expat network

Tax Back In The UK

If you find yourself considered as UK resident for tax purposes, it is as well to know what rates of tax you will now be required to pay – and which you may be able to avoid if you successfully achieve UK non-resident status.

By Iain Yule

 

Income Tax

In the 2014-15 tax year in the UK (running from 6 April 2014 to 5 April 2015) your taxable income (beyond an annual £10,000 personal allowance) attracts income tax at 20% on earnings up to £31,885 (basic rate); and at 40% between £31,866 and £150,000 (higher rate).

An additional rate of 45% applies to income over £150,000. Annual personal allowance is reduced by £1 of every £2 of income above a limit of £100,000.

 

Capital Gains Tax

In the UK, if you make a profit on the sale of an asset such as property or shares, you are liable to pay capital gains tax (CGT). This applies on asset sales you make before you become non-resident or within five years of leaving the UK. The tax is calculated as a percentage of the profit you make on selling an asset.

The rate of CGT remains at 18% where net taxable gains and taxable income are less than the income tax basic rate limit, £31,885. The 28% rate applies to gains or parts of gains that exceed that limit. The annual exempt amount before CGT is charged is £11,000.

If you are selling your main home, no CGT is payable on any profit you make as long as the property is sold within three years of you becoming non-resident. This rule may change from April 2015 and is currently subject to consultation.

 

 Inheritance Tax

UK inheritance tax (IHT) is levied on those who are UK-domiciled, whether resident or not, and very few expats manage to achieve non-domiciled status.

So, when you die, whether while UK resident or not, the UK taxman will charge IHT at 40% of the value of your estate above £325,000. Couples can arrange to shelter up to £650,000 of their estate.

 

Iain Yule is the Editorial Director of expatnetwork.com