George Osborne’s sixth Budget as the Coalition Chancellor was on March 18, 2015.
We have summarised the changes that may affect expatriates, depending on your circumstances.
Please note that there may be changes depending on who forms the government after the General Election on May 7.
The UK personal allowance remains available to both residents and non-residents, and will be £10,600 in 2015/2016, £10,800 in 2016/2017 and £11,000 in 2017/2018. The higher rate threshold is £31,785 in 2015/2016, increasing to £31,900 the following year and £32,300 in 2017/2018.
The remittance basis charge for individuals resident in the UK for 12 out of the last 14 years will increase from £50,000 to £60,000, and a new charge of £90,000 will apply to those resident in the UK for 17 out of the last 20 years.
Tax returns should become a thing of the past with new Digital Tax Accounts, whereby information for most people will be automatically collected.
A new Personal Savings Allowance of £1,000 will be introduced for basic rate taxpayers (£500 for higher rate taxpayers) from April 2016.
From autumn 2015, it will be possible to extract funds from an ISA and replace them in the same year, instead of losing that portion of ISA allowance for the year. The investment limit for Premium Bonds will increase to £50,000 from June 1, 2015. Note that if you are not resident in the UK, premium bond winnings and income from ISAs is likely to be taxable in your country of residence.
A new type of Venture Capital Trust will be introduced in a future Finance Bill. Tax relief on investments within it will be 30%, and dividends and gains will be tax-free.
Capital gains tax
Non-residents are liable to UK capital gains tax on UK residential property from April 6, 2015 as previously announced. There is nothing new in the Budget, but although HM Revenue & Customs say that a property does not need to be valued as at that date, they do state that it is ‘sensible’ to do so. We recommend that expatriates have any UK property valued as at April 5, 2015 if possible.
It will no longer be possible to elect that a property is your main home for UK tax purposes if you are not resident in that jurisdiction, unless you spend at least 90 days in it during that UK tax year. This could however impact your residence position.
Despite predicted changes to the inheritance tax nil rate band, no change was announced and the rate will remain £325,000 until 2017/2018 (the Conservatives may be saving it for their election manifesto).
There will be a review regarding using Deeds of Variation to avoid inheritance tax and a future Finance Bill will introduce new rules to combat tax avoidance through the use of multiple trusts. The Disclosure of Tax Avoidance Schemes will be extended to cover inheritance tax avoidance schemes.
Pensions and annuities
While it will be possible for individuals with certain pension schemes to take the full pension funds subject to their UK marginal tax rate, there will not be parity for QROPS schemes at the present time. This disparity is apparently ‘temporary’.
From 2016, individuals will be able to sell their annuities and pay only their marginal rate of income tax, instead of the current 55%.
From April 6, 2016, the lifetime allowance for pension contributions will reduce from £1.25 million to £1 million and will thereafter be indexed to inflation.
Annual tax on enveloped dwellings
As previously announced, this will apply to properties worth in excess of £1 million from April 1, 2015. In addition, the bands for properties worth in excess of £2 million will increase by 50% above inflation from that date.
The Liechtenstein and Crown Dependencies Disclosure Facilities will close early at the end of 2015, rather than in April and September 2016 respectively. A new disclosure facility will start in 2016, closing mid-2017, in advance of the Common Reporting Standard on automatic exchange of information coming into force in 2017.
This is just a summary, and more detail tends to emerge following the budget. It is important to seek specialist advice to clarify how you are affected, particularly when it comes to the interaction between UK and local Portuguese taxation, and the tax planning opportunities available. Professional advice is even more important when it comes to UK pensions following the new pension freedom.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
By Gavin Scott
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Gavin Scott, Senior Partner of Blevins Franks, has been advising expatriates on all aspects of their financial planning for more than 20 years. He has represented Blevins Franks in the Algarve since 2000. Gavin holds the Diploma for Financial Advisers. | www.blevinsfranks.com