Osborne's plans for expats - not good news?
Posted: Sat 05 Apr 2014 10:59 am
This is from IExpats notifications. Osborne planning some nasty surprises for expats including pensioner expats. Hoping sense within the government will prevail as the expat pensioners will surely suffer. Posted so all Kibkommers aware of these dastardly plans by Osborne. Hopefully if you still pay tax in UK on your pension you will be OK (see para 2 under sub heading 'are you really an expat'
Osborne Ready To Tax Expat Private Pensions
Chancellor George Osborne is making quite clear to expats that they are either in or out of the UK tax system and cannot expect to rely on financial favours from the British government any longer.
Hot on the heels of Osborne’s confirmation that capital gains tax is on the way for non-residents, he has also revealed a consultation is coming to look at scrapping the personal income tax allowance for expats. Getting rid of the personal allowance means the £10,000 a year earnings limit before paying income tax goes for expats. So, any expat couple drawing pension income in the UK – including the state pension – will pay £2,000 income tax each.
Are you really an expat?
Although details of the consultation are awaited and are expected to be published alongside the Finance Bill 2014 on March 27, 2014, who receives the allowance will depend on the definition of an expat. In conversation, an expat is anyone living or working overseas, but the tax definition is different.
For tax purposes, an expat is someone who is no longer a UK resident, which means they have broken their social and financial ties with Britain and reside and pay tax in another country. Although Osborne may have liberated pensions, he is still determined to collect for the Treasury. “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 European Union,” said Osborne.
QROPS solution
Avoiding the personal allowance tax trap could be as straightforward as switching an onshore pension into an offshore Qualifying Recognised Overseas Pension Schemes (QROPS).
QROPS investors pay income tax on their pension payments based on where they are tax resident, not at UK tax rates, and these can vary considerably from country to country. For instance, Gibraltar residents pay income tax on pension income at 2.5% and pick up a 30% tax-free pension lump sum payment compared with the standard 25% payment onshore.
Any QROPS payments can be dropped straight into a personal bank account without foreign exchange worries as providers pay the benefits in a range of major currencies, not just Sterling.
Many providers will also take in small pot transfers of less than £75,000 on QROPS ‘lite’ terms, which is good news for many expat pension investors who have an average pot of around £38,000.
Osborne Ready To Tax Expat Private Pensions
Chancellor George Osborne is making quite clear to expats that they are either in or out of the UK tax system and cannot expect to rely on financial favours from the British government any longer.
Hot on the heels of Osborne’s confirmation that capital gains tax is on the way for non-residents, he has also revealed a consultation is coming to look at scrapping the personal income tax allowance for expats. Getting rid of the personal allowance means the £10,000 a year earnings limit before paying income tax goes for expats. So, any expat couple drawing pension income in the UK – including the state pension – will pay £2,000 income tax each.
Are you really an expat?
Although details of the consultation are awaited and are expected to be published alongside the Finance Bill 2014 on March 27, 2014, who receives the allowance will depend on the definition of an expat. In conversation, an expat is anyone living or working overseas, but the tax definition is different.
For tax purposes, an expat is someone who is no longer a UK resident, which means they have broken their social and financial ties with Britain and reside and pay tax in another country. Although Osborne may have liberated pensions, he is still determined to collect for the Treasury. “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 European Union,” said Osborne.
QROPS solution
Avoiding the personal allowance tax trap could be as straightforward as switching an onshore pension into an offshore Qualifying Recognised Overseas Pension Schemes (QROPS).
QROPS investors pay income tax on their pension payments based on where they are tax resident, not at UK tax rates, and these can vary considerably from country to country. For instance, Gibraltar residents pay income tax on pension income at 2.5% and pick up a 30% tax-free pension lump sum payment compared with the standard 25% payment onshore.
Any QROPS payments can be dropped straight into a personal bank account without foreign exchange worries as providers pay the benefits in a range of major currencies, not just Sterling.
Many providers will also take in small pot transfers of less than £75,000 on QROPS ‘lite’ terms, which is good news for many expat pension investors who have an average pot of around £38,000.