Frequently Asked Expatriate Questions
:Frequently asked questions about Pension Questions
What does QROPS mean?
A Qualifying Recognised Overseas Pension Scheme, or QROPS is an overseas pension scheme that meets certain requirements set by Her Majesty's Revenue and Customs (HMRC). A QROPS must have a beneficial owner and trustees, and it can receive transfers of British pension benefits. The QROPS programme was part of British legislation launched on 6 April 2006 as a direct result of EU human rights requirements of the freedom of capital movement.
A QROPS should not incur an unauthorised payment nor scheme sanction charge and is deemed either a trust or a contract based offshore pension. As such the tax residence of the beneficial owner or beneficiaries is critical as some countries do not recognise trusts, the result being the prospect of taxation at source or upon receipt. Examples could include France and the USA.
A QROPS can be appropriate for British citizens who have left the UK to emigrate permanently and intend to retire abroad having built up a British pension fund. Alternatively, a person who is born outside the UK having built up benefits in a UK-registered pension scheme can move their pension offshore if they want to retire outside the UK. British State Pensions cannot be transferred, but defined contribution, defined benefit pension schemes, SIPPs and SSAS can be transferred abroad. A QROPS does not have to be established in the country where one retires; rather, a person can move the pension to another jurisdiction and have the benefits paid into their country of choice.
What is a QROPS scheme?
A Qualifying Recognised Overseas Pension Scheme, or QROPS is an overseas pension scheme that meets certain requirements set by Her Majesty's Revenue and Customs
What is a SIPP?
A self-invested personal pension is the name given to the type of UK government-approved personal pension scheme, which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and Customs
How much is the UK State Pension?
The full new state pension is currently £175.20 per week, which amounts to £759.20 a month and £9,110.40 per year, though this is set to change.
Can I transfer my pension?
It's up to you to check this with the overseas scheme or your UK pension provider or adviser.
If it's not a QROPS , your UK pension scheme may refuse to make the transfer, or you'll have to pay at least 40% tax on the transfer.
What is the overseas transfer charge on QROPS transfers
The overseas transfer charge of 25% of the 'transferred value' will apply to a transfer if, within five tax years, an individual becomes resident in another country so that the exemptions would not have applied to the transfer.
:Frequently asked questions about Expat Wealth Management Questions
What is a structured note investment?
A structured note is a debt security issued by financial institutions. Its return is based on equity indexes, a single equity, a basket of equities, interest rates, commodities, or foreign currencies. ... The bond portion of the note takes up most of the investment and provides principal protection.
What is an offshore investment bond?
An offshore investment bond is an investment wrapper that can be used as an investment vehicle to control when you pay tax, how much you pay and whom you pay it to. ... Within an offshore investment bond, investments benefit from growth that is largely free of tax – often referred to as gross roll-up.
What does the 2021 UK Budget means for Expats and non-residents?
Expats hoping to invest or buy in British property will be delighted to hear Sunak’s announcement that the Stamp Duty holiday will be extended. The Chancellor announced the expected extension of the Stamp Duty holiday until September 30th.
More specifically, properties worth up to ₤500,000 will be exempted from stamp duty from the end of March until the end of June. After that, there will still be no duty on homes worth up to ₤250,000 for a further three months.
Sunak also announced the creation of a new mortgage guarantee scheme. The scheme aims to stimulate lenders to lend mortgages up to 95% and help people who can’t afford a deposit to enter the property market. The Chancellor noted thanks to the new scheme, the “Generation Rent” will turn into “Generation Buy.”
The thresholds for personal income tax will continue to be frozen from 2022 to 2026 at ₤12,570 for the basic rate and ₤50,270 for the higher rate. Corporate tax is set to increase to 25% in April 2023. However, the Chancellor indicated companies with profits of less than ₤ 50,000 will still pay 19%.
Thresholds for inheritance tax, pensions, lifetime allowance and capital gains tax thresholds will remain frozen. Even with an inheritance tax review, the threshold remains frozen at ₤ 325,000 per person (as it has been since 2009).
The residential nil rate band increases as planned from ₤150,000 to ₤175,000 per person. When passing on a main UK home to direct descendants but starts to taper once joint assets exceed ₤2 million, this provides extra tax relief.
The good news for expats is that overseas property can qualify, provided it is your main home (local inheritance taxes may still apply).
Implementation of a “super deduction” scheme will allow firms to invest in equipment to receive tax breaks from the government.
The extension of the temporary reduced VAT rate for hospitality and tourism will also be extended to the end of September.
Alcohol and fuel duties remain on hold.
Although the personal tax-free pensions allowance remains at ₤40,000, there will be more scope for higher earners to receive tax relief.
