There is no question that this will not have been an easy Budget to put together. There are still uncertainties in respect of Covid19 and the UK economy has problems, for more than one reason. With so many people on a reduced income and many businesses suffering, tax hikes right now would be even more unwelcome than usual.
At this point in time, the UK is in more debt than it has been at any point in the past 50 years, at some £2.13 trillion which equates to 99% of GDP. Over the past 12 months the UK economy has shrunk by 10%, and some 700,000 people have lost jobs. UK unemployment is expected to peak at 6.5% in the 2021/22 tax year.
What is required now is to stimulate growth in the economy but I don’t think there is any immediate fix. The two main issues are to reduce debt and to support people and businesses who have been hardest hit – somewhat opposing issues.
No one knows quite how many people on furlough will actually have jobs to go back to and latest figures indicate that there are currently 6 million people on furlough in the UK at the moment.
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 on the main issues, highlighting any of relevance to expats.
Furlough is a word that was rarely used in the UK until a year ago but many are all too familiar with it now.
The furlough scheme, officially the Coronavirus Job Retention Scheme, is to be extended until September 2021. This pays 80% of employees’ wages for the hours they cannot work due to the pandemic. This is unchanged.
It has been claimed that up to 600,000 more self-employed people will also be eligible for government help as access to grants is widened. Those who have been self-employed for relatively short periods may also be able to put in a claim provided that they filed a return by 2nd March.
There will be no increase in the rates of income tax, National Insurance, capital gains tax or VAT, for now.
The Personal income tax allowance will be frozen at £12,570 from 6th April 2021 to April 2026. (Note that non-residents must claim this as I have written about previously, see here: Tax information for British expats – the personal allowance )
The thresholds for the pension lifetime allowance (LTA), inheritance tax and capital gains tax will be unchanged until April 2026.
The LTA governs how much can be saved, or grow, within a UK pension plan before tax charges apply. This is frozen at £1.073m and will not increase to £1.078m as was due.
A temporary increase in the Nil Rate Band of Stamp Duty Land Tax (SDLT) in England and Northern Ireland was announced last year until the end of March 2021 and this is set to be extended until 30th June. It will remain at £500,000 which means no SDLT on properties below that level if a purchase completes before this date.
In further news, the Nil Rate Band will reduce to £250,000 until 30th September 2021 before returning to the usual figure of £125,000 on 1st October 2021.
No mention of the Stamp Duty surcharge for non-residents that is due to be introduced on 1st April 2021. This applies to residential property in England and Northern Ireland and is at a rate of 2%.
Mortgage Guarantee scheme
Several of the UK’s largest lenders will offer 95% mortgages from April 2021.
In brief, the corporation tax on company profits will rise from 19% to 25% in April 2023 but it will be kept at the current level of 19% for small businesses with profits of £50,000 or less and a taper for those with profits below £250,000.
VAT cuts for tourism and hospitality sector to be maintained at 5% until September 2021. Then a transitional rate of 12.5% until March 2022.
State Pension payments
This wasn’t really mentioned in the speech but will be relevant of many women. The Department of Work and Pensions will backdate £3bn in state pension underpayments to women over the next few years. That’s a really big figure and will apply mainly to widows and the over-80s.
Voting extension for expats
In 2002 a rule was introduced that state that non-residents could only vote in UK elections for 15 years. It appears this might be changed. No mention of a specific timeframe or any detail at this stage.
Other points of interest
- Universal credit uplift will continue for a further six months to help those on lowest incomes in the UK.
- Financial support for domestic abuse schemes, for Armed Forces mental health
- Thalidomide Health Grant. This support scheme for victims was due to expire in 2023 but is to be extended to be a lifetime commitment
- The National Living Wage will rise to £8.91 from April.
- All alcohol duties frozen for second year in a row
- Planned increase in fuel duty cancelled
- First UK infrastructure bank to be based in Leeds
- Visa reforms for ‘highly skilled migrants from March 2022
- An increase in contactless payment limits from £45 to £100
Is this a good budget? No real surprises, not least as the main points had been systematically leaked, but it feels a bit like sitting in the fence. I am sure many would have liked to have seen a focus on taxing major corporations that don’t pay anywhere near in taxes that they should. That money would have been useful in view of the reduction in GDP and thus taxes paid over the past year.
For now, there is continued support for furloughed employees so that will be welcome.
The freezing of allowances may mean that ‘no one’s income decreases’ as is claimed but the fact is that they will do in real terms as inflation has an effect here. Some might even call it a stealth tax. It has been estimated that up to 1.6m people could be pushed into higher tax bands of they receive even any cost of living increases in salaries.
I wouldn’t be surprised to see another budget later in the year when any recovery, on both an economic and health level, is hopefully underway and a degree of normality returns.
I have read through the budget (all 107 pages of it so you don’t have to!) and there is nothing else specifically related to taxing expats.
I write articles such as this one as part of the personal financial planning service and that I provide to expats, and the general consumer, financial and legal information that I provide in The National newspaper, and on the Facebook group British Expats Dubai.
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