Many British expats will be eyeing the upcoming Budget 2013 with increasing nervousness to see what changes they can expect the Chancellor George Osborne to reveal.
In recent times there have been no major surprises in the Budget since many of the announcements have already been made clear in advance – and hopefully this year is no different.
In December, Osborne told Parliament of his plans for expats and the new statutory residence test (SRT).
SRT will is the formula to calculate the tax residency of those who move overseas to work for a time and for those who move to the UK to work.
The SRT will now be divided into three sections which will determine whether an individual should be viewed as being ‘automatically non-resident’ or ‘automatically resident’.
Property tax
This will be determined by analysing the person’s connections and ties to the UK, which will include their family, work, and property.
The new SRT will replace the current rules used to determine a person’s tax residence and will take effect from April 6, 2013.
A whole host of changes are already well-documented to allow people and companies to prepare for them.
Among the new laws is the Annual Residential Property Tax which will be levied on companies which own high value residential properties worth between £2 million and £5 million.
The Chancellor looks set to confirm that the annual limit for Individual Savings Accounts (Isas) will increase by 2.1% from £11,280 to £11,520.
The personal allowance before income tax is paid is also set to increase to £9,440 from the current £8,105 a year.
Income tax changes
The increase will mean that more lower-paid workers will be better off.
Income below £41,451 will be taxed at 20% with those earning more being taxed at 40%.
Other new rules for the next tax year will see another 400,000 taxpayers dragged into the 40% tax rate as the threshold for the allowance increases by 1% every year for the next two years.
One controversial announcement is that those earning more than £150,000 will enjoy a tax cut from 50% to 45%.
Pensioners also look set to get a more generous allowance which will be £10,500 for those aged between 65 and 74, and £10,660 for those aged 75 and over.
There is a major overhaul of the current pensions and benefits system with the current basic state pension set to rise by 2.5% to £110.15 a week.
