UK expats to pay tax on their rented houses back home

[Bazle]

However, there seems to be a question as to whether or not the Personal Allowance will EITHER continue for ex-pats, but NOT be usable against rental income, OR the Personal Allowance will be denied to ex-pats altogether.

Thanks for the link - I will certainly put in my sixpenn'orth!

You need to read the Consultative Document before putting in your submission; there is no question of the sort you mention.

https://www.gov.uk/government/consultations/restricting-non-residents-entitlement-to-the-uk-personal-allowance/restricting-non-residents-entitlement-to-the-uk-personal-allowance

[awayego]

However, there seems to be a question as to whether or not the Personal Allowance will EITHER continue for ex-pats, but NOT be usable against rental income, OR the Personal Allowance will be denied to ex-pats altogether.

Thanks for the link - I will certainly put in my sixpenn'orth!

You need to read the Consultative Document before putting in your submission; there is no question of the sort you mention.

https://www.gov.uk/government/consultations/restricting-non-residents-entitlement-to-the-uk-personal-allowance/restricting-non-residents-entitlement-to-the-uk-personal-allowance

OK. Thanks for the link - I shall read through it carefully!

The fact remains though that if the government makes life any more difficult financially for this ex-pat at least, the option to return is always open and thereby I would become a net consumer of tax funds as opposed to a net contributor!

[spidermike007]

and quote ^^^^

The plans to deny the personal allowance to people who are non-resident for tax purposes – meaning they are in Britain for less than six months of the year – were first revealed in the March Budget. Developed plans have now been released for consultation.

In total, up to 400,000 people could be affected, saving the Exchequer £400 million a year.

The politicians are now debating whether or not a smile should be taxed. It is said that an expression of satisfaction, or joy, or happiness, or contentment, is not a normal kind of expression in this nation, and therefore should be subject to extraordinary measures. Soon, pleasant greetings will be taxed too. And if you lend your neighbor a cup of sugar? One quid tax. This is what happens when you have a government comprised of men and women who lack creativity. Kind of like the government in California. Same thing. No creative ideas. Plenty of cash flow issues. Why not raise taxes? Can you think of any reasons we should not do this? No. Then lets raise taxes. It will be fun. And another 400 million would not hurt. Maybe we can even raise our own salaries, or increase our pensions, or get better health care. Wow. Lets do it.

They should be making life easier for ex-pats, not harder. Think of how much pressure ex-pats are taking OFF the system by living abroad. These guys should be given extra compensation for living abroad, not penalized! Churlish policy designed by man children.

[DiDiChok]

I can tell you having sold and bought industrial property recently in the UK, that HMRC wants your National Insurance number so that they can check if tax has been paid on rental income and to check if any capital gains tax is due.

It's the end of "slush money" as we used to call it.

[chiang mai]

However, there seems to be a question as to whether or not the Personal Allowance will EITHER continue for ex-pats, but NOT be usable against rental income, OR the Personal Allowance will be denied to ex-pats altogether.

Thanks for the link - I will certainly put in my sixpenn'orth!

You need to read the Consultative Document before putting in your submission; there is no question of the sort you mention.

https://www.gov.uk/government/consultations/restricting-non-residents-entitlement-to-the-uk-personal-allowance/restricting-non-residents-entitlement-to-the-uk-personal-allowance

Many thanks for the link, it answers many questions.

[robertson468]

Lets hope that the following extract from the Governments paper is true:

The government does not intend to raise taxes on vulnerable groups or

in situations where the UK is the principal taxing authority and an

individual has no recourse to relief as a result of the UK having sole

taxing rights under a tax treaty. If the government were to restrict

non-residents’ entitlement to the Personal Allowance, it would intend

this to apply to types of income which are taxable both in the UK and

overseas (such as that from immovable property) but to retain the

Personal Allowance on income that is taxable exclusively in the UK.

My words:

The British state pension is exclusively taxable in the UK.

As are military and civil service pensions, I believe.

[SantiSuk]

I know quite a few people living here on retirement extensions who survive on a combination of State pension plus a Company Pension.

No rental income involved.

These people already pay UK tax, I guess because the pensions are paid in the UK and the sum total exceeds the annual allowance.

I am reading that the said allowance could become zero for those out of the UK more than 6 months, certainly nearly all those I know.

A potential loss of £40 pw or £170 a month for a single person.

Some are struggling now.

Am I getting anything wrong here?

No, I think you're spot on. I currently have a company pension and investment income on which I pay UK income tax. If implemented, the proposals would make me £2,000 worse off (more as the nil rate band increases over time) or about 9,000 baht per month.

