3 December 2014
In the Chancellor’s Autumn Statement non-domiciled individuals living in the UK have been targeted. The amount non-domiciles pay as a ‘remittance basis charge’ will increase, making it more expensive for them to defer paying UK tax on their overseas income or gains.
The amount of the remittance basis charge for non-domiciles has changed as follows:
- If resident in the UK for 7 out of 9 years, the charge will remain at £30,000
- If resident in the UK for 12 out of the last 14 years, the charge increases from £50,000 to £60,000
- There will be a new charge of £90,000 introduced for people resident for 17 out of last 20 years
Non domiciles have two options when it comes to paying tax on overseas income and gains. They can pay UK tax as and when the liability arises, or they can defer the tax, known as a ‘remittance basis’. If they choose the remittance basis they have to pay a ‘remittance basis charge’. However, rather than paying the annual remittance charge, if the non-domiciled individual only holds investments, then an alternative solution to this higher charge could be to wrap the investments inside an offshore bond.
Taking this action could save thousands in remittance charge and, for those who have been in the UK for long time, could save them £90,000 a year. The offshore bond essentially defers any income tax and capital gains tax liability until the bond is encashed, which is why there is no tax to declare on an annual basis.
The benefit of using an offshore bond rather than paying the remittance charge is compounded by the fact that if the individual pays a remittance charge they will also lose their capital gains tax allowance and personal allowance.
Rachael Griffin, head of technical marketing at Old Mutual Wealth, comments:
“By significantly raising the amount of remittance charge non-domiciled UK residents pay, the Chancellor is forcing them to look for alternatives. An effective solution for those who hold investments overseas is to restructure these assets inside an offshore bond. This approach can be extremely beneficial providing the individual doesn’t hold other overseas assets outside of the offshore bond.”
For more information please contact
Old Mutual Wealth
02380 916 770
07834 499 558