Currently, those earning over ₤ 110,000 are subject to a “tapered” allowance, but this threshold rises to ₤200,000 from 6 April 2020. Soon, only those earning an “adjusted income” of at least ₤ 240,000 (including salary, dividends, rental income, interest and pension accrual) are set to lose tax relief in the 2020/21 tax year (versus ₤ 150,000 today).
However, the minimum level to which the annual allowance can shrink will reduce from ₤10,000 to ₤4,000. This will only affect those with total taxable income over ₤300,000.
Lifetime allowance (LTA)
The Chancellor said the LTA would remain at its current level of £1,073,100 for 2020/21 rather than increasing in line with inflation. It had been expected to rise by £5,800 in 2021/22, in line with 0.5% Consumer Prices Index.
UK State Pension
The National Living Wage increase (from ₤ 8.21 to ₤ 8.72) helps increase the State Pension.
Under the government’s “triple lock” commitment, the State Pension currently increases by whichever is the highest of inflation, 2.5%, or– as is the case this year– average earnings. This means those on the older State Pension will see a 3.9% rise, from ₤129.20 to ₤134.25 per week (₤ 262.60 extra a year).
While this includes UK retirees living in the EU, you will need to be lawfully resident in your chosen country before the end of 2020 to continue receiving cost-of-living increases beyond Brexit. The Budget also confirmed the Department of Work and Pensions will backdate ₤3 billion in State Pension underpayments to women over the next few years.
There were no changes to transfers to EU/EEA-based Qualifying Recognised Overseas Pension Schemes (QROPS), which remain tax-free for EU residents.
However, the UK’s 25% ‘overseas transfer charge’ remains for non-EU/EEA transfers. This may be extended once the Brexit transition period ends in December 2020, so take regulated advice to explore your options under current rules.
What is an investment platform?
An investment platform is essentially an online service which allows you to buy, sell and hold funds. It's possible for you to do this yourself directly on a non-advised basis via a D2C (direct to customer) platform, or on an advised basis using a financial adviser who will invest on your behalf.
:Frequently asked questions about Property Questions
How to rent out your house?
Start by ensuring you foolow the regulations of a landlord below.
You’re a landlord if you rent out your property. As a landlord you must:
keep your rented properties safe and free from health hazards
make sure all gas and electrical equipment is safely installed and maintained
provide an Energy Performance Certificate for the property
protect your tenant’s deposit in a government-approved scheme
check your tenant has the right to rent your property if it’s in England
give your tenant a copy of the How to rent checklist when they start renting from you (you can email it to them)
There are different rules if you rent out property in Scotland or Northern Ireland.
Coronavirus (COVID-19) and your responsibilities
Your responsibilities as a landlord have not changed because of coronavirus. However, you should follow the government’s coronavirus advice.
Read the coronavirus and renting guidance for tenants and landlords.
It’s your responsibility to:
fit and test smoke alarms and carbon monoxide alarms
follow fire safety regulations for property in a purpose-built block of flats or for houses and property adapted into flats
Health and safety inspections
The Housing Health and Safety Rating System (HHSRS) is used by your council to make sure that properties in its area are safe for the people who live there. This involves inspecting your property for possible hazards, such as uneven stairs.
If you own a property and rent it out, the council may decide to do an HHSRS inspection because:
your tenants have asked for an inspection
the council has done a survey of local properties and thinks your property might be hazardous
HHSRS hazard ratings
Inspectors look at 29 health and safety areas and score each hazard they find as category 1 or 2, according to its seriousness.
You must take action on enforcement notices from your council. You also have the right to appeal enforcement notices.
The council can do any of the following if they find a serious hazard:
issue an improvement notice
fix the hazard themselves and bill you for the cost
stop you or anyone else from using part or all of the property
You have to pay:
Income Tax on your rental income, minus your day-to-day running expenses
Class 2 National Insurance if the work you do renting out property counts as running a business
If you only occasionally rent out your property or part of your home (for example through short-term rental apps), check if you need to tell HMRC about this income.
If you have a mortgage on the property you want to rent out, you must get permission from your mortgage lender.
What expenses can I claim against rental income
It’s one of the most common questions we get asked and it’s understandable why. Many landlords innocently misunderstand the difference between a CAPITAL expense and a REVENUE expense. In particular, establishing the difference between a repair and an improvement and claiming only the mortgage interest not capital repayments on loans.
The common notion is that because you have spent money on your property, it automatically follows that you can set it off against your rental income.
Some expenditure never qualifies for any tax relief
Some expenditure is only allowable against the gain when you sell the property.
Some expenditure may be deducted from rental income in calculating taxable income.
Some expenditure may not be claimed as a deduction but is subject to special rules.
