How UK Budget 2021 Impacts Expats

UK Budget 2021

Offshore pensions for expats remain untouched with no mention of QROPS or international SIPPS in Chancellor Rishi Sunak’s Budget 2021.

The Qualifying Recognised Overseas Pension Scheme was tipped as a tax break that the Chancellor could ditch by many pundits but survived unscathed.

QROPS have proved a great benefit to thousands of expats, with more than 132,000 Brits abroad moving £12 billion of pension cash offshore into the scheme.

The only policy that impacts QROPS is freezing the lifetime allowance (LTA) at £1.073 million until April 2026.

The lifetime allowance test is applied to UK pension transfers to QROPS when the funds are moved out of the country. If the amount transferred is more than the LTA, then the balance over £1.073 million is taxed.

Expats with pension pots brushing the LTA while planning to transfer to a QROPS will need to keep an eye on their retirement savings to avoid an unnecessary tax charge.

Early pension access rules for savers aged 55 or older are unchanged.

Other personal tax changes in Budget 2021 for UK tax resident expats intending to return to the country were:

Inheritance tax nil-rate band and residence nil-rate band

The IHT nil-rate bands will stay the same until April 2026.

The nil-rate band continues at £325,000, the residence nil-rate band at £175,000, and the residence nil-rate band taper starts at £2 million.

Qualifying estates can pass up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without IHT.

Income Tax

The income tax personal allowance rises £70 to £12,570 from April 6 and will stay the same until April 2026.

The higher rate threshold will rise £270 to £50,270 from April 6 and will remain at this level until April 2026.

Capital Gains Tax

Another tax widely tipped for change in Budget 2021 sees no change. The annual exempt amount – the CGT tax-free personal allowance – stays at £12,300 until April 5, 2026.

Savings and ISAs

The tax-free starting rate for savings is unchanged at £5,000 for 2021-22.

The Individual Savings Account (ISA) annual subscription limit – the amount an adult can save in a single year stays at £20,000 for 2021-22, while the Junior ISA and Child Trust Fund annual subscription limit remains at £9,000.

Green savings

The government is setting up a new green savings account through National Savings and Investment (NS&I) in the summer. The account gives savers a chance to back efforts to tackle climate change.

Landlords and Property Tax

Prime Minister Boris Johnson has pledged to change Generation Rent into Generation Buy.

His first step is the Mortgage Guarantee Scheme which will see the government underwrite deposits for home buyers on properties valued at up to £600,000.

The deal also offers the chance to fix mortgage rates for up to five years and runs until December 31.

The guarantee allows borrowers with good credit to access high loan-to-value lending when they cannot afford to save for a large deposit.

As an extra fillip, the stamp duty holiday is extended to June 30, with buyers paying zero stamp duty in England on homes worth up to £500,000.

From July 1 until September 30, the zero-rate band covers homes valued up to £250,000 and on October 1 returns to the pre-holiday rate of £125,000.

There’s no relief on the 3% surcharge for landlords and expats who pay additional home SDLT rates.

Furnished holiday lets

100% business rate relief continues until June 30, then reduces to 66% from July 1 until March 31, 2022.

The relief is capped at £2 million for a business forced to close on January 5, 2021, or £105,000 for all other properties

Property companies

Corporation tax rates rise for buy to sell, buy to let and hybrid property companies that will hit many landlords who have shifted to trade as a company to avoid the impact of mortgage interest relief.

Mortgage Interest Relief does not affect companies, but caps the amount individual landlords can claim as businesses expenses to reduce the tax they pay

Investors and property traders who flip homes for a profit will pay a top rate of 25% from April 2023 for companies with profits over £250,000.

A new Small Profit Rate softens the blow for companies with taxable profits of £50,000 or less, who will pay the current rate of 19%.

Companies with profits between £50,000 and £250,000 pay a tapered rate.

“Around 70% of actively trading companies, will continue to be taxed at 19% and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate,” said a Treasury spokesman.

Loss carry-back relief

Loss carry-back relief lets businesses set off losses against prior year profits.

Budget 20212 extends the relief to three years carry-back for up to £2 million of losses in 2020-21 and 201-22.

Company vehicles

Fuel benefit for cars and the van benefit charge rise in line with the Consumer Price Index measure of inflation from April 6.

Fast-track UK visas for highly skilled workers

Britain is opening the door for more highly skilled workers in education, science, research and technology.

From March 2022, a new fast track visa based on a point system will start for migrants with a job offer.

Budget 2021 also outlined a revamp of ‘elite’ visas:

  • Global talent visas to allow winners of international prizes and awards to gain entry to the UK
  • Innovator visas will ease entry requirements for entrepreneurs planning a start-up business in the UK

Read the guide to the other visa opportunities such as the Tier 1 Investor Visa and UK Family Visa.

Below is a list of some related articles, guides and insights that you may find of interest.

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