After a lengthy delay of almost four months since the Labour Party won the UK general election on 4 July, the new Chancellor Rachel Reeves has delivered her 2024 Autumn Budget.
While a Budget in the UK may not appear to be immediately impactful on your financial circumstances if you live in Australia, there may be good reasons why you should be aware of what was announced and how it could affect you.
For example, you may still have business or financial interests in the UK that could be influenced by some of the changes the Chancellor outlined.
You may also still have residential property that you are earning an income from, or family still in the UK who will obviously be directly affected by this Budget.
Perhaps most importantly, you may be planning to return to the UK at some point in the future and, as a result, will need to carefully consider how these changes could affect your financial plan.
So, read about some of the key changes that Rachel Reeves announced and how they could affect you.
1. Pension assets in the UK will soon be liable for Inheritance Tax
Perhaps the most important change you need to be aware of concerns any pension funds you have in the UK.
In her speech, the Chancellor confirmed that from April 2027 retained assets in your fund will be included in the value of your estate for UK Inheritance Tax (IHT) purposes. This includes any death benefits payable.
However, the exemption for spouses will continue to apply.
Clearly this means you will need to review your retirement income and estate planning arrangements, particularly if you plan to return to the UK when you retire.
If you have no plans to return, or you are an Australian resident with pension funds that you accrued while working in the UK you may want to consider your options with regards to transferring your pension to Australia.
By transferring any funds you do have to an Australian-based qualifying recognised overseas pension scheme (QROPS) you may be able to access an advantageous tax position through your superannuation.
However, it is important to note that not all UK pension funds can be transferred, and there are age restrictions governing when transfers can be made. Because of this we would strongly encourage you to seek expert financial advice before you make a decision about your pensions.
Find out more: Why a QROPS could form an essential part of your financial plan
2. Residency will replace domicile when assessing the tax liability for returning expats
The second important change you need to be aware of is particularly important if you are a British expat with plans to eventually return to the UK.
The current tax regime for expats based on domicile is being changed to a new residency-based arrangement from April 2025.
This will clearly have an effect on your financial planning if you are a non-UK resident returning to the UK.
A foreign income and gains (FIG) regime will be applicable to you if you become UK tax resident after a period of 10 tax years of non-UK residence.
As a result, you will not be liable for any tax on FIG arising in the first four tax years after becoming UK tax resident. For that period, you will only pay tax on UK income and gains, as is the case for non-domiciled individuals now.
These changes will also mean that if you have accrued assets in an Australian super and are returning to the UK to retire, you may be able to structure an advantageous tax position for yourself when you draw from your fund.
Again, given the complexity of the existing and new regimes, we would recommend you seek out expert advice in this regard.
3. You may have to pay more Capital Gains Tax on your UK assets
If you are a UK expat living in Australia you will be aware that you are still liable for Capital Gains Tax (CGT) on profits made when you sell UK-based assets, including property.
Because of this, you should be aware of the changes to CGT announced by the Chancellor in her Budget statement.
The non-property rates of CGT have increased from 10% to 18% if you are a UK basic-rate taxpayer and from 20% to 24% if you pay UK Income Tax at a higher rate.
The changes made effectively bring the rates of CGT in line with those chargeable on the sale of any property.
If you own a business in the UK you are planning to sell, some good news is that the lifetime limit for Business Asset Disposal Relief (BADR) has been retained at £1 million, despite some pre-Budget rumours that this may be abolished.
However, the rate of CGT payable on any sale is rising from 10% to 14% on 6 April 2025 and 18% on 6 April 2026.
4. The second home Stamp Duty surcharge has increased
If you have a “buy-to-let” property portfolio in the UK, or you are simply looking to purchase a residential property, you could be affected by a change to Stamp Duty announced by the Chancellor.
On 30 October she confirmed that, with immediate effect, the Stamp Duty surcharge on the purchase of second homes, including buy-to-let residential properties, would increase from 3% to 5%.
This increase also applies to companies purchasing residential property in England and Northern Ireland.
The surcharge is also paid by non-UK residents purchasing additional property.
Get in touch
How the UK Budget affects you will clearly depend on your personal circumstances and future plans.
If you do think you may be affected by the changes announced, please get in touch with us.
Please note
All information is from the Autumn Budget documents on this page and the details outlined here could be subject to change before becoming law.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only, it does not take into account your personal objectives, financial situation, or needs. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances.
All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.
