TW
0

UK Chancellor Jeremy Hunt delivered his Autumn Statement on 22 November. How might it affect you?

Tax cuts

The tax cuts announced related to National Insurance contributions, so British expatriates here in Mallorca are unlikely to benefit. Effective 6 January 2024, the main rate of Class 1 employee National Insurance contributions will reduce from 12% to 10%, while the rate for self-employed people decreases from 9% to 8% from 6 April.

These cuts only partially offset the fiscal drag created by the frozen income tax thresholds. The budget did not include any plans to remove the freeze, scheduled until 2028. Often referred to as ‘tax by stealth’, freezing thresholds and allowances results in many taxpayers paying more tax over time.

The pension triple lock rise

The government confirmed its commitment to the pensions triple lock, where the state pension is increased by the highest of average earnings growth, Consumer Prices Index inflation or a minimum of 2.5%. The UK State Pension therefore rises by 8.5% from April, in line with earnings.

New pension allowances

Legislation proposed in the Autumn Finance Bill 2023 eliminates the Lifetime Allowance and introduces three new allowances to start from April 2024.

The Lump Sum Allowance (LSA) applies to payments made during the pension scheme member's lifetime and will be a fixed £268,275.

The Lump Sum and Death Benefit Allowance (LSDBA) will have a fixed limit of £1,073,100 and be applicable to death lump sum payments. When the death benefit is paid as a lump sum, any excess above allowance will be taxable at the beneficiary’s marginal rate of income tax, regardless of the member’s age when they die.

If the pension fund is designated to drawdown within two years and the benefit is taken as pension income, the payment will be tax free if the death occurs before age 75. If after age 75, the recipient will pay income tax.

The Overseas Transfer Allowance (OTA) will also be £1,073,100 and apply to transfers of registered pension schemes out of the UK into Qualifying Recognised Overseas Pensions Schemes (QROPS). Such transfers will be tested against Overseas Transfer Allowance and any excess subject to the Overseas Transfer Charge of 25%.

These reforms make an already complex regime even more of a minefield, particularly for expatriates, so it is important to take personalised, regulated cross-border advice.

Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.
Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com.