This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, it is subject to change and we are not responsible for any errors or omissions.
The Autumn Statement is typically one of two key dates in the UK’s financial calendar (the other being the Spring Budget). This year, the Chancellor (Rachel Reeves) is expected to announce the new government’s Autumn Statement on 30 October 2024.
There is plenty of speculation about what policy changes it might contain. However, how might the Chancellor’s decisions affect those living abroad? Below, our financial advisers analyse the government’s most viable fiscal policy options and how they might affect British expats.
We hope these insights are useful. If you want to discuss your financial plan with a member of our team, please get in touch to arrange a no-obligation financial consultation at our expense:
+34 966 460 407
info@scottsdale.eu
Changes to pensions?
The British media is highlighting pensions as a potential area where the Chancellor might try to save some money for the public purse (to fill a £22bn “black hole”). Possibilities include:
- Removing the rule which allows pensions to be exempt from a person’s estate (for inheritance tax purposes).
- Changing/taking away the 25% tax-free lump sum available once an individual reaches their Normal Minimum Pension Age (NMPA).
- Altering the tax relief system – e.g. introducing a “flat rate” for all taxpayers.
- Reintroducing the old Lifetime Allowance (LTA) system, which “capped” the total tax-free amount someone could save across their pensions.
- Lifting the National Insurance (NI) exemption on employer pension contributions.
This is not an exhaustive list of options for the government. Nor are they all equally viable or likely. Some of them bear upon expats. Others may be less relevant.
For instance, the first option (e.g. including pensions in an individual’s estate) could affect British expats in Spain and elsewhere. Remember, even if you are not a resident of the UK, your UK-based assets are subject to UK inheritance tax when you die.
So, if you are living in Spain but your pension is based in the UK, then your pension could be subject to IHT if the Chancellor goes ahead with this policy option. Moving it to a recognised overseas pension scheme (ROPS) could take it out of the tax net. However, this decision has other big implications and should be discussed carefully with a financial adviser.
If you have not yet taken your tax-free lump sum from your UK pension(s), then the second option could also affect you as an expat. However, do not rush to access your pension benefits in a knee-jerk manner. Be careful to fully (and calmly) explore the ramifications of different decisions with a seasoned expat financial adviser.
Capital gains tax changes?
The press has also speculated heavily that the Chancellor could increase capital gains tax (CGT) rates – e.g. equalising them with UK income tax bands.
The implications for expats depend on each person’s unique circumstances. Remember, non-residents are not subject to UK CGT on the disposal of UK-based assets (the main exception is property).
So, if an individual lives abroad and has no Buy to Let(s) in the UK, then even if the Chancellor raises the headline CGT rates, the policy change may have little/no impact.
However, this is not to say that expats are immune from any pivots in UK fiscal policy. The recent decision to abolish the “non-domicile” regime by April 2025 is a case in point.
One specific area of change for British expats to note is Labour’s promise to increase stamp duty on residential property purchases by non-UK residents. So, if you were planning to build/expand a Buy to Let portfolio, please note the additional 1% in tax that may affect you.
Other possibilities
There are dozens (perhaps over a hundred) different types of taxes in the UK. It is impossible to accurately predict which changes may arrive on 30 October 2024.
However, the Labour Party ruled out raising VAT, income tax and National Insurance (NI) before its general election victory in July. This effectively “boxes in” the government and limits its options to mostly wealth-related taxes.
Expats are in a unique position due to their typical status as non-UK residents. For instance, dividend tax has been posited as a potential target for the Chancellor. However, non-residents are not taxed in the UK on UK interest or dividends received.
Fuel and alcohol duties have also been identified as possible areas for fiscal policy change. Again, unless you spend significant time in the UK buying these goods, this option may not affect you significantly as an expat.
Nonetheless, non-residents should keep a close ear to the ground over the coming month. Here at Scottsdale, our financial advice team will be keeping our clients closely updated. Please get in touch if you are a British expat and would like to discuss your goals and options with a specialist financial adviser.
Invitation
If you are interested in discussing your own financial plan or inheritance tax strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
+34 966 460 407
info@scottsdale.eu