The Chancellor has delivered his Budget for 2016. He confirmed changes previously announced in the Autumn Statement and outlined a variety of measures in what was clearly a Budget aimed at supporting those who work, save and invest. We have set out the key points that may affect British expatriates below.
Capital Gains Tax
The government will reduce the higher rate of Capital Gains Tax from 28% to 20% and the basic rate from 18% to 10% for disposals made on or after 6 April 2016. This is positive news for those who have existing investments held outside a “tax-free” environment.
The 28% and 18% rates will continue to apply however for chargeable gains on residential property therefore for expatriates selling UK property even when overseas the tax charge will be 18% or 28% depending on your earnings. Careful planning around whose name to hold the property should be considered.
Stamp Duty on buy-to-let and second homes
The government confirmed that it will proceed with the proposed increase to Stamp Duty Land Tax on additional properties from 1 April 2016. This means if you are an expatriate and you already have a property (anywhere in the world) you will be subject to additional rates of stamp duty if buying a further property in the UK.
Income Tax Personal Allowances
The Income Tax Personal Allowance will increase to £11,000 from 6 April 2016, and £11,500 from 6 April 2017. The higher rate tax threshold will rise to £43,000 from 6 April 2016, and £45,000 from 6 April 2017. The Upper Earnings Limit for National Insurance contributions will remain aligned with the higher rate tax threshold.
Pensions tax relief
Although further changes to the taxation of pensions were anticipated, the tax treatment of pension contributions remain unaffected.
The key highlights are as follows:
- The planned reduction in the Lifetime Allowance to £1m and the introduction of the Tapered Annual Allowance for individuals with ‘adjusted income’ over £150,000 will proceed as previously announced.
- It was confirmed that 25% tax-free cash will not be abolished.
- It was confirmed that salary sacrifice for pensions will continue to receive Income Tax and National Insurance relief.
The ability for expatriates to make pension contributions to UK retirement plans is heavily restricted anyway and the recent changes merely add to this. It is important to note that if you feel you have a large pension fund you need to take expert advice in relation to the £1m lifetime allowance as you might inadvertently create a tax charge.
This wasn’t a ground breaking budget and rarely is these days but key areas for expatriates with ties to the UK include the additional buyers stamp duty on property purchases and to keep an eye on the value of your UK pension pot.
As you can see there are several changes which may have an impact on your circumstances. Therefore, it is recommended to seek advice from an adviser to navigate the complex areas. Should you wish to discuss any of this information in more detail or request a copy of The Budget Report 2016, please do not hesitate to contact St. James’s Place at email@example.com.
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