This is the first Autumn Budget after it was announced that the main one would be issued towards the end of each year. This time there is little that directly affects expats and much of the focus was on the UK housing market with a surprise announcement about Stamp Duty.
This article is a brief overview of some of the main points with particular reference to any changes that have relevance to those living outside of the UK.
The biggest announcement was the abolishment of Stamp Duty for first time buyers on properties with a purchase price of up to £300.000. For properties up to £500,000 (arguably a more realistic level in London and parts of the South East) the rate will be 5% between £300,000 and £500,000, a reduction in costs.
This takes immediate effect and in practice means that on a purchase of price of £300,000 a first-time buyer will save £5,000. The average purchase price of a first-time buyer property across the country is £208,000 and that would be saving of £1,660.
The claim is that 95% of first-time buyers who pay stamp duty will benefit, including almost 80% of those buying in London.
There will be no reductions for properties with a purchase price in excess of £500,000 even for first-time buyers.
The definition of a first-time buyer for this relief is unchanged from previous legislation. A first-time buyer is someone who has never owned any property before and who is purchasing their only or main residence. Residential property anywhere in the world is counted when determining whether someone is a first-time buyer. Where there are joint purchasers, all purchasers would need to be first-time buyers.
It is important to point out that this reduction is applicable in England, Wales and Northern Ireland. Stamp duty is devolved in Scotland (and called Land and Buildings Transaction Tax) and it will be up to the Scottish Parliament to decide if it wishes to follow suit. The change will apply in Wales until April 2018, when it is devolved and the Welsh Government’s new Land Transaction Tax is introduced. Welsh First Time Buyers will benefit from this stamp duty relief until then. It will be for the Welsh Government to make any decisions about introducing future reliefs in Land Transaction Tax.
UK Housing Market
There are major issues of affordability in the UK housing market but whether the measures announced will do much to tackle this is doubtful. The Stamp Duty reductions will help some people but the high prices, caused in part by under supply in many places is part of the issue. The government aims to allow for the building of a further 300,000 homes a year part funded by proposals for £44bn in capital funding, loans and guarantees over the next five years.
Any property that is left vacant will now be subject to Council Tax at the full rate. This is intended to reduce the number of empty properties but if an expat leaves a property vacant for their own occasional use, the full rate will apply all year round.
The Personal Allowance threshold will increase from £11,850 from April 2018 and the plan to increase it to £12,500 by 2020 was reiterated.
Everyone is eligible for the Personal Allowance, whether resident in the UK or overseas, so it is particularly relevant to people who own and let property. There has been no mention of reducing this for people who are not UK tax resident.
The higher-rate tax threshold will increase to £46,350 for the tax year 2018/19.
The main budget document makes reference to how UK property owned by non-resident companies will be taxed in respect of how both income and certain gains are taxed. It is understood that there are significant numbers of people who have set up offshore companies and transferred property ownership to them in order to reduce tax liabilities. From April 2020, income that non-resident companies receive from UK property will be chargeable to corporation tax rather than income tax. The same will apply to gains that arise on the disposal of UK property, so that will be subject to corporation tax rather than CGT.
No change to the Inheritance Tax allowance which remains at £325,000 year and the gift allowances are also unchanged.
Short-haul air passenger duty rates and long-haul economy rates to be frozen, paid for by an increase on premium-class tickets and on private jets.
Income tax to be applied from April 2019 on royalties to companies in the digital economy in relation to UK sales which are paid to a low-tax jurisdiction. This is clearly seen as a way of reducing corporate tax liabilities and reducing this is expected to raise some £200m a year.
No charge to fuel duty or excise duty on beer, wine and spirits.
I have read through the budget (all 86 pages of it so you don’t have to!) and there is nothing specifically related to taxing expats, despite some people’s ongoing fears.
I write articles such as this one as part of the holistic personal financial planning service that I provide to expats, and that includes arranging mortgages on UK properties. Should you have any queries on the latest budget, or any other financial planning issues, please do not hesitate to contact me at firstname.lastname@example.org
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