Let’s take things one at a time.
When you buy a property
The costs and expenses associated with the purchase are treated as part of the purchase price and cannot be set against rental income. We would advise you to prepare a simple statement of all the costs as follows:
Building survey charges
Independent inspection charges
Auctioneers costs (for those of you who have bought through auctions)
Your solicitors’ completion statement should contain the majority of the costs
These can be deducted from the gain (or added to the loss) when you sell the property. You should keep a record of all the costs together with the supporting receipts so that you can claim Capital Gains Tax relief for the expenditure when you sell.
What happens if the deal falls through?
In short, any costs and expenses associated with a deal that falls through are never allowable.
So if you are thinking of buying a property and spend money instructing solicitors and arranging surveys and then decide not to proceed or worse still the seller pulls out, there is no tax relief for the costs.
So what are the allowable costs against rental income?
The general rule is that the expenditure must be expended wholly and exclusively for the Rental Income business. Here’s a list:
Finance costs (restricted for most residential properties)
The interest paid and arrangement fees on any loan taken out to purchase or improve the rental property together with any bank charges on a separate rental property bank account are finance costs. If it is a repayment mortgage, then it is only the interest element which counts as finance costs not the total repayments.
For commercial properties, Furnished Holiday Lettings (see above) and residential properties owned by limited liability companies, the finance costs are allowed in full.
For other residential properties owned by individuals or partnerships, from 6th April 2020, the finance costs are restricted and only 20% of the finance costs can be claimed against the tax liability on the net rental income after deducting all other expenses and losses brought forward but before any finance costs. Prior to 6th April 2020 there was a phasing in of the restriction over three years.
The best way of explaining this is by way of an example:
Joe is a teacher and is 49 years old; he is a 40% taxpayer. He has purchased a buy to let property as an investment. As he has owned the property for some time, the outstanding debt on the property is relatively low. Here is the effect of the change:
Actual ProfitTaxable profit
Repairs and other tax deductible costs1,0001,000
Interest on mortgage2,500Nil
Net Rental profit3,7006,200
Tax at 40%2,480
Less interest relief at 20% on £2500500
Net tax liability on rental income1,980
As you can see the effective rate of tax is 53.51% which is more than Joe’s marginal rate of 40%. Where landlords are highly geared, the tax liability could be more than the net rental income received.
Basic rate (20%) taxpayers should effectively receive full relief provided that the rental income before interest does not cause them to go into the higher rate of tax.
Higher rate taxpayers may wish to consider purchasing new properties in a limited company as finance costs are allowable in full. However, lenders do tend to charge a higher rate of interest on loans to limited companies.
Repairs and maintenance
Repair work carried out on the property can be claimed provided that it is not a capital improvement. If you lived in the property prior to letting it, then work carried out before the property is let is seen as maintenance of the property as a result of private use rather than for rental purposes, so cannot be claimed.
Repairs to furnishings cannot be claimed if there is a furnished residential letting.
Do not forget to include the gas safety certificate cost if applicable.
Legal, management and accountancy fees
You cannot claim any legal fees in connection with the purchase of the property or any fees for the initial lease if it is for more than one year. Any legal fees in connection with the renewal of a lease, a shorthold tenancy of less than 1 year, eviction of clients, rent collection or management fees and accountancy are all claimable.
It is important that you insure the property and the premium for the buildings and/or contents can be claimed. Life assurance premiums are not claimable.
Rent, rates and council tax
You may pay ground rent if the property is a flat. The tenant normally pays the rates or council tax, but if you do pay these costs or there are any void periods where you pay these costs then these can be claimed.
If you pay any service charges or for any other services in connection with the letting e.g. electricity in common areas, these should be claimed. If the property is a furnished holiday letting then it is likely that you will pay for electricity, gas, water, television licence, telephone and other services.
If you need someone to carry out a regular service for you e.g. cleaning, we recommend that you pay a fixed rate for that service and do not provide any tools or materials so that they can be treated as self-employed. However, if for example, you employ a cleaner for one hour a week and provide all the materials, then that person is probably an employee. Be aware, that if you do employ an employee, you need to ensure that you comply with Employment Regulations including Working Time Directive, National Minimum Wage, Health and Safety and PAYE/NIC. The national living wage from 1st April 2021 is £8.91 per hour for adults over age 25.
We advise that you should ask your employee to complete a “Starter Checklist” which is available on the Government website. Provided that you do pay under £120 per week (from 6th April 2020), you have no other employees and your employee marks either certificate A or B, you can retain the Starter Checklist and take no further action. If certificate C or no box is marked or you pay £120 or more per week it will be necessary to have a PAYE scheme in place. If you have a PAYE scheme then you will need to pay the employee under RTI (Real Time Information) even if they earn less than £120 per week.