It seems to me that the UK government is treating its ex-pats as 4th rate citizens. I cost the government zero in health costs with visits to the doctor (and potentially hospital) plus I won't get a free bus pass when I'm 60 next year. Then, when I qualify for the state pension, the amount paid will never increase.

Alan

And our estates get robbed more than the typical Brit to the extent we are married to non UK-domiciled spouses and therefore cannot pass our estates free of Inheritance Tax to our spouses.

It would be fool hardy for UK plc to encourage me - a potentially costly pensioner (health costs for potenially expensive treatments now to be chargeable to the NHS and full inflation-linked pension in the future once I have been driven back 'home') to repatriate together with the social costs of my younger wife and child who will also now repatriate with me together with the deferral of them getting my IHT for say another 25 years when I die.

Developed countries should be trying to encourage their older citizens to get off the home country's books, not trying to claw them back. I understand that pension changes in Australia imply that Oz seems to be keen to drag back its expensive pensioners also. Absolutely nuts!

As Chiang Mai says though - need to do a whole lot more research before loosing off cannon shots. I'll wait to see what my expat tax advisers say about the inteded changes before writing to the press/HMRC!

Edited August 13, 2014 by SantiSuk

[sometimewoodworker]

And our estates get robbed more than the typical Brit to the extent we are married to non UK-domiciled spouses and therefore cannot pass our estates free of Inheritance Tax to our spouses.

see what my expat tax advisers say about the inteded changes before writing to the press/HMRC!

If you are under the impression that you "cannot pass your estate free of Inheritance Tax to your non UK-domiciled spouse" then you need a better tax adviser.

Firstly it is never posible to pass your estate free of Inheritance Tax to your spouse. You can only defer the IHT.

I am currently setting up my will and estate with the main beneficiary my Thai spouse (who is non UK-domiciled) and as part of that consultation there is a legal way for her to inherit and defer the IHT.

[Geordie59]

Do not forget you should be able to offset this against the tax you pay in Thailand under the double taxation agreements.

Seems the chancellor at last is cracking down on tax dodgers, not just the big ones like Starbucks and Amazon.

If the tax legislation in Britain gives a personal allowance of £10,000 before tax needs to be paid, then people earning less than £10,000 a year are not tax dodgers.

How could you interpret this as evading tax? The tax is not owed. Simply baffling comment!

You are not a tax dodger this year - but next year you would be.

[Geordie59]

Like many of these desperate methods designed to squeeze every last penny from the general public it will have little effect on boosting revenues raised. I would certainly consider selling up and breaking my last ties with the UK if I were to be taxed on a few thousand pounds income generated from renting out my house. I would then visit less and obviously spend a lot less in the UK economy 9 remembering that every pound I spend generates 20: VAT for the government).

Interesting that when they reduced the highest tax rate from 50 - 45% they raised more revenue.

Stop chasing our own people out of the country so they can be replace with immigrants, many of whom are illegal, asylum seekers etc who contribute nothing to the exchequer.

[rgs2001uk]

Like many of these desperate methods designed to squeeze every last penny from the general public it will have little effect on boosting revenues raised. I would certainly consider selling up and breaking my last ties with the UK if I were to be taxed on a few thousand pounds income generated from renting out my house. I would then visit less and obviously spend a lot less in the UK economy 9 remembering that every pound I spend generates 20: VAT for the government).

Interesting that when they reduced the highest tax rate from 50 - 45% they raised more revenue.

Stop chasing our own people out of the country so they can be replace with immigrants, many of whom are illegal, asylum seekers etc who contribute nothing to the exchequer.

Instead of thinking about what you will pay for, consider what you will get for free, post #37 nails it for me.

Mother Engerland will welcome you with open arms and throw free healtchcare and inflation linked pensions at you.

I usally claim back the VAT at Heathrow before leaving.

If I go back, I intend to contribute nothing, I intend to be a freeloading parasite immigrant scum.

[CBR250]

Similar situation going on in Australia since April 2012. This is why MPs have fully paid "overseas study tours" - to find new ideas for government regulation. So I don't know if Aussies can blame the Pommies or vice versa. But it stinks.

The tax free allowance in Oz is similar to UK ($20k) - BUT is only available to those who "residents for tax purposes". If you live outside of Oz for more than 6 months a year, any income you make from investments (rentals, share dividends etc) is treated as if you are a foreign citizen, a Beijing Billionaire with waterfront investments. You pay 35.5% tax from the first dollar, rather than nothing for the first $20k and then a sliding scale. This stuffs up self-funded retirees really badly.

