Expat Tax Saving Checklist
Sam Orgill of ProACT Partnership with Tax Saving Tips for Expats Living and Working Abroad in Cyprus UK
Expat Savers can make more tax savings following changes in the UK Budget and with Cyprus Taxes.
Tax Savings can extend to inheritance following changes to Wills and Inheritance tax rates in the UK. They also include Pension Freedom to pay 5% pension income tax or lower.
With Property Tax Savings are always available for the shrewd investor in overseas property.
Cyprus Tax on Saving
If you are Cyprus Tax resident but not domiciled in Cyprus, then you have no Saving taxes (Defence Levy) to pay. This includes most expats and saves 30% on interest and 17% on dividends. Whether the income is earned in Cyprus or abroad.
Tax Saving Tip: If you pay 30% tax at source in Cyprus banks you can apply to have this paid gross.
If you earn interest abroad, declare on your Cyprus return to confirm the 0% Cyprus tax rate. Then you can reclaim tax in from the other country if the double taxation treaty allows.
The same with dividends: declare them in Cyprus for 0% tax rate; reclaim any tax at source if allowed.
Tax Saving Tip: Ask ProACT for guidance in arranging for tax efficient saving income, tax saving returns and rebates.
UK Tax on Saving
From April 2016 a £5000 tax saving allowance exists in the UK. Also the UK will stop to charge tax on bank interest at source, you will have to declare and pay tax on saving in a UK tax return.
Dividends are no longer taxed at source with a 10% tax credit. The first £5000 of dividends is tax free. This is new tax free allowance. Consider a high dividend share portfolio holding to receive additional tax free income. The dividend tax rate is then 7.5% for basic rate tax payers, so again it is a great alternative source of low tax income.
If you are Cyprus tax resident, this will allow you to pay no tax in the UK, but you must declare on your Cyprus return all income worldwide.
There is still an £11,000 personal allowance available to UK Expats for any interest, dividend or rental income. Above this 20% UK tax is due. You should make sure you complete returns to reclaim tax at source
Tax Saving Tip: Ask ProACT for help on tax saving returns and rebates.
Pension Tax Saving for Expats
Under pension freedom, If you have a UK pension fund you can draw up to the whole fund. As a Cyprus tax payer expats would pay 5% tax on this income (after allowances and tax free sum). Then these funds are free of pensions and available to invest – at no tax for Cyprus expats investing for interest or dividends.
Tax Saving Tip: Consider drawing your pension lump sum as a Cyprus Tax resident. Review your options with ProACT Tax Saving Experts.
Inheritance Tax Changes
UK Inheritance tax remains at 40%. Allowance for married couple, main residence, is increasing to 500,000 per person over 5 years. Meanwhile, changes to tax disclosure of capital and estates in the coming year mean that discrete tax planning to avoid 40% UK inheritance tax on Cyprus property will not work. Opening up Cyprus property to UK Inheritance tax on death.
Cyprus inheritance tax is 0%. If lifetime gifts of Cyprus Property are made then you can save 40% Inheritance Tax. This works while keeping you and the family in control and allows the bonus of avoiding in full the cost and delay of probate.
Tax Saving Tip: Consider gifting Cyprus property to avoid UK inheritance tax, and probate cost and delay with ProACT Expatriate Advice
Make a Will Changes
The Cyprus changes to Succession mean Expats must make written changes to their Will to avoid forced heirship and retain financial control of their affairs on first death.
This can be done with a simple codicil or with an update Will. Noting if you use the laws of your home country then you tie your Cyprus Property assets to UK inheritance tax under new tax exchange of information rules being introduced.
Tax Saving Tip: Make written changes to your Cyprus Will. Review you Will to protect Cyprus assets from inheritance tax and probate cost and delay.
Free Review – Tax, Wills, Inheritance, Property
ProACT offer a Free Review of your Tax, Wills, Inheritance and Property issues for Expats living and working abroad. Contact us to book a Free review.
Read more on our website www.proactpartnership.com/blog .
Free Review – Will Property Inheritance Tax
ProACT offer a Free Review of your Wills, title deeds, property assets and identify inheritance tax savings. Whether a Cyprus tax resident or not we can ensure your family is protected and makes tax saving on death.
Expats must make written changes of your Will if you want to use the succession rules of your home country. But consider the impact on inheritance tax at 40% in the UK or other countries. Consider who you want to benefit in your Will, is this possible with your arrangements?
Contact us to book a Free review. CONTACT US
Read more on our website www.proactpartnership.com/blog
Sam Orgill ProACT Partnership Expatriate Advice