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United Kingdom (UK) - Taxation (Other)
VAT or value added tax is something any expat is liable for. There are new rules for VAT starting in 2015. The HMRC and government change rules and liabilities for VAT after assessing the current economic and financial stability of the UK. VAT is typically charged as a store tax or business tax. A person that starts a company in the UK will pay VAT in order to sell goods to a business or a consumer over a certain threshold (around £70,000 worth of total revenue in a year). At a consumer level, the VAT is essentially a sales tax. The standard rate is 20%, reduced is 5%, and there is a 0% rate for certain businesses and goods.
A wealth tax is a levy for aggregate value including household assets, real estate investments, stocks, securities, and pension plans. The tax form looks at the net worth of the expat to determine if a "fair" tax is necessary. Requirement to pay wealth tax depends on residency status. The rate is determined after the tax documents have been assessed.
If a person owns a property, there will often be a property tax rolled into the mortgage or set out in the contract upon cash purchase. Every year there is a property tax for ownership. The rate is based on the value of the property for that current year, thus it is subject to change. Property tax is different from a sales tax applied for selling a home or property.
Expats are not subject to inheritance tax unless they marry a UK resident or attain UK residency. Most countries have an inheritance tax, but for an expat the country that requires the tax paid is dependent on where the inheritance was left to the person and their residency status in both countries. There is also an option of being non-domiciled in status, in which case inheritance tax is not applicable. Typically, for families in the UK there is a 40% value inheritance tax for anything over £325,000 in value. Financial procedures can be put in place to avoid the huge tax rate such as trusts, which would decrease the amount of inheritance given out at one time.
Gift taxes are those that do not qualify as inheritance taxes. For a person that donates gifts to another person, charity, national institution, or political party on the HMRC list there can be a tax deduction on the income tax form, even for expats. If the expat is the one receiving the gift they are subject to paying tax on the amount of money received. A person is able to give £3,000 to an expat without it being taxed. Wedding gifts of £1,000 are exempt for independent parties, as are any £5,000 gifts from parents and half that amount from grandparents. Small gifts of under £250 are also exempt from liability on the tax form. The tax rate is based on the size of the gift and the income line it goes on in the income tax form.
Capital Gains Tax
Capital Gains Tax or CGT is not something all countries have, and is often overlooked by non-European expats. CGT is for stocks, where someone could have a certain amount of shares in a company and earn £7,500 on the sale of the stock after buying it at £3,000. The gain of £4,500 is taxable on income taxes. Anyone who is subject to paying income taxes in the UK will need to list CGT earnings. The domicile status determines whether taxes are paid to the UK or to an expat’s home country. Capital Gains Tax can also apply to any high value asset. Expats are subject to a 28% tax rate.
Property tax does not include Capital Gains Tax for a person who may have sold a home or property in the UK. Selling property in the UK is like any other capital gains profit, assuming there was profit on the sale. CGT may apply in one's home country for an expat if they sell a home after leaving, however this is usually listed on the home country taxes rather than the UK taxes.
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