UK Budgets don’t normally have much of an effect on expats. They give us a bit of an insight into what life is like ‘back home’ and are important for those who have interests in the U.K. such as rental properties. But it does give me an opportunity to raise a couple of points which all British expats should be aware.
Most British Expats should pay voluntary National Insurance Contributions (NICs). It is a common mis-conception that making NICs on a voluntary basis qualifies a person for free treatment on NHS. This is not the case. Class 2 and Class 3 (voluntary) contributions entitle you to Bereavement Benefits, Basic State Pension and New State Pension whilst Class 2 provides an additional benefit: contributions-based Employment and Support Allowance. (source: NI38 Social Security Abroad). At £2.95 per week for Class 2 and £14.65 per week for Class 3 (tax year 2018/19), the state pension benefits alone make this a good investment for most of us. In the budget, Mr Hammond, informed us that Class 2 will be allowed to continue for another year whilst the system for self-employed NICs is reviewed.
The capital gains tax net has been widened to include all immoveable assets in UK held by non-residents with effect from April 2019.
Inheritance Tax remains and is often forgotten by expats. This is a capital transfer tax charged at 40% on death after allowances and exemptions, whilst it is usually paid from a person’s estate on death it can be applied at other times. For those who are UK domiciled, this Inheritance Tax is applied to their entire estate (i.e. world-wide assets less liabilities). For those who are non-UK domiciled this is only applied to assets within the UK. Domicile is an HMRC terms which has little to do with where you are living when you die. There is a nil rate band of £325,000 which has not been changed since 2009. For the last few years, it has been possible for spouses who are both UK domiciled to pass their unused nil rate band to one another making the total amount a couple can pass on to the next generation at least £650,000. In April 2017, a further £100,000 allowance was introduced where the deceased passed on a residential property to a direct descendent. This is known as the Residential Nil Rate Band. This will be increased by £25,000 a year until April 2021 when the allowance will be £175,000. This will then enable a couple to potentially pass on £1,000,000 before inheritance tax is applied.
The above is provided as general information only, not tax advice. If you require tax advice you should consult a competent professional.
Let me know if you have any thoughts, comments or concerns.