UK Budget not sweet for expats
UK Chancellor George Osborne may go down in history for creating a new ‘sin’ tax in his latest Budget, to sit alongside such existing ‘sin’ levies (and guaranteed headline-grabbers) as the taxes Britons currently pay on pints of beer and packets of cigarettes.
The surprise sugar tax on soft drinks sent shares in drink companies tumbling last month after the chancellor revealed it in his annual Budget presentation to Parliament. Investors are clearly aware of the liklihood that the Treasury will develop a powerful ‘sugar dependency’, alongside the addiction it’s already got to the healthy revenues it now enjoys from the existing consumption taxes on booze, petrol and tobacco.
As a Budget for expats, though, Osborne’s effort this year was a little flat. It contained some good news in areas such as personal allowances, and anticipated bad news in particular around the implementation of increases to stamp duty for buyers of second homes, but otherwise there wasn’t much to email home about.
Here is The Fry Group Singapore’s 2016 budget checklist:
* Stamp Duty Land Tax on the purchase of second homes will increase by 3% from 1st April (11 days ago), meaning that anyone buying an additional residential property, whether to live in or buy-to-let, will be liable. This will take the top ‘slice rate’ on properties worth more than £1.5m to 15%. (Transactions completed before midnight on 31st March will be exempt, as will be those properties for which the relevant sale contracts were exchanged before 25 November.)
* Personal allowances for anyone living in the UK, or with income subject to UK tax, will continue, and will increase to £11,500 in 2017/18, from £11,000 in 2016/17. This is good news for expats, after the Chancellor in 2014 raised the spectre of narrowing the scope of personal allowances to exclude non-residents.
* The higher rate band was increased, to £45,000 for the 2017-18 year, from £43,000. This was another boost for property owning expats, as it affects those with rental income from the UK.
* ISA-holding expats got some good news: although you currently aren’t permitted to put savings into an ISA once you’ve moved abroad, unless you work for the UK government, those that do enjoy this right will benefit from increased ISA allowances. From April of next year, the allowance will rise to £20,000 from £15,240.
* A new lifetime ISA, which was quickly dubbed the “LISA”, may benefit UK resident-dependents of expatriates. As outlined by the chancellor, such UK-resident dependents will be able to put up to £4,000 a year into a LISA, with an annual bonus from the government of up to £1,000 paid until they reach the age of 50. Savers will be able to access this at any time without tax implications.
* A cut in the rate of capital gains tax was one of the few surprises in the Budget. The higher CGT rate falls to 20% from 28%, and the basic rate from 18% to 10%. Unfortunately for expat property owners, that does not apply to residential property. Here, main residency status remains important.
Warning of ‘challenges’
In his speech, the chancellor noted that the UK economy is set to grow faster than other major developed economies, but warned of the challenges of volatile markets, and a weak global economy.
He announced increases in infrastructure spending and reductions in corporation tax, while addressing loopholes that have attracted negative media coverage around the corporation tax issue in the UK.
Finally, while Osborne’s sugar tax on soft drinks made anti-sugar campaigners like Jamie Oliver happy, another traditional sin tax budget favourite – alcohol – was spared a rate increase this year. Expat visitors to the UK this summer may at least raise a glass to that.
Martin Rimmer is head of tax, South East Asia, for the Fry Group, a UK-based tax and financial advice specialist with clients in the UK and abroad. Founded in 1898, it currently has five offices in the UK, and four overseas, including Singapore, Hong Kong, Spain and Belgium.
More Comment
Most read
