Just because you consider yourself an expat and live and work overseas does not mean some big tax breaks are closed for you back in Britain.
The chances are if you have left the UK in the past tax year or only work abroad temporarily and keep a home back home, you are resident in the UK for tax and can claim the same reliefs and allowances as any other taxpayer.
Seed Enterprise Investment Schemes (SEIS) are the tax-effective investments attracting a lot of interest.
Open to UK taxpayers, a SEIS offers massive tax-savings –
- 50% refund on income tax paid on with SEIS inputs of up to a maximum £100,000 in this tax year. That gives anyone sinking the maximum in to a SEIS up to a £50,000 tax refund, regardless of the headline rate paid, making the deal attractive for 20%, 40% and 50% taxpayers.
- This can be boosted by another 28% if a higher or top rate tax paying investor disposes of other assets to switch the cash in to a SEIS. This offer is only open for this tax year. Basic rate (20%) taxpayers pick up an 18% bonus instead of the 28% based on the rate of capital gains tax paid.
For investors, the combined reliefs add up to between a 68% and 78% tax rebate on an investment of £100,000.
SEIS schemes invest in start-up companies, mainly working in technology and digital media. Companies receiving investment have to meet a tight set of investment criteria.
The maximum investment in a SEIS is £125,000 over two or more tax years – but the tax breaks only apply to the first £100,000.
Chancellor George Osborne is encouraging investment to fast-track small firms that have limited funding opportunities available through the banks because they have little or no trading history and represent high risk to investors.
In his Budget, Osborne expressed his hope that a SeIS company could grow in to the next Google or Facebook.
Expats who are still tax resident can also look at other tax incentives – ISAs are still open, while self-invested personal pension schemes (SiPPs) offer relief on contributions, providing lifetime limits are observed.
A SiPP is not a qualifying recognised overseas pension scheme (QROPS), which are only available to anyone with UK pension rights living permanently abroad.
Don’t forget these tax breaks are only available to UK taxpayers, so establishing residence is a key step. Get it right and you could land a tax windfall, but get it wrong and all the benefits are lost. That’s why we stress the importance of taking professional, independent financial advice before handing over any cash.
Tax residency is due for a rehash in April 2013 – a new British statutory residence test is on the way and the complicated old rules like ‘ordinary residence’ will disappear.
Introducing the new residency rules will align with the end of the first year of SEIS tax breaks.
Updated 2013
The Budget 2013 saw the extension of the Capital Gains Tax relied for the following year. This shows how much backing the UK government has given to the SEIS scheme and continue to highlight the benefits to investors and the economy about start up companies.
Great lesson Lisa. Very essentials facts for growing income true tax savings.
If I subscribe for shares in 2012/13, can I claim SEIS relief carry back to 2010-11? What rate of relief will I get for the 2010-11 investment? Thanks.
Atco – there is no carry back as the SEIS only took effect from 6 Apr 2012