UK Tax – what recent budget changes may affect me as an expatriate ?

 In thought-leadership

Effect on expatriates of UK 2020 Budget Tax changes
U.K. State Pension.

With the U.K. government’s ‘triple-lock’ commitment, the State Pension is currently increased each year by whichever is highest of inflation or 2.5% or 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).

Lifetime allowance (LTA).

This continues to increase with inflation (as defined by the Consumer Price Index), adding an extra £18,100 to the maximum amount that can be held in U.K. pensions tax-free.

Currently, combined pension benefits up to £1.055 million avoid 25% or 55% LTA tax penalties, and from April 2020, this threshold is £1,073,100.

QROPS Pension Transfers.

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.

U.K. Inheritance Tax (IHT).

The threshold remains frozen at £325,000 per person, as has been the case since 2009.

The residential nil-rate-band has increased from £150,000 to £175,000 per person, which provides extra tax relief when passing on a main U.K. residence to direct descendants.

For expatriates, overseas property can qualify (provided it is your main home) however local taxes may still be applied.

U.K. Property: Stamp duty for non-residents.

Last year, the government consulted on the introduction of a stamp duty surcharge for non-U.K. residents buying properties in the U.K.

The Budget confirmed a 2% surcharge from 1 April 2021, applicable on top of all existing stamp duty.

So, non-U.K. residents who already own a home in the U.K., could face up to 17% in stamp duty costs from April 2021; this is made up of the usual stamp duty charge (up to 12%), plus the 3% surcharge for second homes, plus 2% non-resident stamp duty.

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