And to make the Poms feel better, at least you can get a state pension. As an Oztralian, you MUST live in Australia for the 2 years prior to applying for a pension. Or move back and live there for 2 years before applying. Then the pension is lowered as soon as you move back overseas. There is some discussion of cancelling the state pension altogether for those who dare to choose to live elsewhere than "God's Own Country, The Best Country on Earth". All of those good Ozzies that stay at home see no reason to not punish the evil rapscallions who left! And the expats aren't all that electorally numerous, and are spread across electorates, so are no threat. It's a worldwide rip-off that some UK/Oz politician has invented. There is no equitable treatment of citizens considered - just more $$$$ for Treasury (so it can fund more politicians study trips, so they can find new ways to rip us all off, so ......)

I am thinking of moving back to Oz, putting all of my money into a "family home" (tax exempt), so that my assets are low enough that the government will have to pay me - for unemployment until I am old enough for the pension. There aren't many jobs around for burnt out academics or astro-physicists. It will cost them a fortune. And I will then start using roads, public transport, hospitals, community services. I also won't pay for health care, but just add to the waiting lists. I don't know what short-sighted bureaucrat did the initial maths that shows the government will make a profit on raising taxes on expats, but I doubt s/he factored in the costs of people like me who can easily relocate, based on the best financial outcome.

[rgs2001uk]

^^^^^, brilliant post, nice to see one of our colonial cousins with a sense of humour, your thoughts mirror mine.

My attitude is F Them.

[SantiSuk]

And our estates get robbed more than the typical Brit to the extent we are married to non UK-domiciled spouses and therefore cannot pass our estates free of Inheritance Tax to our spouses.

see what my expat tax advisers say about the inteded changes before writing to the press/HMRC!

If you are under the impression that you "cannot pass your estate free of Inheritance Tax to your non UK-domiciled spouse" then you need a better tax adviser.

Firstly it is never posible to pass your estate free of Inheritance Tax to your spouse. You can only defer the IHT.

I am currently setting up my will and estate with the main beneficiary my Thai spouse (who is non UK-domiciled) and as part of that consultation there is a legal way for her to inherit and defer the IHT.

Hope your better tax adviser tells you that Trusts for IHT are likely to be shortly under attack, before he charges you for setting one up.

IHT is saved - it is not deferred, if she spends it (as she probably will in the 23 years + remaining of her life after I die).

[dunque]

However, there seems to be a question as to whether or not the Personal Allowance will EITHER continue for ex-pats, but NOT be usable against rental income, OR the Personal Allowance will be denied to ex-pats altogether.

Thanks for the link - I will certainly put in my sixpenn'orth!

You need to read the Consultative Document before putting in your submission; there is no question of the sort you mention.

https://www.gov.uk/government/consultations/restricting-non-residents-entitlement-to-the-uk-personal-allowance/restricting-non-residents-entitlement-to-the-uk-personal-allowance

OK. Thanks for the link - I shall read through it carefully!

The fact remains though that if the government makes life any more difficult financially for this ex-pat at least, the option to return is always open and thereby I would become a net consumer of tax funds as opposed to a net contributor!

Of course, the next proposal to be more worried about is the ongoing discussion about combining Tax and NI into one consolidated deduction. That could really clobber pensioners.

[dsfbrit]

I have just sent my comments to the consultation web-site, I have also urged other people I know in Thailand affected by this proposed change to send their concerns to this consultation website as well - this change needs to be stopped:-

[email protected]

[cmsally]

It seems that the main target is the migrant worker, but I'm not getting the logic here. This would be taxing the seasonal workers (ie less than 6 months). I would have thought they come to UK to fill in a job ie agriculture , part time factory, holiday season.

I thought the ones we wanted to discourage were those moving and taking in the benefits etc. Presumably if those migrants stay more than 6 months they get the personal allowance.

Edited August 14, 2014 by cmsally

[dsfbrit]

It is odd what is happening for sure. When the Daily Mail first published this story 2 days ago, it had the headline that the government was targeting non-residents receiving rental income abroad and also those receiving capital gains from selling properties in the UK. It had no mention of migrant workers.

However, when I came to show the article to a friend a few hours later, the article had vanished. It then reappeared a few hours later with this new 'spin' on it - the headline now stating this was an attack on migrant workers and the fact that non-resident pensioners were also affected was accidental.

I get the feeling the government is trying to appeal to the voters who are moving over to UKIP and this is them showing they can be tough with foreigners. So maybe we non-resident expats will be allowed to keep our tax benefits the same as UK residents at the end of the day - I won't hold my breath though.

[MikeOwen]

Any income over your basic allowance is taxable in the UK at 20%,at least , end of story , what's new ?

