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The UK Chancellor released his latest Autumn Statement on Friday 24 November 2023. It contained a host of interesting budget measures for the government. Some of the announced changes – such as “sweetening voters” by cutting National Insurance – have even led to speculation that the government could be preparing for an early general election in 2024.
What do the announcements mean for you as an expat living in Spain? Below, our financial advisers draw attention to some of the key ideas which may affect your wealth and finances. We hope these insights are useful to you. If you want to discuss your financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:
+34 966 460 407
info@scottsdale.eu
What was in the Autumn Statement?
The backdrop of the Chancellor’s Autumn Statement sets the context for many of the announcements. In 2023, the UK economy has been steadily improving as inflation has “cooled” from 6.7% in September to 4.6% in October 2023. This led the Prime Minister, Rishi Sunak, to hail the early completion of one of his key promises (reducing inflation to 5.3% by the end of 2023). Speculation rose ahead of the Autumn Statement that tax cuts could be coming now that average prices were more under control.
The headline measure, when the statement finally arrived, was the planned cut to National Insurance (NI) in early 2024. Class 2 contributions, paid by self-employed people, will be abolished. UK income tax bands are still the same and the tax-free Personal Allowance (set at £12,570 in 2023-24) will be frozen for the foreseeable future. The State Pension will rise by a generous 8.5% in April next year.
The ISA contribution limit will remain at £20,000 per year. However, ISA investors will no longer be prohibited from investing in multiple cash ISAs or multiple stocks & shares ISAs in a single tax year. Inheritance tax (IHT) has not been changed and alcohol duty will be frozen until August 2024. Fuel duty had no announced changes.
What does this mean for expats?
For British nationals living in Spain and receiving their UK State Pension, the budget contains some welcome news by reinforcing the commitment to the “triple lock” system. Next April, income from the State Pension should rise by 8.5%.
Residents in the European Economic Area (which includes Spain) still receive annual increases to their State Pension income under the triple lock system. Inflation in Spain is lower than in the UK (standing at 3.50%) and the cost of living is also lower. Setting aside currency exchange, therefore, the State Pension increase in April could benefit expats in Spain even more than pensioners in the UK.
The changes to ISAs may affect you if you are still eligible to contribute to an ISA as an expat. In 2023-24, UK rules state that you must cease contributions when you cease to be a UK resident and you must notify your ISA provider about your change in status. However, if you can still contribute to an ISA, in 2024 you may temporarily enjoy more flexibility about where you can contribute your money inside ISAs.
Expats are unlikely to be directly affected by the planned rise to the UK’s National Living Wage in April 2024 (to £11.44 per hour). One possible niche case that may be impacted could be a British national living in Spain but still employed by a UK company (receiving a wage in British pounds). Regarding the changes to National Insurance, most expats working in Spain will pay local social security contributions rather than the former.
Looking ahead
For an expat, your liability to UK tax depends heavily on your residency status. If you are deemed to be a UK resident by HMRC, then any changes to the UK’s tax landscape (e.g. announced through a government budget like the Autumn Statement) are more likely to have a direct impact on you.
With the possibility of a UK general election next year, however, you may – regardless – wish to check that you are still registered to vote back home. This can be done via proxy as an overseas voter, or by using a postal vote.
It is worth highlighting the tax “freezes” in the Autumn Statement. Whilst the Chancellor is cutting National Insurance, this pales in comparison to the six-year freeze in allowances and thresholds (to date). These are set to continue for the coming years.
One possible consequence of this could be that people living in the UK, relying solely on the State Pension for their retirement income, may end up paying tax on that income once it exceeds £12,570 per year (in 2023-24 the full new State Pension pays £10,600.20). Bear in mind, however, that British expats residing in Spain can apply for an exemption from UK income tax on the State Pension under the terms of the UK-Spain double taxation agreement.
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