New tax threat for UK expats
by Alexander Beard, on Oct 20, 2014 4:33:36 AM
Measures announced in the 2014 March Budget could impact UK expat’s tax position and earnings potential if, as indicated, George Osborne pushes forward with making them legislation.
Originally speaking during the Budget announcement, Mr Osborne’s plans involve revoking UK expats’ rights to offset income earned in the UK against the current £10,000 basic income tax allowance. The move would impact any expats with a source of income in the UK, including pensioners who draw a state pension. Other expats affected would include people who draw a rental income from a home within the UK. The move, if confirmed, is expected to produce an extra £400 million in tax for the government annually.
The current tax position allows the £10,000 tax allowance for UK expats who are not residents for tax purposes due to the double tax treaties in place with most countries. However, as with the United States and their FATCA law, the UK is currently investigating ways to increase the tax income from UK nationals who are not currently resident within the country. The Chancellor is said to be considering a system which takes into account whether individuals have a ‘strong economic connection’ to the UK. Based on this, the individual will then be judged to be entitled to receive the £10,000 basic tax allowance, or to have waived it.
If confirmed, the move could seriously impact expats who rely on a limited UK-based income to maintain and supplement their lifestyle abroad. Pensioners in particular could see a regular income they rely on exposed to significantly increased taxation.
As ever with a move abroad, it is important to plan for all eventualities. If you are currently planning to move abroad, or are already resident outside the UK, then it is a good idea to plan for the introduction of this new legislation. Careful tax planning can help to put you in the best possible financial position, whilst knowing what income to expect when you have completed your move can help you to live the lifestyle you desire, safe in the knowledge that your finances are there to support you.
If you would like help planning for a move abroad, or if you are an expat and are concerned about the changes detailed above, then please do get in touch with us via the Contact page. We have offices in several countries and are authorised to provide financial advice based on the taxation systems of the UK as well as other international territories.