[ThaiPauly]

I have read the Government paper posted here and it's clear to me that having 2 rental properties in the UK I would be taxed on the whole of my rental income.

That means that I loose the 10,000 GBP allowance every year meaning I would be 2,000 GBP a year worse off.

Now that's food for thought !!

[dsfbrit]

MikeOwen, you are absolutely right. However the government is proposing that for 'non-residents' - this 20 percent tax will start at 0 pounds and not 10,000 pounds as it stands at the moment. So quite simply for example, tax on 20000 pounds at the moment is 20000-10000 = 10000 * 20 percent = 2000 pounds. Under the new rules the tax would be 20000-0 = 20000 * 20 percent = 4000 pounds. So an extra 2000 pounds in tax.

Bearing in mind this additional charge will be on UK state pensions annually, then with the state pension being around 6000 pounds, the tax on this will be 6000 * 20 percent = 1200 pounds. For some people this is a massive loss, as they are living here just on their state retirement pension. Receiving 4800 pounds instead of 6000 pounds a year is a big deal for them.

[chiang mai]

I think you have to separate taxation on pensions and everything else, it seems clear to me having now read the link provided earlier that there will be a degree of protection offered to pension payments, Everyone interested in this subject really must read the consultation document.

[Thai at Heart]

I know quite a few people living here on retirement extensions who survive on a combination of State pension plus a Company Pension.

No rental income involved.

These people already pay UK tax, I guess because the pensions are paid in the UK and the sum total exceeds the annual allowance.

I am reading that the said allowance could become zero for those out of the UK more than 6 months, certainly nearly all those I know.

A potential loss of £40 pw or £170 a month for a single person.

Some are struggling now.

Am I getting anything wrong here?

No, I think you're spot on. I currently have a company pension and investment income on which I pay UK income tax. If implemented, the proposals would make me £2,000 worse off (more as the nil rate band increases over time) or about 9,000 baht per month.

It seems to me that the UK government is treating its ex-pats as 4th rate citizens. I cost the government zero in health costs with visits to the doctor (and potentially hospital) plus I won't get a free bus pass when I'm 60 next year. Then, when I qualify for the state pension, the amount paid will never increase.

Alan

I agree Alan - the UK government doesn't see the expat community as anything like first class citizens.

By abolishing the personal allowance we will have to pay tax on all investment income, rental income and any other income such as pensions. Every penny will be subject to tax. If the Capital Gains tax rules are changed, we will have to pay CGT when we sell our home in the UK, even if it is our main residence.

Presumably we will still be able to claim tax relief on the expenses associated with renting out properties?

Are the rules around ISA's also going to be changed? Will we be stripped of those tax benefits too regardless of how long we've held the investment?

Are we still going to suffer the frozen state pension?

The current government are simply hitting anyone the see as soft targets and use the excuse of "well other countries do it". Yet the big boys will continue to find ways around this and be applauded by the same government for their "innovation".

Strange response......why do you think expats are, or even should be, treated like 'first class citizens'?

You, like myself probably chose to leave the UK because there were more opportunities and a better life to be had overseas. I don't consider myself as being 'first class' compared to people living in the UK and paying full taxes etc. and unfortunately tax loop holes are dropping like crazy, country by country.

What is even more worrying to come in the UK, is the same tax regime as they have in the USA.......whereby you have to pay 'full' taxes on global income regardless if you live in the UK or not. Its coming for sure....because the UK spends way too much money, actually it gives most of it away to all these failed states in aid.

Problem there is, if you don't pay, or they suspect you of not paying, they freeze your passport so you cannot move around, and force you to report to an embassy where they slap you with an inflated tax bill and some fines.

Don't believe they wouldn't do it. Leaving the UK and becoming non tax resident may have built an empire,but there is no longer an empire.

[theoldgit]

As I mentioned before the Personal Allowance goes up to £10,500 in 2015, so the worst possible scenario is an increased tax liability of anything between £2,100 and £4,200 for those who are already paying tax.

I personally don't think it will come in for those receiving pensions that are taxed in the UK, but never say never.

[dsfbrit]

Chiang Mai. I agree that we all need to read the consultation. I have only read it for an hour, so I am not understanding everything yet. However, it seems to me that the only section relating to pensions is section 6.6 (below). I don't think this covers 'State Pension' paid to people in Thailand, unless the tax treaties clause covers it? still I will read it all again.

