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Expat tax threat could net govt £400m

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Hundreds of thousands of expats who raise an income in the UK could lose their right to use the personal allowance.

The Chancellor George Osborne is preparing to push ahead with plans first announced in the March Budget to prevent British expats from offsetting income earned in the UK, such as from renting out their homes, against the £10,000 allowance, the Telegraph reports.

The move, which may also hit retirees drawing a government pension, could affect up to 400,000 people and raise the exchequer an extra £400m annually, according to the report.

Currently, individuals that derive an income from UK property, but are not resident here for tax purposes, are generally entitled to the same personal tax allowances as UK residents due to double tax treaties agreed with other countries.

The government is consulting on whether to restrict the allowance to those with a “strong economic connection” to the UK.

Expatriates may be forced to consider selling their UK rental properties if the proposal is given the green light, according to experts.

Jackie Hall, a tax partner at accountants Baker Tilly, told the Telegraph: “Our pensioners who’ve gone abroad are going to suffer the biggest impact.

“If you have already jumped ship and are reasonably comfortable, this could turn the tide against you. Those people may begin to struggle because they haven’t got the income in retirement that they thought they had.”