Every year a three-letter word puts a sizable dent in your earnings so here’s a round-up of some of the bigger tax changes to watch out for in 2013
HMRC recently clarified the new Statutory Residence Test which may catch expats out, assuming they have escaped the UK tax net by virtue of Full-Time Working Abroad (FTWA), reports Mr Don Riegger, Managing Director and Principal for Tax, Deloitte Singapore. “To qualify under FTWA rules and to be considered a non-UK resident, an individual must not have more than 30 UK workdays per tax year and must work more than 35 hours a week outside the UK in an average working week.” Although these two tests sound simple, the practical details can catch out anyone with regular business travel to the UK and mean they are not automatically considered non-UK resident by HMRC.
Another concern is the reduction of annual allowance for pensions tax relieved savings. It is set to be reduced to £40,000 in the 2014/15 tax year from the current level of £50,000 to a reduced level of £40,000, reports says Eric Mellor, Investment Manager, IFS. “Individuals contributing to registered pension schemes may find it necessary to reduce or even cease their current payments and look to supplement this area of their retirement planning by contributing payments to an alternative tax efficient vehicle.
“For some expatriate clients, offshore savings plans may represent a suitable, tax efficient alternative,” advises Mellor.
The last-minute deal on 1 January 2013 to stop the US careering over the fiscal cliff saw taxes rise on individual incomes over US$400,000 and household incomes over $450,000, on investment profits and dividends, and on the portion of estates that exceeds $5 million. “A new 3.8% per cent Net Investment Tax will apply to investment income for married couples with income above US$250,000,” says Mr Don Riegger, Managing Director and Principal for Tax, Deloitte Singapore. An additional Medicare Tax of .09 per cent will also apply to earnings above the same threshold (and non-married individual tax payers earning over $200,00).
Film star Gérard Depardieu (aka Gerardovich) is Russian now, thanks to the French Government’s 2013 finance bill detailing a 75 per cent tax on professional income exceeding €1 million. The French actor made headlines by moving to Belgium and then accepting Russian citizenship in a bid to protect his earnings from the new levy. At the time of press there are rumours that the controversial 75 per cent tax may be a lowered but the rate will stick for five years rather than two. President François Hollande’s Socialist government also announced increases in increases in Capital Gains Tax and a Wealth Tax -– imposed on individuals with assets over €1.3 million (S$1.70 million), including property, vehicles, jewellery and financial products such as shares or life assurance contracts.
The Labour Party’s May 2012 budget announced changes to the Living Away From Home Allowance (LAFH). This allows employees who move for a job to claim tax benefits on food and rented accommodation. The allowance has been restricted to one year and requires the main Australian residence to be left empty.
As many economies struggle took keep budgets on an even keel, it’s worth making an appointment with a financial advisor to check if a change in legislation hasn’t triggered a tax liability.