Do you travel to the property to carry out maintenance or deal with issues with the tenants? If so you should claim the cost of travelling. It does have to be reasonable – if you live in London and spend a week on holiday in Cornwall, popping in for ten minutes to check that the holiday home next door was alright would not make the journey a business trip! If you travel by car, you can now claim the authorised mileage rates which are 45p per mile for the first 10000 business miles in a tax year and 25p per mile for each additional business mile.
These can include postage, stationery, telephone calls and other administrative expenses. The rules for claiming the use of home as an office have changed from 6th April 2013. Either a complex calculation has to be made justifying the charge or the following can be claimed depending on the hours worked in an office:
Number of hours
worked per monthMonthly claim
25 or more£10
51 or more£18
101 or more£26
It is unlikely that a charge for using your home as an office can be justified unless you are managing a number of properties yourself.
Any other expenses incurred wholly and exclusively for the property business can be claimed. The licence fee for Houses of Multiple Occupation (HMO) is claimable for example.
Property income allowance (alternative to expenses and capital allowances)
From 6th April 2017, there is a new property income allowance of £1000 which can be deducted from your rental income (provided that the income is not received from a connected party) instead of any expenses. It is only worth claiming this allowance if your expenses are less than £1000 and they are less than the actual rent received. You cannot claim any expenses if you claim the Property Income Allowance. The allowance is designed to save people with low rental income having to declare and pay tax on that income rather than as a general tax saving measure.
The cost of purchasing or improving a property (e.g. an extension) cannot be claimed as revenue expenditure against your property income. The distinction between capital and revenue expenditure is not black and white. If you buy a property and simply redecorate it before you let it out, this will be considered to be revenue expenditure. If however, you bought a property for a significantly lower price than normal because it was in a poor condition and then carried out substantial works, this expenditure would probably be considered as capital expenditure.
However, most capital expenditure is eligible for relief for Capital Gains Tax purposes when you come to sell the property, so it is important that you keep records and receipts for the expenditure incurred.
Capital allowances (not available on residential lettings apart from furnished holiday lets)
Whilst structural works cannot normally be claimed, capital allowances are available on the purchase of fixtures, plant and machinery. There is an Annual Investment Allowance for expenditure up to £1,000,000 from 1st January 2019 until 31st December 2021 when it reverts back to £200,000. As most landlords will not be spending more than the annual limit or claiming for a car, cars and eligible expenditure over the annual limit are not discussed.
Examples of expenditure eligible for Annual Investment Allowance are as follows:
Heating systemsStorage equipment
The list is not exhaustive and you should obtain further advice from us, particularly if your expenditure is over the annual limit.
If you sell an asset on which you have previously claimed Capital Allowances, the proceeds are taken into account and may create an additional income charge.
Replacement of Domestic Items relief
Where a residential property is not a Furnished Holiday let or no Rent a Room relief is claimed, the expenditure on replacing items of furniture and white goods will be allowed as an expense less any proceeds on the disposal of the item being replaced. The cost of assets which are not replacements is not be allowed as an expense.
If you use the property for private purposes, which is most likely if it is a furnished holiday letting or you are not claiming Rent a Room relief in your own home, then any expenditure claimed must be restricted for its private use.
If you have previously occupied a property then any expenditure which relates to that period of occupation cannot be claimed. So any maintenance of the property prior to the first letting is private. Conversely, if for instance you had paid an annual insurance premium on 1st April and left the property with a view to letting it on the following 1st October, then you would claim one half of the insurance premium paid even though it was paid when you occupied the property.
This can be a confusing area for many landlords. Errors can be costly if they are picked up by HMRC. Choosing a property tax specialist to help you get it right could save you £000’s. Get in touch if you need some help.
How much stamp duty will I have to pay?
The stamp duty rate ranges from 2% to 12% of the purchase price, depending upon the value of the property bought, the purchase date and whether you are a first time buyer or multiple home owner.
Can foreigners buy property in the UK
There are no legal restrictions on expats buying property in the UK. Foreigners and non-residents can also get a mortgage in the UK. ... You will need to appoint a UK solicitor or conveyancer to handle the legal paperwork when buying a house in the UK.
Can British expats still open bank accounts
If you're legally living in the country, as a minimum, banks there have to let you open a basic bank account. These come with most of the features of a standard current account, except for overdrafts, though you may be charged fees for using them.
What is an “Expat Will”
An "Expatriate" Last Will and Testament works in conjunction with your existing Will, but covers any assets that you own in a foreign country. Your existing Will remains in effect, and covers your assets in your home country, but if you own assets in a different country, then you also need an Expatriate Will.