When a new Prime Minister takes office, it is usual for them to want to put their own stamp on things and Liz Truss and her team are doing just that. Kwasi Kwarteng, the current Chancellor of the Exchequer, has made a few announcements today, a mini-budget if you will, or an oddly named ‘fiscal event’ according to the government.
As has been the case in recent years, many measures have already been announced or deliberately leaked so this was largely about clarification.
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.
EDIT. As this mini-budget went down so poorly, and did such dmanage to UK financial markets, Kwazi Kwateng was replaced by Jeremy Hunt and many of the announcements have since been rescinded so I have commented under each section to clarify. Added comments are in italics.
Interestingly, we saw a number of reversals of announcements in recent budgets. This is unusual as this is the same political party, albeit we have been many changes in senior roles in recent years.
Stamp Duty
The threshold on which stamp duty (Stamp Duty Land Tax – SDLT) is payable is to double to £250,000. For first-time buyers, the threshold will increase from £300,000 to £425,000.
The discounted stamp duty rate for first-time buyers will apply to £625,000, up from £500,000. To qualify as a first-time buyer under these rules, you must not own any property, even in another country, and the property is to be your main residence.
According to UK property company Zoopla, homebuyers in London and the South East of England pay 65% of all stamp duty due to higher prices.
Three-quarters (76%) of stamp duty came from homes priced at more than £500,000. This announcement will particularly benefit this demographic.
Non-resident buyers, will still pay the surcharge of 2% that came into effect in April 2021 but the changes will still present a saving for non-residential property investors.
This is for property in England and Northern Ireland only and we will have to see if the devolved governments for Scotland and Wales choose to follow suit.
The change comes into immediate effect. (23rd September 2022)
Update: This change has remained
VAT-free shopping for overseas visitors
There was an announcement to reintroduce VAT-free shopping for overseas visitors. The official documentation refers to this as something new to boost visitors but we remember differently.
The intention is to introduce a modern, digital, VAT-free shopping scheme. There will a consultation so we don’t know when this will come into effect, or how.
The Budget document states: “The new VAT-free shopping scheme for non-UK visitors to Great Britain will enable them to obtain a VAT refund on goods bought in the high street, airports and other departure points and exported from the UK in their personal baggage.”
Hopefully this will apply to UK citizens living overseas and it will no doubt be popular, especially if it is an easy to manage, digital system.
Update: This announcement has been withdrawn
Income Tax
The basic rate of income tax will reduce to 19% (from 205) from 6th April 2023 for England and Wales
This had already been announced, but for 2024, so it is being brought forward by one year.
A pledge to abolish the 45% additional rate of tax that is payable on income in excess of £150,000 a year from April 2023.
Note the tax rates and thresholds are different in Scotland.
Update: Basic rate atx will remain at 20% ‘indefinitely’. The abolition of the 45% tax rate has been reversed.
National Insurance
On 22nd September, the Chancellor Kwasi Kwarteng announced that 1.25% increase in National Insurance will be reversed from 6 November. The increase was an increase on the rate and was a real increase of over 10%.
Reversing the National Insurance rise means someone earning £20,000 will get an additional £1.79 a week while a person on £100,000 will benefit from an additional £21 a week.
This a simple rewind to the levels that were in place in March of this year, so not actually a cut, just a reversal of the the Health and Social Care Levy after a few months.
Energy Prices
While not directly relevant to most experts this is a big issue in the UK at the moment
The Energy Price Guarantee (EPG) is intended to limit bills to £2,500 for the average household.
The EPG will cap the unit price that consumers pay for electricity and gas and should mean that the average household will pay no more than £2,500 per year for a period of two years from October 2022.
Update: Changed to apply to April 2023 only
There are number of allowances and exemptions and we can only hope that this makes the difference to people who are genuinely worried about heating their homes this coming winter as fuel bills have more than doubled.
Other points
- Reversal of the cap on bankers’ bonuses
- Planned increase on alcohol duty scrapped – Decision reversed
- Investment zones. Nothing new here, just a rewording and a move around of a few business benefits.
- Tightened restrictions on industrial action
- Major benefits like Universal credit to increase by inflation in April 2023 but pressure to reduce payments to the unemployed who cannot prove they are looking for work.
- Plans to simplify IR35 (off-payroll working) and repeal some recent reforms Since reversed
- Planned alcohol duty increases to be cancelled – announcement reversed
- An intention to bring forward reforms to improve access to affordable, flexible childcare
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. This applies especially energy companies with huge profits but households are seeing massive increases in utility costs which is a major cause of worry for many.
This was put together quicky but even so, it is curious that information was not given to the Office of Budget Responsibility to review this Mini Budget and provide forecasts prior to the event.
Some of these announcements are significant but you could view them as a bit of gamble. If it works all well and good but if not, the costs, not least of government borrowing, is a major worry.
These moves may help the economy generally in the next year but they are likely to a short-term ‘remedy’ and not a significant benefit over the long term. You can still have growth without cutting taxes as is proved in many European countries and it is clear that the NHS and social services require funding and these tax cuts won’t help them.
It does appear that the wealthy will benefit more than the average household, even if many people will get a little in their pockets. The reality is that ’trickle down economics’ doesn’t work.
Sterling has dropped in value again which is not good for the UK as a whole, but will benefit expats who want to convert money to Sterling. See THIS LINK for the best value, and most importantly the safest way, to do so
Info on UK property for investment: UK property options – latest info
I have read through the ‘The Growth Plan 2022’ (a mere 40 pages this time so I got off lightly!) 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.
To arrange a meeting to discuss any aspect of your personal financial planning, please email me at keren@holbornassets.com Please take a look at the other useful articles on this website.
