How does the UK 2021 budget affect expat retirement plans?

Planning for retirement isn’t always easy, but it can be particularly confusing if you’re a British expat hoping to retire overseas. No matter what your retirement goals are, it’s important to take into account a number of considerations, including your current finances, your financial goals, and how your chosen retirement location could affect your plans.

Following the announcement of the new 2021 Budget, many expats will need to re-evaluate current finances and plans for the future, some of which may be affected by the changes made by the government ahead of the next financial year.

To help you achieve this, we’ve taken a closer look at this year’s budget, highlighting some of the key points that could impact British expats.

Stamp duty and taxes

Expat retirement planning often requires the creation of a financial action plan, which is put in place to ensure specific retirement goals are achieved. If you’re approaching retirement age and looking to settle down overseas, it’s likely that you’ve considered a number of financial avenues that could help boost your standard of living in the future, including investing in a rental property in the UK and adding to your savings.

If you’re investing in property to boost your retirement savings – whether through selling on or letting into your retirement – the stamp duty changes announced in the budget could be relevant to you. According to the 2021 Budget announcement, all resident and non-resident Britons will enjoy an extension of the stamp duty holiday, or Nil Rate Band of the Stamp Duty Land Tax (SDLT). This means the stamp duty threshold will remain at £500,000 until 30th June, so no properties sold under this price will be liable for stamp duty.

While this is good news for any imminent expat buyers, the positivity has been dampened by the revelation that non-residents will be subject to a stamp duty surcharge from 1st April 2021. In real terms, this means paying an additional fee of 2% on any property purchased in England and Northern Ireland after this date as a non-resident. If you’re planning on purchasing a property after this date, remember to take this additional fee into account when calculating your costs.


When it comes to savings, the budget delivered a mixed bag. According to the announcement, income tax and National Insurance thresholds will increase once more this year before it is frozen five years, allowing savers to earn and save a little more before becoming liable for tax. Similarly, the tax-free personal allowance is set to rise from £12,500 to £12,570 in April 2021, before being frozen until 2026.

While this may not be positive news in the long term, it does mean those seeking to save for a final year before retiring from work will still benefit from a slight increase during the 2021/22 financial year. The higher-rate tax threshold, which marks the point where the amount of tax charged rises from 20% to 40%, is also facing the same treatment and will increase once more from £50,000 to £50,270 before a freeze.

The pensions lifetime allowance

According to the 2021 Budget, there are more thresholds that are set to be frozen for the next five years. Sadly for higher earners, this includes the pensions lifetime allowance. This allowance dictates the maximum amount of money you can pay into your pension over your lifetime before you are required to pay tax on this sum.

Currently, the figure stands at £1,073,100, and this was expected to rise in the coming years in line with inflation. However, as Britain attempts to deal with its turbulent economy, this is now set to remain as it stands for the next five years. For expats planning their future retirement, this change will mean a reduction in the amount of tax-free pension that can be saved and this should be taken into account when undertaking financial planning. This also means a loss in real-terms of the amount that can be saved for the next five years.

Expats with long-term retirement plans should also take note of changes to the capital gains tax allowance, which faces the same five-year freeze as many other allowances. Capital gains tax is paid by taxpayers on any profit made when an asset is disposed of or sold, including a second home or shares that aren’t within an ISA. The current capital gains threshold sits at £12,300 per year, and the budget has now confirmed that this is where it will remain until 2026. As a result, expats will not benefit from an increased allowance for the next five years, and should keep this in mind when managing financial plans in the not too distant future.

State pension payments for women

Thankfully, there is some positive news when it comes to pensions. Even before the 2021 Budget, expat retirement was supported by the Department for Work and Pensions, and non-resident Briitsh citizens have long been entitled to claim their state pension from the UK regardless of their overseas status. However, the Department for Work and Pensions has now revealed that there have been significant underpayments to married women dating back to 1992 and estimated to total around £3 billion. Under the new budget, these underpayments are set to be addressed.

Under the previous system, married women were entitled to claim a basic state pension at 60 per cent of the full rate, based on their husband’s pension contributions. This was assuming this amount would be greater than the pension they would receive themselves. Married women have previously had to apply for this once their husband turned 65. However, since 17th March 2008 this should have been applied automatically by the department when processing each pension claim.

Following a search of their records, many retired women have been contacted by the department, and many have gone on to make successful claims for the money they were owed. However, there are still many women who have not claimed the additional pensions to which they are entitled, including a number of widows and women aged over 80.

In the budget, the government has stated that the department has set up a special unit made up of more than 100 civil servants to help look further into the issue. This unit will be responsible for tracking down any resident or non-resident Britons who have missed out on additional pension payments. Those affected by the errors will be entitled to claim their share of the £3 billion, regardless of their country of residence. If you think you may fall into this category, contact the Department for Work and Pensions to check your eligibility.


At ExpatRoute, we know planning for retirement overseas can sometimes feel like a daunting task. In this article, we’ve tried to reduce your workload by offering an expatriate-focused look at the latest budget announcement. However, if you think you may need additional advice or support, please contact an independent financial adviser who can help guide your future retirement planning based on your personal circumstances.

Leave a Reply

Your email address will not be published.