6.6 Pensioners

Pensioners who live overseas are a significant group of British national expatriates, estimated by DWP at around 1,200,000 individuals. Most UK national pensioners living overseas would not be affected by any restriction on non-residents entitlement to the Personal Allowance. This is because:

• some are still resident in the UK for tax purposes and so would not be affected by any change
• provisions of tax treaties generally mean that UK state pensions, personal pensions or private sector occupational pensions are only taxable in recipients’ states of residence and not in the UK
• many non-resident UK national pensioners do not have any other income (i.e. employment or property) which is taxable in the UK and would not be affected by losing their Personal Allowance

However, under double tax treaties, UK sourced government service pensions (a wide category which includes, amongst others, some NHS staff and those employed by local authorities) are generally only taxed in the UK, regardless of recipients’ residence status. This can also be the case with some other forms of income under specific treaties. The withdrawal of the UK personal allowance from non-residents in receipt of a UK government service pension would result in them paying more tax overall as there is no overseas tax liability against which the additional UK tax could be relieved.

The government is concerned that individuals, like those in receipt of government service pensions, who are not eligible for double taxation relief, would be disproportionately affected by the removal of the UK Personal Allowance.

The government does not intend to raise taxes on vulnerable groups or in situations where the UK is the principal taxing authority and an individual has no recourse to relief as a result of the UK having sole taxing rights under a tax treaty. If the government were to restrict non-residents’ entitlement to the Personal Allowance, it would intend this to apply to types of income which are taxable both in the UK and overseas (such as that from immovable property) but to retain the Personal Allowance on income that is taxable exclusively in the UK.

Edited August 14, 2014 by dsfbrit

[sandyf]

I always understood the UK State Pension to be paid untaxed. It is only when combined /aggregated with other income and the total then exceeds one's personal Alllowance that tax becomes payable on the 'excess' over and above the Allowance.

That is probably because as far as I know the UK state pension has always been less than the Personal Allowance.

You are probably right for a large percentage of the population. It all depends on what you receive as additional state pension. If you were in SERPS and had fairly high earnings then your state pension would be over the personal allowance. I wasn't a particularly high earner and my state pension is just a few pounds short of the personal allowance.

Many opted out of SERPS so that benefit appears in their occupational pension as opposed to the state pension.

[sandyf]

If the government were to restrict non-residents’ entitlement to the Personal Allowance, it would intend this to apply to types of income which are taxable both in the UK and overseas (such as that from immovable property) but to retain the Personal Allowance on income that is taxable exclusively in the UK.

I voiced an opinion along these lines in the other thread. I believe we will see the HMRC introduce the term "Allowable income"

[GavinK]

If the government were to restrict non-residents’ entitlement to the Personal Allowance, it would intend this to apply to types of income which are taxable both in the UK and overseas (such as that from immovable property) but to retain the Personal Allowance on income that is taxable exclusively in the UK.

I voiced an opinion along these lines in the other thread. I believe we will see the HMRC introduce the term "Allowable income"

Isn't UK Rental Income only taxable in Thailand if remitted here ? If so your thinking is that the Personal Allowance would be fully usable against non-Thai remitted earnings ?

[topt]

If the government were to restrict non-residents’ entitlement to the Personal Allowance, it would intend this to apply to types of income which are taxable both in the UK and overseas (such as that from immovable property) but to retain the Personal Allowance on income that is taxable exclusively in the UK.

I voiced an opinion along these lines in the other thread. I believe we will see the HMRC introduce the term "Allowable income"

Isn't UK Rental Income only taxable in Thailand if remitted here ? If so your thinking is that the Personal Allowance would be fully usable against non-Thai remitted earnings ?

Theoretically if remitted in the year it was earned - but as discussed ad nauseum in other threads unless you declare it how would they know. In other words who is to say that the money you remitted was from current income received or from any savings for example. So in reality it does not really apply.

[Bazle]

If the government were to restrict non-residents entitlement to the Personal Allowance, it would intend this to apply to types of income which are taxable both in the UK and overseas (such as that from immovable property) but to retain the Personal Allowance on income that is taxable exclusively in the UK.[/size]

I voiced an opinion along these lines in the other thread. I believe we will see the HMRC introduce the term "Allowable income"

This is what we need to get sorted out - "taxable exclusively in the UK".

As you know, Thailand taxes a UK pension on a "remittance" basis - they tax it if you take it into Thailand (in the year you earn it).

What does HMRC intend "taxable exclusively in the UK" to mean in the context of a remittance basis? Do they mean that the income is prima facie taxable in the other country (in our case, Thailand), with the amount being quantified by reference to the amount remitted, or do they mean just the amount remitted, i.e. the amount that should be taxed?

Obviously, if it is the first, it will have a massive impact on people with British pensions in Thailand.

Altering the word "taxable" to "taxed" would solve the problem.