Finalising the 2021 Budget is likely to have been a complex process thanks to the endless uncertainties currently facing Britain and British citizens. As well as the ongoing complications surrounding Brexit, the UK has been dealing with ongoing economic instability and the wide-ranging ramifications of the Covid-19 pandemic. And these issues are far-reaching – many expats are also facing significant difficulties such as reduced income, suffering business and navigating the ever-changing restrictions.
Thankfully, the 2021 Budget has addressed a number of these concerns, including taxes and furlough. While not all changes will be welcomed by all, many have been designed to aid the business and citizens through the pandemic and to support the country’s ongoing financial recovery. We’ve taken a look at some of these points to discover how the changes could affect British expats, both immediately and as the year progresses.
The furlough scheme
‘Furlough’ was a relatively unfamiliar word at the start of 2020, but as the pandemic took hold many UK citizens have been forced to learn significantly more about this once-obscure concept. The furlough scheme was originally introduced on 20th March 2020 as the Coronavirus Job Retention Scheme. The scheme pays 80% of employees’ wages for the hours they have been unable to work as a result of Covid-19.
According to the 2021 Budget, this scheme will now be extended until September 2021 to help support British citizens, including expats working overseas. However, from July UK businesses will be expected to contribute to these payments, starting with a rate of 10%. Check with your company directly if you are unsure whether your wages are covered by the scheme.
Self-employed expats may also be entitled to claim via the extended scheme. In fact, it has been suggested that up to 600,000 additional self-employed workers could become eligible to receive government help via the scheme this year, including those working abroad. However, your eligibility will depend on your individual circumstances, so you will have to contact HMRC to confirm your status before making a claim.
Expats working for UK businesses within industries greatly affected by Covid-19 may benefit from additional financial support offered in the budget. Known as Restart Grants, £5 billion worth of funding has been promised to businesses within the hospitality, accommodation, leisure, personal care and fitness sectors, all of which have been significantly affected by the pandemic. Each business will be eligible for up to £18,000 worth of financial aid via the scheme.
In addition, businesses will be able to access a new UK-wide Recovery Loan Scheme. This scheme will make loans between £25,001 and £10 million, and asset and invoice finance between £1,000 and £10 million, available to help businesses of all sizes get back on their feet. While the benefit of this scheme for expats is indirect, it is expected to help thousands of UK businesses, including those with workers living overseas, to move onto the next stage of recovery as Covid-19 restrictions ease.
Taxes and the personal allowance
The budget did allay fears that there may be a significant increase in tax rates, with income tax and National Insurance thresholds only set to increase once before being frozen until 2026. Similarly, the tax personal allowance will rise from £12,500 to £12,570 for the next 12 months, before staying at this rate for five years. While this doesn’t offer a positive outlook in the long-term, it will provide expats with a small increase in the amount that can be earned during the tax year 2021/22 before tax is applied.
The pension lifetime allowance (LTA) has also been frozen until 2026. The allowance dictates the amount of money that can be saved by UK residents or non-resident expats in a UK pension plan before tax charges apply. This means that this figure will remain at £1.073 million rather than increasing to £1.078 million as the government had previously suggested it would.
Another tax-related change that affects expats is the newly-available relief for gifting business assets. Known as ‘Gift Hold-Over Relief’, this new allowance means any financial gains made following the disposal of businesses can be deferred when completing a tax return. Subsequently, any capital gains tax due can be pushed back until the recipient sells or gifts the assets.
Stamp Duty changes also affect expats, who are eligible to pay tax on any property purchased or let in the UK. According to the announcement, expats and UK residents will enjoy an extension of the Nil Rate Band of Stamp Duty Land Tax (SDLT), which will now remain at £500,000 until 30th June. This means no SDLT on properties below that purchase price if completion takes place before this date.
However, the introduction of the Stamp Duty surcharge for non-residents is set to be introduced as planned on 1st April 2021. This means expats will be expected to pay an additional stamp duty surcharge of 2% on any properties purchased within England and Northern Ireland after this date. If you are planning on purchasing property in the UK in 2021 and you are unable to complete the sale before the new surcharge is introduced, please contact an independent financial adviser to find out how this could affect the amount you pay.
The 2021 Budget also presented new rules regarding expat voting. According to the announcement, UK citizens who have lived overseas for more than 15 years will be given the right to vote in general elections, with £2.5 million set aside to fund the changes. If you’re affected by this adjustment, you will be allowed to vote in the constituency where you lived before you moved away from Britain.
This may feel like an unexpected change, but a number of governments have been promising to revoke the law since it was passed in 2002. When the law was initially introduced, it removed many long-term expatriates from the electoral roll and resulted in significant protest from those who still consider the UK their home.
While nobody was looking forward to the release of the budget in 2021, many expats have come away from the announcement relatively unscathed. The changes to the furlough scheme and the voting rules are likely to be particularly welcomed by British residents abroad. However, alterations made to tax rules could impact those with UK property or higher rates of earning. Your individual circumstances will dictate the ways in which the changes highlighted in the 2021 budget affect you.
While ExpatRoute has tried to cover all of the points that will have a significant impact on the lives of many, it’s important to consult an independent financial adviser to get an accurate idea of how your personal finances will be impacted.