1. TAX OBLIGATIONS
Quite simply, never forget HMRC and make sure you are up to date with your tax planning and reporting, residence status and your HMRC listed address and contact details. If you are living overseas, you’ll need to keep an accurate record of your visits to the UK to support any claim to be UK non-resident, and also make sure you are aware of any local reporting requirements and tax implications that may arise for you each year.
If you have non-UK resident status and have tax liable UK income or gains, when completing a Self-Assessment Tax Return you won’t be able to use HMRC’s online services to report. Instead, you’ll need to send your Tax Return by post, use commercial software (linked to HMRC’s website) or seek help from a professional. If you are sending your Return by post, be sure to fill in the ‘residence’ section (form SA109) to tell HMRC you are non-resident.
The main UK tax reporting dates to be aware of are:
– Online (commercial software) Returns by midnight 31 January 2020
– You must pay the tax you owe by midnight 31 January 2020
2. UNDERSTAND CHANGES AROUND UK PROPERTY
In the last five years there have been many changes to UK property taxation, and more are scheduled for April 2020, so it’s sensible to know what applies to you if you own UK property and are living abroad. Some important considerations include:
– Do you have a 6 April 2015 valuation for your UK residential property?
– Have you made an election for Principal Private Residence (PPR)?
– Are you recording any time spent in your UK property?
– Do you understand the UK Capital Gains Tax implications if you sell UK property?
3. MAKE SURE YOU HAVE AN UP-TO-DATE WILL
Wherever you are in the world a valid Will is a necessity. When living overseas it is worth drawing up a Will in all jurisdictions where you hold significant assets (property in particular).
Another useful step to consider is to choose a power of attorney who can make financial decisions if you or a loved one are incapacitated for any reason.
4. USE YOUR ALLOWANCES
Each year you are entitled to an Inheritance Tax exemption of GBP3,000 on a ‘use it or lose it’ basis. It is sensible tax planning to make sure you have used this allowance each year by making lifetime gifts to your intended beneficiaries – or perhaps to the next generation if you have grandchildren or others you would like to benefit. If you live overseas it may be useful to gift assets without paying UK tax while you remain UK non-resident. Do remember that if the gift is above your annual allowance you may need to survive for seven years from making that gift for it to be free of Inheritance Tax.
Inheritance Tax allowances are rising significantly this year. The current threshold is still £325,000 but you can enjoy another £150,000 if you pass your home to a direct descendant or spouse. That additional allowance will rise to £175,000 in April meaning that a married couple could pass on a property worth up to £1 million before attracting any Inheritance Tax.
5. CHECK PERSONAL PROTECTION
The watchword here is to be prepared – although no one enjoys considering such things it’s important to check if you have enough life cover, income protection and critical illness cover, especially if it has been a while since you last reviewed things. A good starting point is to ask what your employer provides with any shortfalls picked up with individual policies, as cost-effectively as possible.
6. REVIEW FINANCIAL GOALS
Take stock of your investments to ensure they still reflect your aims and objectives and risk profile.
Over life your priorities will change and you may need to consider a range of needs including planning for school/university fees, paying off your mortgage, and funding your retirement. Being proactive allows you stay on track and achieve your desired real life goals.
7. KEEP YOUR INVESTMENT STRATEGY TAX EFFICIENT
Your overall investment planning should always factor in sufficient tax planning so that your assets, liabilities and income are structured in the most optimal and tax-efficient way.
If you are abroad and planning to return to the UK consider your investments and the effects of UK Capital Gains Tax in advance (6 to 12 months is preferable). And when you become UK tax resident make sure you use the allowances provided including Individual Savings Accounts (ISAs) providing Capital Gains and Income Tax freedom, and annual Capital Gains Tax planning.
8. CONSIDER YOUR PENSION
Many people plan to spend at least part of the retirement somewhere other than the UK, so it’s important to properly understand what pensions you have – whether they are UK-based or elsewhere – and the options available. It’s also worth noting that the UK New State Pension will reach £175 a week this year, with the Basic State Pension offering a higher weekly amount of £134 from April. The age at which you can claim the state pension will rise to 66 in October. The lifetime allowance, which dictates how much you can save in a pension tax-free, is currently £1.055 million but will rise to in line with inflation to £1.073 million from April.
9. PROTECT YOUR BUSINESS
If you own a business or are planning a new venture it’s important to plan your finances sensibly. If you are overseas you need to consider what will happen to your business operations if you choose to return to the UK. You should also always ensure you have the appropriate insurances and licences for the area you are operating in.
If you have concerns or questions about your finances, or any of the areas covered here, it’s useful to get in touch with a financial planner to help you navigate through what can be a minefield of complexity.
Whatever this New Year brings, I wish you a prosperous, fulfilling and exciting 2020.
Peter Webb ATT, International Tax Manager