Despite a disproportionate (in my opinion) reaction in the media to the proposed changes to National Insurance for the self-employed, the recent UK Budget did not generate much in the way of headlines. The Chancellor appears to have used this Budget to keep Government policy relatively stable, presumably to allow for more radical changes in future if the impact of Brexit requires such action.
National Insurance for the self-employed
National Insurance Contribution (“NIC”) obligations for self-employed people have always been different from those for employees as a result of the historic differences in access to certain benefits. When the Budget was announced, it included a proposal that NIC contributions for the self-employed would be increased in April 2018, to bring their contributions more in line with those in employment. However, there has been a well publicised backlash to this proposal with fears that it will hit the lowest earners the hardest.
Further analysis of the figures, suggests that the self-employed might not have been as hard hit as the publicity would have you believe. The maximum net cost to each self-employed person would be in the region of £220 in the first year.
The changes to legislation affecting Non-Doms have been the subject of much discussion for several months and we have written articles on the implications of the changes previously (see the News section of our website for more details). I will not revisit the subject in any detail here, except to confirm that from 6th April 2017 individuals who have been resident in the UK for 15 out of the last 20 tax years (instead of 17 out of 20 under the previous regime) will now be deemed domiciled in the UK, and those who return to the UK (even temporarily) after taking up domicile elsewhere must now give careful consideration to their own domicile beginning from the date of their return.
QROPS (Qualified Recognised Overseas Pension Scheme)
To qualify as a QROPS, the pension scheme must meet a number of criteria including being established outside the UK and regulated in its country of establishment. The Budget has sought to further discourage UK residents from transferring pensions outside of the UK. Subject to a small number of exemptions, transfers to a QROPS requested after 9 March 2017, whether that be from a UK registered scheme or from another QROPS, will be subject to a 25% tax charge on the value of the pension fund.
Currently UK residents can receive £5,000 of tax free dividend income. This allowance will be reduced from £5,000 to £2,000 with effect from 6 April 2018. This seems particularly unfair when you consider that businesses will have already paid corporation tax on the profits from which dividend income is paid to shareholders. Please note this applies to UK and foreign dividends alike.
Non-residents investing in UK property
Non UK residents that own real estate property in the UK for investment purposes must currently register with HMRC under the non-residential landlord (“NRL”) scheme and the net income from the property is subject to UK income tax at 20%. The Budget proposes to bring this income within the scope of UK Corporation Tax. The result will, in most cases, be a lower rate of tax being payable on the net income because the rate of Corporation Tax is expected to fall to 17% in the coming years.
There is potentially some bad news resulting from this change for high value structures that will encounter restrictions over how much interest expense can be claimed against their rental income. It seems only to be relevant to those taxpayers with an interest expense of more than £2,000,000 per year.
Changes to UK Probate fees
Probate is needed when a deceased person (who doesn’t have a surviving spouse or civil partner) held an estate, such as shares, buildings and land. As with Inheritance Tax, probate fees are payable before the estate is distributed to the heirs. Current probate fees are payable a flat rate fee of £215 regardless of the value of the estate, but the fees are being changed so that a new sliding scale will be introduced based on the total value of the deceased’s estate:
- Under £50,0000 you won’t pay anything (£0)
- Between £50,000 and £300,000 you will pay £300;
- Between £300,000 and £500,000 you will pay £1,000;
- Between £500,000 and £1,000,000 you will pay £4,000;
- Between £1,000,000 and £1,600,000 you will pay £8,000;
- Between £1,600,000 and £2,000,000 you will pay £12,000; and
- Anything over £2,000,000 you will pay £20,000.
The new probate charges seem excessive, particularly for those estates worth over £2,000,000 which will suffer a 9,000% increase in fees!
- The threshold for VAT Registration has been altered by increasing it to £85,000 and the deregistration threshold is now £83,000.
- Roaming charges imposed by mobile phone providers will become subject to UK VAT at 20%. I could not find details of when this change will be implemented so holidaymakers and business travellers should make the most of (relatively) cheap mobile phone useage overseas whilst they can!
If you require any further information about the points discussed in the article, please contact Stuart Foster on: +44 (0) 1624 626586 or at email@example.com.
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