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Expat Investor : July August 2008
expatinvestor.com 24 EXPAT INVESTOR ? July/August 2008 FIRST PERSON Moving abroad – a back- to-basics look at the issues When you move abroad you need to take into account that every single jurisdiction is different and that each will have its own set of issues. In the first article in this series, I highlighted the importance of seeking professional advice from a range of practitioners who can advise not only on the financial aspects, but also the legal and taxation issues that will arise. We looked at savings and investment, your pension and property and how to deal with the different currencies, together with some of the potential pitfalls if you fail to address each of these aspects carefully. In this article, we will touch on some of the other issues that will be important when you move abroad for the first time, whether you are embarking on an overseas contract for a fixed period or planning to retire in the sun. At Ashburton, we have been investing the assets of expatriates for many years, frequently visiting them where they live to discuss and advise on investment decisions. I, personally, have been based for a number of years of my working life in the Gulf, most recently in Dubai, so have become accustomed to the issues and considerations that arise time and again. We mentioned last time that it is wise to seek independent financial advice to help you manage your finances. However, this may prove to be trickier than it sounds. Once you have selected the person you wish to advise you, its necessary to confirm that they are qualified to do so. You need to check how they are regulated and what type of regulation is prevalent in the country in which you are residing. What tends to happen in some countries is that non-qualified staff move into areas where there is no requirement to be qualified and set up advisory companies and there have been a number of frauds perpetrated as a result. So, beware, is the message and double check the qualifications of the person advising you and ensure they are relevant to the location where you are. The issue that really hits people is the tax implications of an overseas move. At Ashburton, we are not tax experts and advice should be sought from tax professionals. However, there are some general points to take into account. If leaving the UK, for example, you may find that your worldwide income is still covered by the UK tax net up to a certain period of time. In some cases this can be a considerable number of years. You need to check on double taxation agreements, for example and whether they apply where you are living. Reciprocity may also be a factor. By that I mean, do the two locations, the one you are leaving and the one you are moving to, co- operate over tax matters? You also have to make sure you are eligible to go back to your home country for a limited period without incurring a tax charge. In the UK, for example, if you are one day over your limit, it would be enough to trigger a tax bill. Travel between home and host country, therefore, is an important consideration. For more from Ashburton, enquire through the fast facts number below. In the second of a short series, Gavin Fraser, Global Sales Director, Ashburton, offers his perspective on the financial issues expats need to consider when moving overseas. Fast Facts 66460 UK Tax Rates and Allowances 2008/2009 Allowance Personal £5,435 Blind Persons £1,800 Age Allowance Personal (Age 65-74) £9,030 Plus for married couples (age 73-74) £6,535 Personal (age 75 and over) £9,180 Plus for married couples (age 75 plus) £6,625 Income Tax Band Taxable Earned/saved Dividend Income income rate Basic rate £0 to £36,000 20% 10% Higher rate Over £36,000 40% 32.5% There will be a new 10% starting rate for savings income only, with a limit of £2,320. If taxable non-savings income is above this limit then the 10% savings rate will not be applicable. Capital Gains Tax Annual exemptions Individuals £9,600 Most trustees £4,800 Taxable gains charged at 18%. Entrepreneurs Relief – available for gains on disposal of a business and certain assets following cessation of a business. Lifetime allowance of £1,0000,000 will be effectively taxed at a rate of 10%. Inheritance Tax Chargeable Transfer Rate Up to £312,000 NIL Over £312,000 40% Any previously unused nil rate band on a spouse death can be applied to the surviving spouse’s estate. Exemptions Per donor £3,000 per annum Small gifts £250 per annum/per donee Non-domiciled souse £55,000 (once only) State Pension Single person £90.70 per week Married couple £145.05 per week Stamp Duty on Property Up to £125,000* NIL £125,001 to £250,000 1% on whole price £250,001 to £500,000 3% on whole price Over £500,000 4% on whole price * For disadvantaged areas the nil rate band extends to £150,000. VAT Standard Rate 17.5% Registration threshold for small businesses £67,000 per annum National Insurance Class 2 self-employed rate £2.30 per week Class 2 small earnings exception £4,825 per annum Class 3 voluntary rate £8.10 per week Personal Pensions Annual Allowance £235,000 Lifetime Allowance £1,650,000
May June 2008