Income Tax
Personal allowance
£12,750
* Personal allowance reduced by £1 for every £2 of adjusted net income over £100,000
**Frozen at this level until at least April 2026
UK income tax rates – excluding Scotland (non dividend, non savings, )
20% basic rate on taxable income from £12,751 to £50,450
40% higher rate tax on taxable income from £50,451 to 150,000
45% additional rate tax on taxable income over £150,000
Scottish income tax rates (non dividend, non savings, excluding Scotland)
19% starter rate on taxable income from £12,751 to £14,655
20% basic rate on taxable income from £14,656 to £25,228
21% intermediate rate on taxable income £25,229 to £43,500
41% higher rate on taxable income from £43,501 to £150,000
46% top rate tax on taxable income over £150,000
Pensions
Personal or employer pension
Lifetime Allowance £1,073,100
*Frozen until April 2026
** Find out how you can mitigate the Lifetime Allowance here.
State Pension
Qualifying years required to obtain maximum New State Pension – 35
Maximum New State Pension (state pension age reached after 5th April 2016) – £9,339.20
Maximum Basic State Pension (state pension age reached before 6th April 2016) – £7,155.20
Making up missed years
As an expat, you can boost your state pension entitlement by making voluntary National Insurance Contributions:
Class 2 – £3.05 per week
Class 3 – £15.4
*You can read more in my Expat State Pension Guide
Capital Gains Tax
You will only be in the scope of UK capital gains tax on the disposals of UK real estate.
CGT rate on disposal of UK property when below the UK higher rate income tax band – 18%
CGT rate on disposal of UK property when within the UK higher rate and additional rate income tax bands – 28%
*You can find out more about the CGT rules for expat owners of UK property here
Stamp Duty on Property
England and Northern Ireland – Stamp Duty Land Tax (SDLT)
Up to £125,000 – 0%
£125,001 – £250,000 – 2%
£250,001 – £925,000 – 5%
£925,001 – £1,500,000 – 10%
Over £1,500,000 – 12%
COVID Relief
From 8th July 2020 till 30th June 2021, there will be a 0% SDLT rate on the slice of a property value up to £500,000.
From 1st July 2020 until 30th September 2021, there will be a 0% SDLT rate on the slice of a property value up to £250,000.
First Time Buyers
0% SDLT on the first £300,000 for properties up to £500,000
Non-resident Purchasers
2% surcharge on properties £40,000 or more.
Additional properties
3% surcharge on additional properties £40,000 or more.
Scotland – Land and Buildings Transaction Tax (LBTT)
Up to £145,000 – 0%
£145,001-£250,000 – 2%
£250,001-£325,000 – 5%
£325,001-£750,000 – 10%
Over £750,000 – 12%
First Time Buyers
0% SDLT on the first £175,00
Additional properties
4% surcharge on additional properties £40,000 or more.
Wales – Land Transaction Tax (LTT)
Up to £180,000 – 0%
£180,001 – £250,000 – 3.5%
£250,001 – £400,000 – 5%
£400,001 – £750,000 – 7.5%
£750,001 – £1,500,000 – 10%
Over £1,500,000 – 12%
Additional properties
4% surcharge on additional properties £40,000 or more.
Inheritance Tax
Nil-rate band – £325,000
Residence nil-rate band – £175,000
*100% of the unused proportion of a deceased spouse’s/civil partner’s nil-rate band and residence nil-rate band can be claimed on the survivor’s death.
**For estates in excess of £2,000,000, the value of the residence nil rate band is reduced by £1 for every £2 over the threshold
Rate of tax on excess – 40%
Non-domiciled spouse/civil partner exemption – £325,000
*The rules when leaving an estate to a non-domiciled spouse are more complex. You can read more here.
Annual exempt gifts:
£3,000 per doner
£250 per donee
Tapered tax charge on lifetime gifts within 7 years of death
0-3 years between gift and death – 100% (of 40%)
3-4 years between gift and death – 80% (of 40%)
4-5 years between gift and death – 60% (of 40%)
5-6 years between gift and death – 40% (of 40%)
6-7 years between gift and death – 20% (of 40%)
After 7 years, the gift falls outwith the estate for Inheritance Tax purposes
Tax Incentivised Investments (ISA etc)
None. As expats we don’t qualify. Sorry.
Main Due Dates for Tax Payments
Income Tax – Self Assessment
31st of January in year following 31st July – Normally 50% of previous year’s income tax
Following 31st of January – Balance of income tax
Capital Gains Tax
CGT incurred following the disposal of a residential property will have to be paid within 30 days of the completion date in all cases
Inheritance Tax
Normally 6 months after the end of the month of death
I hope that you found this guide useful!
Every Tuesday, I send out a short email to British expats who are thinking about retirement.
In it, I include updates on tax issues that are likely to affect them.
It usually only takes a few minutes to read.
To receive it in your inbox, just enter your name and email address here – https://mailchi.mp/24b18b4330d2/the-expat-retirement-digest
All the best,
Ross Naylor
ross.naylor@aesinterntational.com