As has been the case for the past couple of years, many of the Budget measure have been leaked or drip-fed to the press so we were not expecting much in the way of surprises and there is nothing that dramatic.
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 and especially in the GCC. The UK press will cover many points in detail but many of the points will not be directly relevant to expats so this article focuses on the points that will be most relevant to us.
There is no doubt that it is a tough time economically but rising inflation is a major concern. In September 2021, UK inflation reached 3.1%, the highest it has been since 2008. The Chancellor stated that inflation is expected to average 4% during 2022 and warned of challenging times ahead before they could reach their goal of inflation at 2%.
Many experts are forecasting an increase in the cost of living of 4% in the UK over the next year. With few wage increases, this will be felt by many people.
After many years of low inflation and interest rates, these topics are firmly back on the political table.
This is important as any increase in inflation has an effect on Government debt interest. UK debt is largely inflation-linked, issued as gilts, so any increase in inflation, increases the cost of servicing it, This increased Government spending reduces public money available for other purposes.
It was confirmed that public sector borrowing is still higher than at any time since WW11 with UK debt standing at around 85% of GDP (gross domestic product – according to figures from the Office for Budget Responsibility (OBR).
The OBR has revised its forecasts for UK economic growth and states that it expects GDP to expand by 6.5% this year, an increase from its forecast of 4% in March 2021. This is lower than the figures predicted by the Bank of England of 7.4%.
It is worth noting that the OBR is often wrong.
There will be myriad articles discussing the Budget in detail so I don’t intend to duplicate those but simply to highlight a few main points and bring to your attention any topics that specifically affect expats or are of general wide interest.
Capital Gains Tax on UK property sale
This is a useful announcement for expats that own UK property.
With effect from 27th October 2021 the deadline for residents to report and pay CGT after selling UK residential property will increase from 30 days after the completion date to 60 days. This applies both to UK residents and non-residents.
National Living Wage
As was already announced, along with various other measures, the National Living Wage, or minimum income as many still know it, will increase by 6.6% to £9.50 per hour. This is for those aged 23 years or over and will come into effect in April 2022. To put it in real terms that is an increase of 59p per hour.
Different rates apply to younger ages as follow:
- National Minimum Wage for those aged 21-22: From £8.36 to £9.18ph
- National Minimum Wage for 18 to 20-year-olds: From £6.56 to £6.83ph
- National Minimum Wage for under-18s: From £4.62 to £4.81ph
- The Apprentice Rate: From £4.30 to £4.81ph
There has been much in the press recently about the uplift to Universal Credit being removed. This was introduced to help during the worst of Covid and while it was announced as a temporary measure, the effect of inflation has meant many people will struggle even more without it.
40% of Universal Credit claimants are employed and require the extra to reach a liveable income
The uplift will still be removed but instead the Universal Credit taper level will change.
Universal credit taper is currently 63%which means that for each £1 earned you gain only 37p. It is being reduced to 55% so that for each £1 earned you keep 45p.
There is also an increased in the amount that households with children, or a household member with limited capability for work, can earn before their Universal Credit award begins to be reduced by £500 a year.
This is to come into effect within weeks, no later than 1st December, rather than at April 2022.
Government statistics say that two million families will keep extra £1,000 a year, similar to the £20 a week uplift amount.
These are not large sums but will make a difference to struggling households, albeit it will make no difference to those on benefits who are unable to work such as people with disabilities. With an unprecedented number of food banks, this matters.
Pension Triple Lock
A year ago, the Chancellor stated the triple lock, a Manifesto promise, would stay, but that is no longer the case. The triple lock is a government commitment to increase the value of the state pension by at least 2.5% every year.
In the latter part of the full Budget and Spending review it confirms that “The government is therefore legislating to temporarily suspend the earnings element of the ‘Triple Lock’ used to uprate the State Pension and Pension Credit.”
No change to the Lifetime Allowance for larger pension funds.
An announcement of a 50% in Air Passenger Duty for domestic flights only, although this does exclude private jets.
Given the current focus on the climate and this being a week before COP26, a global climate change conference, this seems rather out of step, especially as the main Budget document goes into detail about the Net Zero Strategy.
From April 2023, there will be new tax band for long haul flights, of over 5,500 miles. This will be £92 on economy class and it is claimed that fewer than 5% of passengers will pay it
Flights from all parts of the UK to the UAE are shorter than 5,500 miles.
Invariably a topic that UK tax payers and visitors are interested in.
Alcohol duties were, 1643 first introduced in the UK in 1643 and are rather complex. There will be a simplification with the number of main duty rates to reduce from 15 to just six. In short,
- The stronger the drink, the higher the rate. Lower alcohol drinks will attract a lower rate of tax.
- Proposals for a small producer relief. EG, small brewers, cider makers that make drinks with an alcohol content of below 8.5%
- End of duty premium of 28% on sparkling wines. This will now be the same as still wine of equivalent strength
- Draft relief. Lower rate of duty on draft beer and cider. Cut by 5% to benefit pubs,
These changes are due to be introduced in February 2023, so some time to wait.
In addition, a proposed increase in duty on sprits, wine cider and beer will be cancelled.
Other points of interest
- Extra spending on the NHS and a claim that there will be a further 50,000 nurses but no information where these will be obtained
- Planned increase in fuel duty are cancelled.
- Pay rises for public sector workers over the next three years. No details so we can only hope the amounts are at least at inflation.
- Investment in the NHS and other public services
- Reiteration to recruit a further 50,000 nurses plus 50,000 primary care roles in England but no detail of how or from where.
- Temporary rate uplifts to the Theatre, Orchestra and Museums & Galleries Exhibition tax reliefs, a hard-hit sector.
- Temporary business rates relief in England for eligible retail, hospitality and leisure properties for 2022-23. It is claimed that over 90% of retail, hospitality and leisure businesses will receive at least 50% off their business rates bills in 2022-23.
- Aim to reinstate Overseas Development Aid to 0.7% of GDP by 2024/25.
- Capital support for greener transport and greener homes
- Substantial investment to improve and digitise HMRC (It needs it.)
- NS&I Green Savings Bond to be launched. Don’t get excited as the rate is 0.65% pa for three years.
- Confirmation of increase in National Insurance of 1.25%, a real increase of 10%.
- Main National Insurance levels to increase in line with September 2021 inflation rate, so at 3.1%.
- Duty on all tobacco products will increase by the amount of the retail Price Index + 2%. The rate on hand-rolling tobacco will increase by RPI + 6% and the minimum excise tax will increase by RPI +3% this year. These changes will take effect from 6pm on 27 October 2021
- Corporation tax on banks to increase to 28%
There has been some growth in the economy and in markets but the UK still has many troubles, not least the high rate of Covid infections and enquiries into wasted taxpayer money in dealing with the pandemic.
As I have stated before, 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. The change in the Universal Credit taper will be welcomed by those requiring support but it is not a huge amount.
At the time of the Spring Budget, I said we could expect to see a second budget but for most, this contains little to get excited about.
Shortly after the Chancellor has given his speech to the House of Common, the full Autumn Budget and Spending Review, to give it it’s full title, is published online and this is what I read through to find anything not mentioned that relates to expats, although this time it is really only the afore-mentioned CGT window.
I have read through the budget (all 202 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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