This is just the second UK Autumn Budget and unusually it was on a Monday, the first time since 1962. Budgets are normally on a Wednesday but that would fall on Halloween this year so too much of a gift to headline writers.
This is the last Budget before Brexit and not too much was expected as the UK Government is dealing with complicated Brexit issues although there will be a Spring Statement that can be upgraded to a full Budget if deemed necessary.
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 UK press will cover many points in detail but much of this is not directly relevant to expats so this article focuses of the relevant points for us.
There are no major surprises and very little that affects expats apart from a potential increase in Stamp Duty in England and Wales for non-residents. The Chancellor has claimed that this is an ‘end to austerity’ but there are still many issues in the UK economy, especially as we still do not know just how Brexit will play out and the true cost.
Here are some of the main and most relevant points.
The Personal Allowance threshold will increase to £12,500 with effect from April 2019, a full year earlier than set out in the Conservative manifesto. It will remain the same in 2020/21 and then increase by CPI.
The higher-rate tax threshold will increase to £50,000 for the tax year 2018/19.
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.
First time buyer Stamp Duty relief is extended to buyers of shared ownership properties valued up to £500,000. This is to be backdated to the last budget in November 2017 as these were not included in the previous exemptions for first time buyers. This was a temporary increase in the limit to £300,000 for direct purchase announced last year.
Shared ownership is not really an option for non-resident so of little benefit to expats.
There is to be a consultation on Stamp Duty Land Tax (SDLT) for non-residents. The government will publish a consultation in January 2019 on a SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland. No mention of Scotland or Wales.
Private Residence Relief
The current exemption means that people do not pay Capital Gains Tax in the final 18 months of ownership. From April 2020 this exemption period will be reduced to nine months.
No change to the Inheritance Tax allowance which remains at £325,000 year and the gift allowances are also unchanged. The Residence Nil Rate Band will increase to £150,000 in April 2019.
If you are UK domiciled, a very different concept to being UK resident this applies to the majority of UK passport holders, you are subject to UK Inheritance Tax on your worldwide assets, no matter where you reside at time of death.
Less than 5% of estates actually pay Inheritance Tax so whilst it is much hated, the impact is less than many might imagine but a review is expected before too long.
UK Pensions & saving taxes
No real changes to private pensions, contrary to expectations. The Lifetime Allowance for pension savings will increase in line with CPI for 2019-20, rising to £1,055,000.
Bullet points on other announcements
- UK Inflation is forecast to be an average of 2% in 2019.
- Fuel duty remains frozen. Tobacco Duty will rise as before at 2% over inflation. Beer and Cider Duty frozen, as is the Duty on spirits. Duty on wine to increase by RPI.
- From April 2019 the National Living Wage will increase by 4.9% from £7.83 an hour to £8.21.
- The Universal Credit Working Allowance increased with the intention to help the lowest paid in society.
- To date, a total of £4 billion has been set aside for Brexit preparations, with a substantial increase announced in this budget.
- NS&I will allow people other than parents and grandparents to gift Premium Bonds to a child and will lower the minimum investment to £25 (from £50).
- Full NHS funding review to take place. Additional funding for social care.
- An end to PFI (Private Finance Initiative) contracts.
- Limiting lettings relief where there is shared occupancy. Relevant to UK residents.
- A cut in business rates of up to one third for smaller independent businesses, designed to give them some help in a world where more and more people shop online.
- UK Digital services tax – to catch existing tech giants who generate over £500 million in annual global revenue with effect from April 2020. Too many have circumvented the system and not paid their fair share when operating in the UK.
- Plans for a new tax on the manufacture or import of plastic packaging that contains less than 30% recycled material. There is will a consultation period, to be announced.
- There will be a new 50p coin to ‘commemorate’ Brexit to be launched in Spring 2019. This was announced earlier in the day to very mixed responses.
I have read through the budget (all 107 pages of it so you don’t have to!) and there is nothing specifically related to taxing expats, apart from a potential increase in Stamp Duty in England and Northern Island.
I write articles such as this one as part of the holistic personal financial planning service that I provide to expats. 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