The U.K has just gone through what many have called the most anticipated budget in years, and although many were predicting big tax rises, the result was one of ‘keep calm and carry on’.
Expatriates do have some planning areas that they will need to consider before the 5th April 2021, because even if you have not been in the U.K for many years, you can still take advantage of some strategic financial planning for the long-term.
The below are some brief points for you to consider:
1.National Insurance Contributions
I start with this one because I feel it gets neglected quite easily by many expats in Hong Kong. The year that you receive your U.K state pension may be going up to age 67 by 2028 and retirement may seem far away for some of the younger expats. However, covering 35 years’ worth of national insurance is necessary to qualify for the full state pension, which is a guaranteed income that can come in handy in retirement.
2. Annual exemptions for IHT purposes
U.K. expats may not realise but they are most likely still classed as U.K. domiciled for Inheritance Tax (IHT) purposes. For some, this puts them in a position where IHT is an issue in the long-term, a good way to minimise the impact is by gifting £3,000 on annual basis and making use of the gifting of qualifying surplus income.
3. Pension contributions and withdrawals
If you have U.K pensions, did you know that you can still contribute to them even if you are abroad? There is a criterion to qualify:
- The contributions must be from U.K. earnings.
- You should be within five years of being a non-resident in the U.K.
You can also have your employer contribute if they are a U.K-based employer, so it may be worthwhile speaking to your HR department.
You may also be able to withdraw from your pension tax-efficiently, using your personal allowances in the U.K. to maximise the level of tax-free income that you receive.
It is worth noting that each case is different and you should seek advice with the points mentioned above. There may be areas that may have been overlooked for some years, but you can start planning for your financial future before the 5th April.