A summary of yesterday’s UK Budget and its implications for expats.
The Chancellor delivered his Budget speech yesterday – his first Autumn Budget. An hour into the speech and we were waiting for the punchline. It never came.
Mr Hammond seemed to navigate the precipice he was edging towards with no big fiscal announcements and hopefully no U-turns in the coming days. With UK pensions left untouched, no amendments to the QROPS rules, and no mention of immediate changes to UK inheritance tax, a low key Budget speech passed.
- A research paper commissioned by HMRC on the ‘Influence of inheritance tax reliefs and exemptions on estate planning and inheritances’. In essence this concludes that those who participated in the research had a limited comprehension of UK IHT.
- There was also an announcement of a consultation paper in 2018 on the taxation of trusts with the objective of making taxation of trusts simpler, fairer, and more transparent. So we have a number of consultations to look forward to in 2018 and perhaps a wholesale review of inheritance tax.
- There were no further changes to the non-domicile rules, although the legislation introducing the changes to the UK deemed domicile rules and changes to non-domiciles holding UK residential property through offshore structures has just received UK Royal Assent. We did see an extension to taxing gains made by non-residents on immovable property, for example UK land and commercial property.
Standard Lifetime Allowance
As expected, the standard Lifetime Allowance for pensions will change in line with the 3% annual consumer prices index (CPI) increase for September 2017 from £1,000,000 to £1,030,000 from 06/04/2018.
Pension fund investment in innovative firms
The Government will also support long-term investment by giving pension funds confidence that they can invest in assets supporting innovative firms as part of a diverse portfolio. The pensions’ regulator will clarify guidance on investments with long-term investment horizons. With over £2 trillion in UK pension funds, the Government hopes that small changes in investment could transform the supply of capital to innovative firms.
State pension increase
The basic state pension will be increased by the triple lock. The rise in April 2018 will be 3% – a cash increase of £3.65 per week for the full basic state pension. The benefits of the triple lock increase will also be passed on to the poorest pensioners through an increase to the standard minimum guarantee in pension credit to match the cash rise in the basic state pension. This will be paid for through an increase in the savings credit threshold – the savings credit starting point.
The full new (2016) state pension will also be increased by the triple lock, rising by £4.80 per week.
From April 2019, tax relief for employer premiums paid into life assurance products, or certain overseas pension schemes, will be extended to cover policies when an employee nominates an individual or registered charity to be their beneficiary.
HMRC has commissioned qualitative research to attempt a ‘deep dive’ into the behaviour and motivation underlying an individual’s decision making process for inheritance tax (IHT) planning.
This research may signal the prelude to a review of IHT planning in the UK whilst HMRC evaluates the current system’s effectiveness and use from a policy perspective.
Stamp duty land tax
Relief for first time buyers
From 22 November 2017 first time buyers paying £300,000 or less for a residential property will pay no stamp duty land tax (SDLT).
First time buyers paying between £300,000 and £500,000 will pay SDLT at 5% on the amount of the purchase price in excess of £300,000.
First time buyers purchasing property for more than £500,000 will not be entitled to any relief and will pay SDLT at the normal rates.
Higher rates for additional properties
Since April 2016, all those who purchase residential property when they already own at least one property, and are not replacing their main residence, have paid higher rates of SDLT (3% above the standard rates). Relief from the higher rates will be introduced for certain cases, including:
- where a divorce related court order prevents someone from disposing of their interest in a main residence
- where a spouse or civil partner buys property from another spouse or civil partner
- where a deputy buys property for a child subject to the Court of Protection
- where a purchaser adds to their interest in their current main residence.