Amidst all the fanfare surrounding Chancellor George Osborne’s pension reform, there’s a good chance you may have missed the announcement that personal allowances for non UK residents will soon be under review.
As you’ll no doubt be aware, during the 2014/2015 tax year the limit is set at £10,000, and next tax year will rise to £10,500. However, whilst non-residents are currently eligible for the same benefits as UK residents, George Osborne has suggested that this is subject to change.
“To ensure the UK personal allowance remains well targeted, the government intends to consult on whether and how the allowance could be restricted to UK residents and those living overseas who have strong economic connections in the UK, as is the case in many other countries, including most of the EU”, the Chancellor said.
There are some five million Brits living and working overseas, and those who “have strong economic connections in the UK”, i.e. who derive income from a UK property or pension, but are not subject to UK tax, may be affected by the planned review.
Industry speculation holds that the personal allowance will remain intact for Brits residing in the EU, but for those in other countries could lose out. Expats living in popular Commonwealth nations such as Australia and Canada would be particularly galled by these changes. In 2010, the government withdrew personal allowances for non-residents who were citizens of Commonwealth nations, and expat pensioners in Commonwealth nations suffer from pension freezes despite strong historical and cultural ties to the UK.
Another financial concern for expats is the introduction of capital gains tax. First proposed in the autumn Budget and to be introduced in April of next year, when a non-resident sells a UK property they will now be subject to taxation.
Although recent pension reforms have been hailed as a turning point for UK residents, Budget 2014 will be a worry for the UK’s expats, who have felt their fair share of the government’s austerity measures.