The UK government has confirmed the continued availability of UK personal allowances for expats until April 2017 at least. Moreover, the tax-free personal allowance for all will increase to 10,600 pounds from next month.
This is welcome news for the five million Brits who live abroad and were fearful, following a statement in the British budget last year, that non-residents would start paying income tax from the first pound of their income. The issue has been very sensitive in Thailand which has about 70,000 British expats living here most or all of the year, many retired people living on fixed incomes or state pensions. They stood to lose at least 2,000 pounds a year, if tax relief had been abolished, or 4,000 pounds for a married couple.
The British government now states, “Last year the government launched a consultation on whether or not to restrict the income tax personal allowance for non-residents. Whilst the government believes there is a strong rationale for doing this, it recognizes it is a complex change for both employers and individuals who may be affected. The government will continue to discuss implementation of this change with stakeholders. Should the government decide to proceed, a more detailed consultation will be undertaken. No change will come into effect before April 2017.”
Tax specialists say that the government has backed down, at least for now, because there are too many categories of expats to fit a one-size-fits-all solution. John Dolan, who is based in Thailand, said “There is all the difference in the world between retirees living here on small pensions and wealthy individuals with jobs in Thailand and property in UK which they rent out. If the scheme had been introduced, the pensioners would have been worst hit.”
Jon Preshaw, of the Chartered Institute of Taxation, said it was good news as the proposals would have made the tax system unduly complicated. He added that many expat pensioners are already hit by the freezing of the old age pension without the annual increase which UK residents enjoy.
Many Pattaya-based British retirees say they are much relieved by the government announcement. “Seeing my income dramatically shrink would have meant I would have needed to go back to the UK where I could claim various benefits,” said 72-year-old Andrew Littleton. “Living in Thailand is more expensive than it used to be, especially if you fall ill, and the British government should be supporting rather than penalizing us to stay abroad.”
In separate developments, the UK government is planning to charge capital gains on British property sold by non-residents from April 2015. But children will benefit from reforms to air passenger duty which is being scrapped for under-12s this year and for all children under 16 from next year. However, to enjoy the benefit, they must be flying economy class.