Stuart

As we approach the close of another tax year, the aim of this newsletter is to share some observations on the recent budget, announced on March 3rd and, also, to prompt you to think about any last-minute steps you can take to minimize the tax burden before the year closes on 5 April 2021. This has been an uncertain year for many who, due to the pandemic, find themselves stranded in the UK, in unfamiliar territory, faced with a new tax reporting obligation for the first time after many years overseas, far from any concerns about UK tax. In the previous newsletter, we discussed the need to ensure full disclosure on worldwide income as a UK resident taxpayer. This newsletter revisits this topic to provide further comment on HMRC’s current focus on this matter through their worldwide disclosure facility team. BUDGET 202 Another budget has come and gone and again, on the surface, it seemed unremarkable with no significant changes to personal allowances, tax brackets or to capital gains tax, which has been the subject of considerable speculation in recent months. However, there were significant changes announced for taxes on business, to be rolled out over a multiple year timeframe, that reinforced the general belief that this would be a budget to alleviate the growing fiscal deficit which has mushroomed during the pandemic. To this effect, the Office of Budget Responsibility had advised that this budget will raise the tax burden to levels not seen since the 1960’s and is expected to rise to 35% of GDP by the 2025/26 tax year. The rise will hit both businesses and middle-income earners. With little change to personal allowances, and now fixed at the same rates for the next four years, such action will bring, according to OBR, a further 1.3 million people into the UK’s taxpaying system and a further 1 million taxpayers into the higher tax bracket. While the personal tax-free income allowance will increase from £12,500 to £12,750 in the 21/22 tax year, there will be no further increases considered until 2026. Similarly, the higher-rate threshold of £50,000 will increase to £50,270 for the next tax year and remain unchanged until 2026. With inflationary pressures on wages, this will certainly contribute, as intended, to increased tax collections and is currently referred to as ‘fiscal drag’. By freezing tax rates and allowances, it is expected that a further £19bn will be collected by April 2026, a relatively small chunk of the current national debt of £300bn resulting from the supportive measures taken during the current Covid-19 crisis. The inheritance tax threshold of £325,000 (set 10 years ago) remains unchanged as does the capital gains tax allowance and the pensions lifetime and annual allowance. THE PENSIONS ALLOWANCE The pensions allowance offers each taxpayer an opportunity to reduce their taxable income. Where contributions are made to a registered pension scheme, tax relief is available in the same tax year in which those contributions are made.For contributions to a ‘relief at source’ scheme, basic tax relief is given at source, and deemed to be paid net of the basic rate of tax applicable, typically 20%. For those taxpayers on higher rates of tax, 40% and 45%, the extra tax relief is claimed through the annual self-assessment process. While the lifetime allowance for pensions contributions currently remains set at £1,073,100, the annual allowance of £40,000 for pension contributions per tax year may be increased by the amount of the annual allowance that remains unused from the previous three tax years.If you are close to the higher tax brackets of either 40% (with taxable income in excess of £50,000) or 45% (where taxable income for the year exceeds £150,000) you may wish to pursue the opportunity to increase your pension contributions and therefore minimize the impact on your tax liabilities. INVESTMENTS THAT PROVIDE TAX RELIEF The UK Government is forever committed to generating capital growth and safeguarding the longer-term prospects of the economy. In this regard, tax relief is available through various Government incentives, a scheme aimed primarily at encouraging people to invest in higher risk companies. As a result, tax relief is available to those investing in companies that are focused on growth and development who satisfy the overall ‘risk to capital’ condition of the scheme, be it an Enterprise Investment Scheme (EIS), a Seed Enterprise Investment Scheme (SEIS) or a Venture Capital Trust (VCT). When subscribing for shares in an unquoted trading company, on EIS terms, tax relief of 30% of the amount subscribed is available, up to the maximum allowed per tax year, typically £1m, with investments of up to £2m accepted for knowledge-intensive companies. As EIS tax relief is aimed at reducing the overall tax liability, the liability to tax should be sufficient for the full EIS tax relief to be utilized as there will be no refund where the amount of relief exceeds the tax assessed. Under an SEIS, income tax relief is available on 50% of the amount subscribed, capped at £100,000 per tax year. With a VCT, tax relief of 30% of the amount subscribed is possible, up to a limit of £200,000. The relief is clawed back if the investments is disposed of within the first 5 years. In addition to the above, there is also the opportunity to subscribe to shares in a social enterprise where social investment tax relief is available of 30% of the amount subscribed, limited to £1m. For further comment and insight into any of the above, as you contemplate the upcoming end of the 20/21 tax year or to consider what plans you can put in place for the next tax year, contact Hodgens Global.

