UK Spring Budget 2017: How could it affect Americans in the UK?
We asked the experts, below you'll find quotes from those in the know on how the Spring Budget 2017 could affect you. This page will be updated as new comments come through.
Kevin Hancock, Tax Director at Humphrey & Co:
The UK Chancellor Philip Hammond gave his first and last Spring Budget today. The key announcements affect American citizens who are self-employed and required to pay National Insurance Contributions ("NIC"), Americans who are trading through a UK company and Americans who receive dividends from investments.
For self-employed Americans who fall within the UK NIC system, the rate of Class 4 NIC will increase from 9% to 10% from 6 April 2018 and a further increase to 11% will apply from 6 April 2019. Kevin Hancock, Tax Director at Humphrey & Co commented that the changes reflect the fact that self-employed now qualify for the same state pension as employees through the NIC system and so the government regards closer alignment of the rates as necessary. The Chancellor advised that despite this increase, all self-employed individuals earning less than £16,250 will pay less NIC than currently due to the abolition of Class 2 NIC from 6 April 2018 as announced previously.
It was also announced that the Dividend Allowance (the amount of dividends that can be received tax-free) will reduce from £5,000 to £2,000 from 6 April 2018. This measure could increase the UK income tax liability for Americans resident in the UK with substantial dividend receipts and also those who trade through UK companies and structure their remuneration through dividends.
Clive Tutton of AISA Group
"While it has been questionable for a US resident to transfer to a QROPS in the past due to the provisions of the Double Tax Treaty and IRS rules, this is the final nail in the coffin for QROPS as an option for those resident in the USA"
"The changes will take effect for transfers requested on or after 9th March 2017. UK tax rules will also apply to any payments made in the first 5 full tax years following the transfer, regardless of whether the individual is or has been UK resident in that period"
This information was supplied by AISA Group, find out more at www.aisagroup.org
Nick Blogg, Investment Manager, LGT Vestra US
One of the announcements contained within the Spring Budget that may impact those leaving the UK was the introduction of a 25% tax charge on transfers from UK pensions to Qualifying Recognised Overseas Pension Schemes (QROPS) when the individual does not reside in the same country as the QROPS.
QROPS are used to facilitate the transfer of UK pension benefits to an overseas jurisdiction. As this typically follows an individual leaving the UK, it is perhaps less relevant for UK resident individuals unless they intend to leave the UK in the future.
Malta is generally considered to be the QROPS destination of choice for US taxpayers due to the favourable tax treaty between Malta and the United States.
However, whist in certain circumstances a QROPS transfer may have provided benefits, we anticipate that going forward the imposition of a 25% tax charge on the transfer value will greatly reduce their use. As a consequence we expect to see a greater number of individuals looking to use a UK SIPP solution when transferring UK pension benefits, especially as the UK rules now offer greater flexibility than they have in the past.
This information was supplied by LGT Vestra US, find out more at www.lgtvestra-us.com