Taxing Times for Expat Wealth
ProACT Sam explores the differences between ‘Income Tax’ and ‘Capital Tax’ and how they affect expats’ wealth.
Capital tax is applied to your family and business property, investments and holdings.
INCOME TAX
Most people pay income tax on earnings.
Any income earned as salary, sole trader, bank interest, property rental, dividends or royalties.
In countries like the UK and increasingly around the world these incomes are taxed at source. Business income and some salaries can have tax deductible items. Such incomes not taxed at source generally require tax returns annually or more frequent tax payments.
CAPITAL TAX
Capital taxes are charged in the event of a change of ownership.
A family or business could own capital assets in property, investments, business licenses, business shares or valuable art or collectibles.
If you own capital assets of value like property, business shares, investment shares and funds, crypto bitcoin currencies or similar, these are all on a register somewhere and that transfer of the ownership will be a registered event, recorded and subject to a capital tax assessment.
Basic “Capital Gains Tax” on UK assets is up to 20% but could be more for residential property. It becomes payable on the disposal of any UK capital assets and will also require the expat to complete a UK return for the year of disposal of that asset.
INHERITANCE TAX
Inheritance tax is a form of capital tax on a family's wealth on death. For UK assets while Capital Gains taxes could be up to 28% for residential property, on death ‘Inheritance Tax’ is charged at 40%.
In addition to all the assets subject to capital taxes, inheritance tax will also include and cash, insurance payouts, and remaining pensions funds.
Capital taxes are charged in the country where the fixed asset is based. So if an expat has property in 3 countries there are 3 potential charges of capital gains tax. Even if an individual or business tax residence is abroad, tax could still be charged in the UK or another country where any business or company asset is based.
WEDNESDAY WEBINAR LIVE - JOIN US
In this month's “Wednesday Webinar” on 1st September 2021 ProACT Sam delves into the capital and inheritance tax saving opportunities for expats “Living and Working Abroad” .
You will discover how to maximise allowances, when expenses and chargebacks can be applied, how to defer payment liabilities and more.
Most importantly we will examine how expat family and business can protect their wealth to ensure their profits and inheritance goes to their family and not the taxman.
If you’re a retained client you will get exclusive time with ProACT Sam after the webinar to put your questions to him.
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