incentivises pension saving. This is ongoing and a formal response is expected in the 2016 budget. The expectation of the pensions industry is that there will be further limitations on pension tax relief.

Student loans

Graduates in England and Wales who started university on or after September 2012 will see their student loan repayment threshold frozen until April 2021, rather than rising in line with inflation.

These graduates can earn up to £21,000 before making student loan repayments so freezing the threshold could make repayments more expensive.

Tax returns

Further steps have been announced to replace paper tax returns with digital ones thus streamlining the system. This is being called Making Tax Digital.

If you have any queries on this or any other personal financial planning issue please contact me at keren@holbornassets.com