Happy New Tax Year for Expats
ProACT Sam celebrates the New Tax Year Changes and Looks Forward to the new challenges for Expats Living and Working Abroad in the year leading to EU Brexit.
With the UK sticking with centuries of tradition, until 1752, the spring is deemed the start of the new year. Whereas seeds were sown and babies made in time for the autumn harvest and winter births.
So it is also time for the start of the UK New Tax Year
Cyprus celebrates Easter as their main religious new Year Holiday time but has a calendar tax year although traditionally tax returns are due in April.
Happy New Tax Year - Spring changes abound for Expat Tax Returns and Rebates.
In April we are running a series of New Tax Year blogs, podcasts, newsletters and Webinars for Expats Living and Working Abroad, investing in overseas property and relocating offshore.
Follow our podcast https://proactpartnership.com/blog/the-living-working-abroad-podcast
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Happy New UK Tax Year
The UK tax year starts 6th April 2018
Fixed income arising in the UK must be declared to the HMRC
This includes property rental, earned income, capital gains and inheritance tax on uk assets.
From April 2016 the UK banks pay gross interest. So moveable income like royalties, bank interest and dividends can be taxed in your country of residence if properly registered and declared. If an Expat doesn’t have a tax residence abroad tax should be declared and paid on these in the UK
UK nationals retain a liability to UK tax on their world wide income unless they are registered tax resident elsewhere or registered as non resident
Buy to Let Mortgage Tax Relief
From 2017 a limit is being introduced on mortgage tax relief for UK property investors.
For the UK tax return now due, for the last year 2017-18 only 75% of the mortgage interest is allowable against higher rate income tax, the rest being limited to the basic rate of 20%.
Higher rate tax is charged up to 45% in the UK. So private property investment landlords in the UK are facing a 25% tax increase by this change of allowances.
By Brexit year 2020/21 all mortgage interest will only be allowable against basic rate tax at 20% for individual UK property investors.
Tax Saving Review point
Consider the higher tax liability from rental income. If it affects you how could you adapt your property holdings for tax savings?
Owning property through a limited company allows full mortgage interest relief, a transfer to a limited company could save income tax.
Talk to ProACT Partnership Tax Saving Expat Experts
Expats owning UK property though a company can also make UK inheritance tax saving at 40% as the value of the asset is the company shares not the property value.
Changes to Domicile and Inheritance Tax
UK Inheritance taxi at 40% is paid on death for assets above a basic nil rate band of £325,000.
If an Expat is permanently domiciled outside the UK only UK assets are charged to Inheritance tax. Owning a property or business share in the UK valued up to £325k is free of inheritance tax.
Someone born in the UK, a British Citizen, will be deemed domicile even if living and working abroad as an expat and tax resident in another country, unless they have been out a long time. A long time. An Expat living and working in the UK will be deemed domicile if she has lived in the UK for 20 years and as a tax resident for 15 of those.
Expats living in the UK in the last 3 years before death will always e deemed domicile for worldwide Inheritance tax on death, no matter how long they spent abroad.
Cyprus has a legal definition of ‘domicile’ so many expats are automatically “Non Domicile” by law. This leaves them by definition with their domicile of origin, catching many UK expats with potential world wide inheritance tax on death even if abroad, and including on Cyprus assets,
In practice Expats have to certify they are not Cyprus domicile to avoid 30% defence levy saving taxes, confirming by their own hand they should pay inheritance tax in their home country. In Cyprus Inheritance tax is 0%, in the UK 40%.
ProACT Sam Orgill
ProACT Partnership Expatriate Advice
ProACT Partnership - Tax Saving Expat Experts
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