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What new financial opportunities arise for UK citizens living abroad after the budget?

The recent UK budget presents promising new financial opportunities for UK citizens living abroad, especially with the transition to a residency-based taxation system. As regulations shift, expats can reassess their investment strategies to capitalise on these changes. Being informed of the intricacies of the new system, particularly how it affects worldwide asset valuations, opens the door to smarter financial planning.

With the proposed abolishment of the domicile principle, expats may find themselves in better positions to optimise their tax affairs. The implications of this may allow those who strategically manage their residency status to minimise tax liabilities on their property investments abroad. Furthermore, understanding the new regulations regarding inheritance tax could lead to more favourable outcomes for expats' estate planning.

Investment planning will also shift with the changes in pension tax liability, presenting potential avenues for wealth management and growth. For instance, expats may need to consider diversifying investments or utilising local financial instruments optimally structured under the new rules.

To navigate the evolving landscape of expatriate finance, seeking expert advice from professionals such as Robert Webb from Chase Buchanan can be instrumental. Don’t miss the chance to revise your strategies and make informed decisions that will enhance your financial portfolios amidst these new opportunities. Contact Robert today at robert.webb@chasebuchanan.com for guidance tailored to your needs.

Tuesday, 10 December 2024 - Fiscal
What new financial opportunities arise for UK citizens living abroad after the budget?
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Budget

In the recent UK budget, two announcements were made that could have profound implications for British expats.


1. Domicile and UK Inheritance Tax (IHT)

Currently IHT is payable on the value of your worldwide assets (including Portugal) if you are a UK domicile. This is an outdated and complex principle that is about to be abolished. From April 2025, the domicile criterion will be replaced by a residence criterion.
The new criteria is divided into two parts:

  1. If you have been resident in the UK for more than 10 of the last 20 years, you will be classified as a long-term resident and will be subject to IHT on your worldwide assets. Tax will be 40% on asset value over £325,000. This applies to those who have recently arrived in Portugal
  2. The liability could last for 10 years after departure from the UK, but there is a tapering allowance called a tail. This applies to everyone currently residing in Portugal. Some examples:
  • Tax resident in Portugal for 10 or more years - no longer subject to UK inheritance tax except on UK assets if they are valued at more than £325,000
  • Tax resident in Portugal for 8 years - liability will last for another 2 years on your worldwide assets
  • Tax resident in Portugal for 4 years - liability will last for another 6 years on your worldwide assets

 

2. Pensions and UK IHT

Currently, there is no IHT payable on UK pension funds in the event of death. Everything changes! From April 2027, 40% IHT will be deducted from UK pension funds, even if you are living outside the UK.

  1. During the tail period, your pension fund will be included in your worldwide asset value
  2. After the tail has expired, only YOUR UK assets will be taxable and this obviously includes the pension value as long as the combined total is over £325,000
  3. If death occurs after age 75, not only will 40% IHT be payable on the pension fund, but UK beneficiaries could potentially pay income tax on the amount they receive. This amount could also be 40%!

These two new announcements on the UK's October 2024 budget are likely to have a significant impact for UK expats. If you require further information, please contact Robert Webb at Chase Buchanan, who is an expert in this area and can assist you.

Robert Webb - Private Weath Manager - robert.webb@chasebuchanan.com - +351 913 711 370 - chasebuchanan.com

 

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