HomeFinance No surprises in UK Spring Budget other than a sting in the tail for pensions
No surprises in UK Spring Budget other than a sting in the tail for pensions
Tuesday, 04 April 2017
Hammond’s first and only Spring Budget, there was very little to surprise and
not much that had not already been announced in the 2016 Autumn Statement.
The personal tax-free
allowance will increase by £500 to £11,500 from April 2017. The threshold for
the higher rate band will also rise to £45,000 (excluding Scotland, where it
remains at £43,000). The budget proposed to increase the personal allowance and
the basic rate band to £12,500 and £50,000 respectively from April 2020.
government confirmed it will abolish Class 2 National Insurance Contributions
(NICs) - a flat rate contribution paid by the self-employed - in April 2018. However,
Hammond's plan to increase the rate of Class 4 NICs - payable by the
self-employed on profits - was dropped a week later amidst claims it broke a
key Conservative party ‘tax lock' election promise. While there will now be no
change in Class 4 contributions, Class 2 contributions will still be scrapped next
order to top up their UK State Pension, expatriates who are self-employed
within the EU can opt to pay the flat rate Class 2 contributions instead of the
higher Class 3 voluntary contributions. As Class 2 contributions are under half
those of Class 3, this makes the purchase of an extra year's pension only
around £146 per year instead of over £730. From next April this lower cost option
will no longer be available.
current allowance as too generous, the government announced a reduction in the
tax-free dividend allowance from £5,000 to £2,000 from April 2018. This measure
is aimed at director shareholders but could also affect those with large
portfolios of shares.
non-UK residents using the ‘disregarded income' regime, dividends can still be
tax-free in the UK. Although this approach may not be the most suitable way for
expatriates to invest, this regime can still be used to tax-efficiently extract
funds from UK companies.
As set out in
the 2016 Autumn Statement, the government will cut the rate of corporation tax
to 19% from April this year and then again to 17% in 2020. This is to encourage
outward investment in the UK from non-UK individuals and corporations, but can
be tax-efficient for Britons moving abroad who retain UK companies.
Qualifying Recognised Overseas Pension
In the most
unexpected move, the government announced they will introduce a 25% charge on
transfers to QROPS from 9th March 2017. This targets those seeking to reduce
the UK tax payable by moving their pension wealth to another jurisdiction. However,
some crucial exceptions will apply. If expatriates reside in and transfer into
a QROPS based in the European Economic Area (including Gibraltar), transfers
may still be made tax-free.
government plans to introduce a new penalty for people who enable another
person or business to use a tax avoidance arrangement that is later defeated by
HMRC. They will also close a loophole in the Promoters of Tax Avoidance Schemes
(POTAS) legislation, making it harder to circumvent the law through re-organising
Taxation of non-domiciles
There was no update
on the government's proposed changes to the taxation of non-UK domiciled
individuals and offshore structures owning UK residential properties.
suggested in the Summer Budget 2015 include introducing UK inheritance tax
liability for those holding residential properties indirectly through a company
or partnership, and revised domicile rules for those resident in the UK from 5th
will have to wait for the final version of the 2017 Finance Bill legislation to
be released for confirmation of changes.
residents, the ISA limit increases to £20,000 from 6th April 2017, as announced
in the 2016 Budget. This allows more tax-free savings to be locked away each
year. While non-UK residents cannot add to or open an ISA, they may retain
existing ones. However, income and gains from ISAs are generally not tax-free
in the new country of residence.
The new 12-sided
one-pound coin comes into circulation on 28th March 2017, so from then you can
expect your change to look different on return visits to the UK. As the round
pound will cease to be legal tender from October 2017, the clock is ticking on
the chance to cash in any British piggy banks.
If you are
thinking of transferring your UK pensions to a QROPS, or you think any other of
these Budget measures may affect you, take personalised, professional advice.
An adviser with cross-border experience can guide you on both UK and Spanish
taxation and your range of options as an expatriate.
Partner, Blevins Franks
This e-mail address is being protected from spam bots, you need
Tel: 952 809 212
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.