Expats to keep their tax breaks

British expats with UK-based assets or income can still enjoy a sizeable tax break

Last week’s Autumn Statement from UK Chancellor George Osborne brought good news for British expats fearful that they may lose their personal tax allowance.

Amid earlier reports that Osborne would scrap the allowance – a tax break for the five million or so Brits who live and work overseas but still have assets or income in the UK – the Statement confirmed that the allowance would remain in place, for the time being at least…

Indeed, the allowance – set at £10,000 for a single person – has actually been extended to £10,600 for the tax year 2015/16. What this means is that any British person who lives away from the UK can earn £10,600 tax-free on assets in Britain. This could be rental income from a property, a pension, or a secondary income.

Those who are married are subject to different rates depending on circumstances, while the rate will differ slightly according to age, too.

“This is good news,” said the Chairman of the Chartered Institute of Taxation’s management and taxes subcommittee, Jon Preshaw. “We were concerned that the changes proposed would make the tax system unduly complicated. The government accepted that the current system has the advantage of familiarity and for many non-residents presents an internationally compelling tax offering.”

Preshaw added that although the concerns that people who no longer had “strong economic connections to the UK” were benefiting from the highest personal tax allowance of all the G20 countries were valid, maintaining the status quo was the best course of action. “This is an automatic consequence of the decision by the government to significantly increase the personal allowance,” he said.

Expats who do own a UK property may be affected by another announcement unveiled in the Autumn Statement. Although Osborne is lowering stamp duty for 98% of homes purchased in the UK, all property sold in Britain by non-residents – even British citizens who now reside permanently overseas  – will be subjected to new levels of capital gains tax.

The government said that it will publish these new rates this week, but the likelihood is that capital gains tax will increase for this bracket of homeowners.

In other related news, air tax for children under 16 will be scrapped from 2016, which will enable British expats with young children to fly for just that little bit cheaper by that date. Every little helps, goes the saying…