This article will help you understand why budget changes have come into force as well as how they affect UK expats that reside in USA. With speculation that a transfer to a ROPS for EU residents would incur a 25% transfer charge as well as the UK state pension being frozen, I think the average UK expats will feel quite relieved with the outcome of the budget. However, wealthy UK private pension members will feel they have been trapped into being penalised for saving in what is deemed as a tax-efficient way of growing your retirement income with the new lifetime allowance rules coming into force next year.

Many of the budget changes have been implemented to pay for improved testing and vaccination rollouts for COVID-19 in an attempt to get the world, and the economy, back to full strength. With the added pressure and the cost implications of Brexit, this has put a huge strain on government spending which in turn will cost taxpayers.

How does this impact US residents with UK assets?

• The Lifetime Allowance (LTA) at its current level of £1,073,100 will be frozen with no increases until April 2026.
• The income tax personal allowance and the higher rate threshold will remain frozen with no increases from April 2022 until April 2026, although they will increase to £12,570 and £50,270 respectively next month. This might not be seen as a direct impact for non-UK residents, however, for those retirees who are receiving UK sourced income such as a UK private pension, tax at source will apply should the annual income amount exceed the income tax personal allowance.
• The IHT nil-rate band will remain at £325,000 and the residence nil-rate band at £175,000 until April 2026

How can I benefit from the changes?

• For those private pension savers that already have in excess of the LTA or are likely to breach this level before retirement, transferring to a ROPS would still be a viable option to avoid breaching the LTA and therefore being liable for up to a 55% tax charge for the excess above the LTA upon a “benefit crystallisation event”.
• For those retirement savers who have already built up a UK private pension pot, saving into alternative arrangements such as a “general investment account” or an “offshore bond” would prove a much better way of saving without the added concern of the UK changing the goalposts between now and retirement.
• An increase to the income tax personal allowance makes it, even more, important to obtain an NT tax code to avoid being taxed at the source regardless of the annual income amount you may receive.
• Many non-UK residents often believe that they are no longer susceptible to UK IHT, however, UK IHT does not depend on your residency but instead your “domiciled status” which is very difficult to lose. The good news is IHT can be avoided with the right financial planning such as trust planning and gifting to beneficiaries before death.