The UK Chancellor of the Exchequer, George Osborne, delivered his Autumn Statement on 3rd December. There were a few announcements which may affect expatriates, depending on your circumstances.
The personal allowance will increase from £10,000 to £10,600 from 6th April 2015.
The Government still believes there is a “strong rationale” for removal of the personal allowance for non-residents of the UK, but that this is a ‘complex change’ for those affected. Consultation will continue on this matter, so we have to wait and see how this goes ahead.
The threshold for the higher rate of income tax, currently 40%, will increase from £41,865 to £42,385 from April 2015.
Capital gains tax charge for non-UK residents
The Government released a document to explain how this charge on gains arising on disposal of residential properties, originally announced in last year’s Autumn Statement, will work. In summary:
■ Gains arising before 6th April 2015 will not be taxed.
■ An individual can rebase the value of their property to the value as at that date, or can opt for the gain to be time-apportioned, or the whole gain to be taxed – whichever is more beneficial.
■ The Annual Exemption will be available to all individuals (£11,000 from April 2015) and trustees (£5,500 from that date).
■ The rate applicable will be 18% or 28% for individuals, 28% for trustees and 20% for companies. Where a property falls into the Annual Tax on Enveloped Properties the gain will be taxed at 28%.
■ If an individual completes a self-assessment return, the declaration will be made on the return and paid in the normal way. Otherwise the gain is reportable and the tax payable within 30 days of date of sale.
■ Losses can be offset on gains on other UK residential properties, and carried forward to set against similar gains if unutilised in the current year.
■ Private Residence Relief (PRR) elections can only be made if the non-UK resident spends at least 90 days in their UK properties during the relevant year. This may have an impact on their UK residence position, so you need to consider this carefully and take advice.
UK residents owning overseas property can also now only make an election for PPR on a foreign property if they spend more than 90 days in that property, or in all properties they own in that jurisdiction, in the relevant year. Again, this may have an impact on residence.
From 6th April 2015, the ISA (or NISA) threshold will increase from £15,000 to £15,240. Note that while non-UK residents may hold ISAs, they cannot add to them.
From 3rd December 2014, ISA holders will be able to pass on their ISA benefits to their spouse or civil partner on death, via an additional ISA allowance usable from 6th April 2015. Under current rules, where amounts held in ISAs are transferred to a spouse on death, the value then becomes liable to income tax.
For annuities providing “death benefits”, the 55% tax charge on death is abolished. This brings annuities into line with income drawdown plans, which will see the so-called ‘death tax’ removed from next April. It will only apply where the payment occurs after 6th April 2015. If the person who dies is 75 or over, beneficiaries will have to pay tax on the amount received at their marginal rate of income tax. This levels the playing field between pensions and annuities. The changes do not affect people in final salary pensions.
There is still no clarity on the position of Qualifying Recognised Overseas Pension Schemes (QROPS).
The ‘slab system’ which operated under the old rules in respect of the stamp duty charge on property purchase has been abolished from midnight 3rd December 2014.
The new system means that buyers will only pay the rate of tax on the part of the property price within each tax band – like income tax.
The announced plan to make just one nil rate band available for all trusts settled by an individual have been abandoned. However the Government still intends, via new rules in Finance Act 2015, to curtail the setting up of trusts on different days to obtain nil rate bands for each trust. It also intends to introduce new rules on trust calculation. There is therefore a period of uncertainty until the new rules are announced next year.
If any of these changes may affect you, seek specialist advice relating to your personal circumstances. Remember you need to take the tax rules of both the UK and Spain into account to determine the best solution for you.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
For more information and personalised advice, contact Blevins Franks on +34 971 719 181.
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This article was written on the 17th of December, 2014.