UK Expats: A new tax is in the works
Posted on August 14, 2014
The UK treasury is considering removing any personal tax allowance for expats earning abroad and at home. This hasn’t gone through yet, but if you’re a UK expat, expect Osborne’s new tax plans to take a chunk out of your income, properties and pensions if they go forward. Here are the details.
Who would it affect?
The scope of those potentially affected is wide; as many as 400,000 people who live abroad but claim the personal allowance in the UK could expect to see a rise in their tax bill of as bad as £4,000 in some cases. Unless you live in a high tax paying country where your income is enough to offset your UK tax bill, expect to feel the brunt as your after tax income would become taxable under these proposed rules.
Your properties won’t be safe
If you were one of the 175,000 Britons living abroad who earned a rental income from your UK property, you’ll know how valuable the £10,500 (or £21,000) tax free allowance is to you. These new changes would spell trouble for those of you who are retired abroad and relying on this income to help make ends meet. The proposed changes would see you needing to find potentially an extra few thousand a year to cover these new costs.
On top of this, from next April expats will also be liable to rates of capital gains tax on their UK properties. This will mainly affect future retirees, those of you who were planning to keep your houses when you move abroad as these new proposals will leave you getting double hammered on your rent when you own it and the profit you make when you sell it. So if you are thinking of selling your property and live overseas, now could be the time.
Your pensions won’t be safe either
Earnings generated from pensions, state or private, count as income and are therefore taxable. Fortunately, most pension incomes are only taxable in the country of residence, but for those of you who fall out of this category of pension, expect your income to take a nosedive. This definitely won’t help those who rely on their hard earned pension to live a well-deserved retirement in the sun and, combined with the real possibility of your property income being snatched away, Osborne’s plans would be sure to put a ding in your retirement plans.
Indeed these proposals aren’t all that fun, but they’ve been designed to crack down on what’s seen as inequality in the UK tax system, where migrant workers and non-residents are entitled to the same benefits as UK residents. In fact, these proposals would actually ‘normalise’ Britain and put it in line with the majority of other countries. Australians for example already have no tax free threshold on Australian based income.
The bottom line here is that these proposals (though they seem a good chance, since politically, this tax chance is less offensive to domestic voters so it has a good chance of passing) could see even more expats lose connection with the UK. It’s usually the case that holding property and pension in the UK has had its advantages, but if this allowance is scrapped it will remove any tax incentive to invest in the UK whilst retiring, leaving expats to look to put their money elsewhere.
Certainly an area worth keeping an eye on.
About Caterer Goodman Partners
Caterer Goodman Partners is a Shanghai based wealth management firm established with a clear vision to provide a new level of personalized financial planning services for expatriates in Asia. Our financial advisors provide guidance for our clients in all areas of investment, specialising in managed accounts, money-market funds, retirement planning and alternative investments. At Caterer Goodman Partners, we offer our advice and experience to provide low cost, tax-effective and simple solutions to match our clients’ interests.
About Owen Caterer
Since graduation Mr Owen Caterer has worked with the Queensland Premier's Department in Trade Facilitation and then as a financial adviser in Shanghai from 2005 until 2010. He then rose to Senior Adviser, then Business Development manager and then to Chief Investment Officer responsible for portfolios to a value of US$280 million across Asia. Following that Mr Caterer left to found his own firm with a partner in the financial advisory and wealth management area. This focused on developing China and Asia's first fee-based financial advisory (rather than commission-based). This has grown to now have 8 staff and and managing almost US$35 million for clients throughout Asia. This business success was recognized as a finalist in the 2013 ACBA in the Start Up Enterprises category and are one of a small number of foreign managed firms to have a full asset management license in China. Owen has also been active in the community volunteering for the Australian Chamber of Commerce in Shanghai and acting as the Vice-Chair of the Small Business Working Group (2012-2014) and as the Co-Deputy Chair of the Financial Services since 2013 until the present. They have continued to grow their business and have now been selected as a small group of companies who are platinum members of the Australian chamber of commerce. The achievement they are most proud of is their efforts to reform the financial planning industry in China and push it away from a hard-sales commission driven model to a more ethical management fee and long term customer service model. Owen has a Graduate Diploma of Applied Finance from the Securities Institute of Australia of which he was a member as a Fellow of Finance for many years and also has an undergraduate degree from Griffith University in International Business. Owen's interests are tennis, running and his wife and two children. He speaks fluent Chinese, first arriving in China in 1997.
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