5 Things to Plan for the UK Budget Tax Changes

October 25, 2017 ProACT Sam Orgill

EU Brexit for Expats - 5 Things to Plan for the UK Budget Tax Changes

ProACT Sam Orgill of www.proactpartnership.com Tax Saving Expat Experts asks:

How will the UK Budget on 22nd November affect EU Brexit for Expats, their tax and money?

Everything’s the same in the UK. Same Chancellor, same prime minister, same tax year.

Then everything is different – the UK Budget date has been changed, from Spring to Autumn, (March to November), the UK government has lost its majority, the EU have turned up the heat on EU Brexit, politicians are feeling the heat from the opposition and unions, inflation is rising, people are being squeezed financially.

Budget Change

The UK has in the past, including 2017, held a spring budget, meaning that often tax changes were announced up to a year ahead, but sometimes failed completely. An autumn statement was used to move things along and lay the way.

UK chancellor Phillip Hammond has announced the UK will have one Autumn Budget and maybe a spring statement. A complete change from tradition but logical all the same. He will be able to announce on 22nd November revised tax increases and decreases, to be implemented the following spring April 5th new tax year date, bringing forward the pleasure and pain of tax reductions and tax rises.

1. Any Changes in the UK Budget Will be Enforced in April 2018. Review your tax position on investment, savings and pensions and make changes by April 5th 2018

What Could Change?

The spring budget 17 was something of a failure for Philip Hammond as he tried to introduce large National Insurance increases for contractors, service companies and the self-employed, only to withdrawn the proposals under howls of protest.

With the success of the Labour opposition’s appeal to the young, and increasing EU Brexit uncertainty, and a slowing economy (because of the uncertainty), the world is very different for the chancellor who is surrounded by competing vested interests from voters, business, unions and politicians.

This means on the one hand personal allowances could be removed on UK income for Expats Living and Working Abroad. This would mean higher tax affecting investment, savings, property rental income, pensions, and earned income from the UK.

On the other hand a tax neutral budget making new investments in UK infrastructure and public services, to support jobs and the UK economy spending in the short term, during the transition period of EU Brexit, could be introduced in an attempt to calm nerves for all vested interest – voters, business, politicians and Expats.

EU Brexit will occur in March 2019 and all parties need to agree on its format a year ahead. The start of the next tax year April 2018. This autumn budget is the platform for EU Brexit and will give Expats a good idea how property, pensions, and business taxes will be affected in the next 18 months to Brexit and the following 2 year transition period to 2021.

2. Expats will be able to review the impact of EU Brexit on their property, pension and business tax from the budget on 22nd November 2017.

Business Tax Rises – Do you need to reorganise your business?

Expats must also consider what the Chancellor might do to re-introduce the spring budget tax hikes he introduced, but quickly withdrew them under howls of protest. He tried in the spring to implement National Insurance increase for contractors, those operating from UK service companies, and the self-employed.

Expats working overseas from UK service companies would be hardest hit and may find income drawn from their companies taxed at source. Allot of tax could be raised from the contractor and gig economy by requiring all service companies pay the owner / contractor as an employee on PAYE not self-employed rates.

3. Review Your Overseas Business Structure for 2018, Expats Living in the UK or Working Abroad may be adversely affected by tax increases if they do nothing.

UK Increase Expat Pension Tax

From the Spring 2017 budget UK resident Expats have to pay more UK tax, on their whole pension from abroad, even if not remitted to the UK. This dramatically changed the landscape for the UK with the HMRC collecting £9 billion in Tax form non-domicile expats living in the UK.

This rule could be applied to pensions paid from the UK to expats living and working abroad. When UK tax at source is applied, the individuals must make tax returns to minimise their tax – keeping two countries informed on income. This would give rise to a UK tax increase, but not more tax paid in an Expat country of residence.

For example Canadian pensioners living in the UK, pay 25% tax at source to Canada. As a basic rate tax payer they are due 20% tax in the UK, but they would pay no more because 25% is paid at source to Canada.

A British Expat living in Canada may receive a UK pension with 0% tax in the UK, but would pay the Canadian tax equivalent, 25%.

This Change made no difference to Canadians.

But for British Expats Living Abroad in Cyprus and paying 5% tax on UK pensions, a 25% tax at source would result in a large increase in tax payments.

4. Use Pension Freedom Rules Before Taxes are Tightened Further for Expats

UK Tax Return Due Now

Paper UK Tax returns are due in the UK by 31/10/2017. If not already submitted to the UK an online UK tax return is required. ProACT Tax Saving Expat Experts offer this services to Expats Living and Working Abroad.

Under new exchange of information rules the UK HMRC knows much more about your income and financial affairs. Tax offices around the world have already upped the ante on seeking out Expats who try to shelter overseas investment, property, pension and business income and capital gains.

The highest profile UK Expat paying high taxes is the Chief Executive of HSBC bank Stuart Gulliver, who claimed that he was Hong Kong domiciled after returning to work in the UK. In March 2017 he lost his case against the HMRC and was left with 123 questions to answer to the UK Taxman regarding income he was earning from overseas interests while Living and Working back in the UK.

5. Plan to Get your UK Tax return submitted online on time, and include all your income on your UK or overseas tax return.

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ProACT Expat Experts offer tax saving for people living and working and investing abroad. Find out more at our website. We value your feedback, please comment and share on our articles on our website www.proactpartnership.com/blog

EU Brexit for Expats could be impacted with Budget changes creating a clear distinction between British nationals and Expats Living and Working in the UK. Any rule changes for UK based Expats is likely to have the reverse consequence for British Expats Living and Working Abroad.