Wednesday, 19 March 2014

Personal Allowances for UK Non-Residents At Risk!

Buried amongst the Budget Day announcements is a potential nasty shock for British expatriates - the Government intends to begin a consultation process on whether and how the Personal Allowance could be restricted to UK resident taxpayers and to those living overseas “with strong economic connections” in the UK.

This move is designed to bring the UK in line with most other EU countries where non-residents get no tax benefits when determining income which  is taxable.  Typically, the types of income on which UK non-residents actually pay UK tax are limited under the various Double Tax Agreements to income such as UK rental income or UK Government Service pensions.

It begs the question, what exactly are “strong economic connections” and we are sure this is going to be vigorously debated during the consultation process.  It is to be hoped that the retained ownership by British citizens of their former family home, now let out to produce an income, and UK public sector pensions will be within the definition of “strong economic connections”! 

Add this to the move announced in the Autumn Statement whereby it is intended to introduce a UK capital gains liability from April 2015 for non-residents disposing of UK sited residential property and it is understandable why British expatriates are beginning to feel the sand shifting under their feet.