2018 UK Budget – Expat Report

Pensions

• Despite pre-budget reports of a possible cut of higher rate tax relief for pension contributions and a reduction of annual allowance for pension contributions, these were not changed at this budget.
• The Lifetime Allowance (LTA) for UK Pensions is to rise by £25,000 on the 6 April 2019, increasing the current allowance from £1,030,000 to £1,055,000.  This is the maximum that an individual can save tax free over the lifetime of their pension pot.

Income Tax

• The personal allowance for income tax in England, Wales and Northern Ireland will increase on the 06/04/2019, from £11,850, to £12,500.  Since April 2017, the Scottish Parliament sets the basic rate limit and higher rate threshold for non-savings, non-dividend income for Scotland.

• In addition, one year earlier than planned, the basic rate limit will increase from £34,500 to £37,500.  As a result, the higher rate threshold will increase from £46,350 to  £50,000 for 2019/2020 & 2020/2021 tax years.

• Starting rate for savings – The band of savings income that is subject to the 0% starting rate will remain unchanged from £5,000 for 2019/20 tax year.

• Rent a room relief – In order to eligible for exemption from income tax on profits up-to £7,500 from 06/04/2019, an additional test of ‘shared occupancy’  will be introduced. Essentially the individual claiming the relief must have a physical presence for all or part of the period of the rental, with the individual whose occupation of the accommodation is generating receipts.

So, for example, if a property was rented out on a short term basis and the owner was not resident in the property for at least some of this period, then the rental receipts would not be eligible for relief.

Capital Gains Tax (CGT)

• Capital Gains Tax annual exempt amount for individuals, personal representatives and trustees for disabled people increased from £11,700 to £12,000 and for other trustees from £5,850 to £6,000.

• From the 6 April 2019, all non-UK resident persons, whether liable to Capital Gains Tax or Corporation Tax, will be taxable on gains on disposals of interests in any type of UK land. The elections for the non-resident Capital Gains Tax rules not to apply for certain persons have been removed.

This measure extends the scope of the UK’s taxation of gains accruing to non-UK residents to include gains on disposals of interests in non-residential UK property. It also extends the charge on gains on disposals of interests in residential property to diversely held companies, those widely held funds not previously included, and to life assurance companies. The measure also taxes non-UK residents’ gains on interests in UK property rich entities (for example, selling shares in a company that derives 75% or more of its value from UK land).

https://www.gov.uk/government/publications/changes-to-taxing-gains-made-by-non-residents-on-uk-immovable-property/capital-gains-tax-and-corporation-tax-taxing-gains-made-by-non-residents-on-uk-immovable-property

• No change to level of entrepreneurs’ relief available for Capital Gains Tax, although from 6 April 2019, however, the ownership period to qualify is doubled from one year to two years.

Stamp Duty Land Tax (SDLT) and first time buyers relief

• First time buyers of properties in England and Northern Ireland will benefit from relief on SDLT for properties worth up-to £500,000 (increased from current allowance of £300,000).  This relief will also be extended to buyers of shared ownership properties.

• This change will apply to relevant transactions with an effective date on or after 29 October 2018, and will also be backdated to 22 November 2017, so that those eligible who have not previously claimed first-time buyers relief will be able to amend their return to claim a refund.

ISA’s / Trust Funds

• Individual Savings Account (ISA) annual subscription limits – The adult ISA annual subscription limit for 2019-20 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs for 2019-20 will be uprated in line with CPI to £4,368
• Child Trust Funds – The government will publish a consultation in 2019 on draft regulations for maturing Child Trust Fund accounts. The annual subscription limit for Child Trust Funds for 2019-20 will be uprated in line with CPI to £4,368.

Companies

• No change to corporation tax rate of 19%, or to the legislation for this to fall to 17% in 2020.

• Business rates bills for companies with a rateable value of £51,000 or less to be cut by third over two years.
• From 6 April 2020, non-UK resident companies that carry on a UK property business, or have other UK property income, will be charged to Corporation Tax, rather than being charged to Income Tax as at present. This change will align with the end of tax year 2019 to 2020 on 5 April 2020.

Fuel Duty

• In 2019, fuel duty will remain frozen for the ninth year in a row, saving the average driver £1,000 since 2010.

Additional Points

• Additional £500m set aside for a no-deal Brexit.
• Consequential minor amendments to tax legislation to reflect EU exit – The government is responsible for preparing for all possible outcomes to EU negotiations. This power will allow the government to make small, essential changes to UK tax law to maintain the effect of tax legislation if the UK leaves the EU without a deal. Changes made under this power will maintain current operation of the tax law in essential areas, including changes in line with no deal legislation in other parts of the law.
• Private finance initiative (PFI) contracts to be abolished in future.

Consultations

• Consultation on Stamp Duty Land Tax charge for non-residents – The government will publish a consultation in January 2019 on a SDLT surcharge of 1% for non-residents buying residential property in England and Northern Ireland.

• Consultation to be launched on the possible introduction of a UK Digital Services Tax in April 2020.  The 2% tax on the revenues of certain digital businesses is to be paid by profitable firms that have at least £500m a year in global revenues.

• Trusts consultation – As announced at Autumn Budget 2017, the government will publish a consultation on the taxation of trusts, to make the taxation of trusts simpler, fairer and more transparent.

•  in case you read the following article from International Investment:http://www.internationalinvestment.net/regions/uk/uk-budget-tax-avoidance-clampdown-to-raise-2bn-over-five-years/

  ‘HMRC will crack down on insurance companies that issue investment products through offshore centres such as the Isle of Man or Dublin where these instruments do not attract VAT.’

  Please note that this refers to the Amendment of the VAT (Input Tax) (Specified Supplies) Order 1999, which is not relevant to ourselves, as it is aimed at UK insurers looping intermediary services via an overseas territory who then reclaim VAT on their costs.

  An offshore loop is a cross border structure that enables these VAT costs to be reclaimed by routing services carried out in the UK via a body located outside the EU. These services are then used to provide insurance (and other financial services) back into the UK market.
  Providers of financial services cannot reclaim VAT, as their services are free of VAT.

  The budget confirmed:

  ‘The VAT (Input Tax) (Specified Supplies) – As announced in a Written Ministerial Statement on 19 July 2018, the government will legislate to restrict the application of the Specified Supplies Order in certain circumstances to prevent a version of VAT avoidance (offshore looping) that involves UK insurers gaining a competitive advantage by setting up associates in non-VAT territories and using these associates to supply their UK customers.’