Welcome to the first edition of The Hodgens Global Newsletter As we complete another tax reporting deadline in the UK, we hope you will enjoy this first newsletter to highlight aspects of our service, to maintain contact and to discuss some of the most common concerns that arise when you find yourself living life as an expat. Hodgens Global can help you identify and address all personal tax reporting obligations in the United Kingdom and is able to liaise with HMRC directly on your behalf whenever the need arises. BREAKING NEWS Non-UK residents with plans to purchase residential property in England and Northern Ireland will be required from April 2021 to pay an additional 2 percentage points of Stamp Duty above those standard rates applicable to UK residents. Stamp Duty Land Tax (SDLT) is a transaction tax that is payable when purchasing property in England and Northern Ireland. BREXIT and THE CORONAVIRUS For many expats, much uncertainty existed in the build up to Brexit, and now that the United Kingdom has officially left the European Union it is fair to say that confusion persists, given the number of enquiries received recently. Your taxpayer status will continue to be the same whether you are residing permanently in or out of the EU area, either in Germany, Italy, Singapore, or Australia. The terms of each country’s Double Taxation Agreement with the UK will remain in place regardless of any involvement of the EU. In terms of the Coronavirus, the disruption and chaos this has caused to many on a personal level is disheartening and for some expats it is creating many challenges that require resourcefulness and courage. In such situations, tax is an issue that will not go away unless confronted and resolved. For others, caught up accidentally in the UK over extended stays, due to the closing of borders and travel corridors, HMRC’s rigid criteria to determine if taxpayer residence in UK has been established is causing havoc for those who are unfamiliar with UK tax laws. Welcome to the first edition of insights from Hodgens Global where we discuss additional Stamp Duty charges on UK property purchases by non-UK residents, Brexit uncertainty and the Coronavirus, which has provided many with the opportunity to consider working from home in an  overseas setting. Also, in the newsletter we discuss our new cloud-based file sharing system which allows clients to automatically access their files and documents, 24/7, throughout the year. Welcome to the first edition of The Hodgens Global Newsletter As we complete another tax reporting deadline in the UK, we hope you will enjoy this first newsletter to highlight aspects of our service, to maintain contact and to discuss some of the most common concerns that arise when you find yourself living life as an expat. Hodgens Global can help you identify and address all personal tax reporting obligations in the United Kingdom and is able to liaise with HMRC directly on your behalf whenever the need arises. BREAKING NEWS Non-UK residents with plans to purchase residential property in England and Northern Ireland will be required from April 2021 to pay an additional 2 percentage points of Stamp Duty above those standard rates applicable to UK residents. Stamp Duty Land Tax (SDLT) is a transaction tax t BREXIT and THE CORONAVIRUS For many expats, much uncertainty existed in the build up to Brexit, and now that the United Kingdom has officially left the European Union it is fair to say that confusion persists, given the number of enquiries received recently. Your taxpayer status will continue to be the same whether you are residing permanently in or out of the EU area, either in Germany, Italy, Singapore, or Australia. The terms of each country’s Double Taxation Agreement with the UK will remain in place regardless of any involvement of the EU. In terms of the Coronavirus, the disruption and chaos this has caused to many on a personal level is disheartening and for some expats it is creating many challenges that require resourcefulness and courage. In such situations, tax is an issue that will not go away unless confronted and resolved. For others, caught up accidentally in the UK over extended stays, due to the closing of borders and travel corridors, HMRC’s rigid criteria to determine if taxpayer residence in UK has been established is causing havoc for those who are unfamiliar with UK tax laws. WORKING FROM HOME – OVERSEAS With the opportunity to work from home while working for their UK employers, many are transferring the ‘home’ to other countries. Spain, Portugal and the Netherlands feature often in discussions. When working from home overseas you have to consider the double taxation agreement with the other country. If the situation allows for you to be deemed non-UK resident, arrangements can be made for you to obtain the appropriate DT relief from HMRC. We would be happy to guide you further on this matter. DISCLOSURE As a resident taxpayer of the UK, all worldwide income is taxable in the tax year in which it arises. For many, the most common way to settle tax is through Pay As You Earn, whereby tax is deducted at source from the monthly salary. If you are in receipt of worldwide income and gains, you should be aware that the tax authorities of various countries communicate with each other. It is therefore in your best interests to learn how to be fully tax compliant. Voluntary disclosure is looked upon more favourably than when being prompted by HMRC to do so. While HMRC offer a Digital Disclosure Service, there are still expats in the UK who maintain undicslosed interest bearing assets overseas. When this is discovered by HMRC, a letter is issued to the taxpayer that often provokes stress and concern. This can be avoided by seeking professional guidance and support. CLIENT FILE SHARING In the constant pursuit of excellence and accessibility to clients in all corners of the world, we are excited by the addition of