Mixed news in UK budget plans

THE UK Budget contains some good news, and some possibly worrying news for expats in France.

The main element which Connexion has spotted as likely to benefit Britons in France is an increase to the personal allowance on income that may be taxed in the UK.

However there are question marks over another policy – abolishing the Class 2 National Insurance Contributions that many expats working in France use to top up missing state pension years.

The UK government says the personal allowance – the part of UK income taxed at 0% - will rise to £10,600 from next month (£100 more than previously announced), up £600 from the current £10,000 and up £4,125 compared to 2010.

The allowance will rise further to £10,800 in April 2016 and £11,000 in 2017, Chancellor George Osborne said.

For French tax residents, this helps those who have incomes like UK rental income and ‘government’ (public service) pensions and British rental income, which are taxable in the UK.

The government previously considered abolishing the allowance for some kinds of income of people who are not UK tax residents but shelved the idea until at least 2017 after a consultation last year.

Linked to the increase in the allowance, the threshold for higher-rate income tax (40% as opposed to 20%) will rise from the current £41,865 to £42,700 in 2016 and £43,000 in 2017, which the government says is the first above-inflation increase in seven years.

The chancellor also said the government plans to axe the current system of the self-assessment forms that are filled in by, for example, small businesses in the UK and expats with certain UK income such as rents.

He said the calculation of their income tax and National Insurance will be done using ‘online accounts’ and those with simple affairs will have nothing to do. Changes will come in for some people from next year, he said.

The move to abolish Class 2 National Insurance Contributions was mentioned by Mr Osborne as supporting self-employed people. But it could make it difficult for expats who want to top-up national insurance payments from abroad – and possibly hike the cost.

At present, expats wishing to top up missing years towards British pension rights pay Class 2 National Insurance Contributions at £2.75/week – similar to self-employed people with small profits in the UK.

This compares to much more costly fixed-rate contributions paid by non-working expats and earnings-related contributions paid by other working people in the UK.

Now the government says it is looking to abolish Class 2 ones in the next parliament. A spokeswoman told Connexion they will be consulting on how they will be replaced later this year.

Photo: HM Treasury