The government is planning more tax and pension blows to hit expats in the pocket.
Following an announcement to charge overseas residents capital gains tax on the sale of homes in Britain, the next expat targets are the £10,000 a year personal income tax allowance and halving the state pension deferral rate.
Financial experts claim the measures will make expats significantly worse off.
Chancellor George Osborne announced in Budget 2014 that he was considering abolishing the income tax personal allowance for expats.
The move will cost a basic rate taxpayer £2,000 as they will have to pay income tax on qualifying British investments, savings and pension payments.
Pensions minister Steve Webb has also made public his intention to cut the state pension deferral rate from 10.4% to 5.8%.
State pension deferral
The deferral rate is annual an uplift in the state pension paid for every year the benefit is not claimed.
The new rule will affect anyone hitting state pension age after April 2016.
Deferring the state pension for a year earns someone £635, which will reduce by £294 a year to £341 a year from April 2016.
Deferring the state pension for anyone who can afford to do without the cash is one of the best saving decisions a pensioner can make as few investments return anywhere near 10.8% a year.
Combined, the three measures will make the government billions of pounds a year in extra tax revenues.
CGT for expats
Thousands of expats relying on selling homes in the UK to fund their retirement will pay capital gains tax on the proceeds from April 2015, causing them to rethink their later years finances.
Similarly, they will also lose any tax free income tax allowance on rents and income from investments and pay tax starting at 20%.
The personal allowance consultation released by the Treasury explained many countries in the European Union, the US, Canada and Australia, already limit tax allowances for expats so that the benefit only applies to tax residents.
A spokesman said; “The government wants a tax system that is simple to follow and operate. The government is committed to ensuring that anyone benefitting from Britain’s economic and social success pays a fair amount of tax in the UK.”
At the same time, the government has also announced measures to curb expats in the UK from other countries from claiming benefits, arguing only those paying into the system should gain a financial advantage from state welfare.
What the government forgets is that this is not their money to withhold. It belongs to those who paid years of mandatory NI contributions. They are just administrators of our cash and think it is their right to dip into the NI fund and use our money for other projects, meanwhile they come up with every way possible to reduce our income from years of investment. We will return to the UK, as no doubt many others will, because our pension is already frozen just because of where we live. So instead of saving the UK economy £3,700 a year we will use as many of the senior benefits for which we are eligible.
The UK government can claim to have one of the lowest pensions in the EU
if not the world for countries with a similar pension system and not
only that but for 560,000 pensioners who live abroad, the only country
to have a pension that effectively decreases at the rate of inflation for
these ex-patriot pensioners but not for the other 650,000 who are also abroad.
How is it that politicians can get things so screwed up
Mind you they are quick to look after their own welfare and increase their allowances and benefits with your money.
Pensioners are an easy target.
“The government wants a system that is simple to follow and operate”.
It already has one and that makes a personal allowance avaılable to all taxpayers and to introduce a system whereby varıous addıtıonal conditions need to be satisfied to determıne eligibility hardly seems to fit these requirements.
It shows the confusıed thinkıng of Osborne and the Treasury when one part of the coalition government is actually proposing to increase the allowance and the other part to ımplement a dracoiıan discrimination and abolish the allowance to UK citizens over seas is totally and utterly absurd.
Having been extolled by government throughout one’s working life to plan and budget for one’s retirement it is irresponsıble to even contemplate moving the goalposts yet again with the withdrawal of the tax free allowance which for many is a cornerstone of their living.
When one takes into account the considerable savings already being made to the UK economy through living abroad the argument “anyone benefitting from Britains (alleged) economic and social success pays a fairer amount of tax in the UK” is skating on very thin ice ….what benefits does the retired civil or publıc servant get from having over GBP2,000 per annum confiscated from probably their sole source of income? The government already discriminates against the frozen pensioner so for them the downward spiral in living standards and the resultant poverty is goıng to be exacerbated.
The “savings” that have been quoted by abolishıng the personal allowance to overseas citizens amount to just GBP400 million. From that, of course, needs to be deducted the whole process of settıng up, admınısterıng, advisıng and handling all the complaınts and querıes other runnıng costs…and then there is the final question ….does the saving of such a small sum really justify throwing the lives of those already abroad – and many of considerably advanced years – and those planning to do so into such turmoil?
They had better be prepared for an influx of millions of expats who will have to return to the UK because of this policy. The 1.1 million pensioners alone, who at 2011 figures saves the UK £3,700 each (which adds up to many millions over a year) will be costing the economy instead of saving. Good thinking Osborne, shooting ones self in the foot is never a good career move.