Insurance protection is hardly a glamorous purchase and generally people will avoid the topics of illness and death, but ensuring you have decent protection for your dependents is a must. Insurance protection is important no matter your employment, life stage, or the number of children you may have.
Historically, property alongside pensions has been one of the most common ways to invest in the UK. As many know, property is an asset class, just like cash, bonds and shares and can serve as a form of diversification when building an investment portfolio. In the UK, there have traditionally been many tax incentives for property investing. However, these are slowly being tapered back making other avenues of investing potentially more attractive.
When it comes to planning for a home purchase in the UK, there are many factors and aspects of your financial life to consider. First there are the traditional things to consider:
Clearly defining your personal wealth goals and objectives is the first step towards determining an appropriate investment strategy and asset allocation to suit your needs. The additional value add comes with giving proper consideration as to how to meet your goals in the most tax-efficient and optimal manner. As a US person living in the UK, you want to make sure that you avoid the tax traps that are littered within the investment world to mitigate any overall costs of investing.
Financial planning is often an area that takes a back seat in busy lives. When there is no specific deadline to make a financial decision, it is very easy to say that you will address it in the future when life becomes less hectic. Taking the time to review your financial position, your personal wealth goals and objectives and consider the implications of whether your strategy will appropriately meet those goals can be an important exercise. Ensuring that you have an effective and appropriate strategy will likely afford you future flexibility and peace of mind. Below we discuss the areas that are beneficial to consider and review. A few easy steps can ensure optimal wealth planning strategies.
The standard lifetime allowance (LTA) is a limit on the amount of pension benefit that can be drawn from pension schemes – whether lump sums or retirement income – and can be paid without triggering an extra tax charge. As of 6 April 2016, the LTA reduced from £1.25 million to £1 million. Provided nothing changes, the LTA is set to stay at £1 million until April 2018 when it is scheduled to increase each year in line with CPI.
With the lower LTA threshold, there is a segment of individuals who, if not already addressed, should give consideration as to whether or not a form of LTA protection might be appropriate in their situation. Lifetime allowance protection locks in the level of your lifetime allowance. There are three protection programmes that remain available to individuals who do not currently hold protection or have not previously applied for protection in the past. Special attention should be paid to those who think they qualify under the IP2014 programme, noted below as an application for this is only available until 5 April 2017. These are:
For many Americans living in the UK, the focus of retirement savings and contributions has typically been UK pensions as opposed to US pensions due to the generous annual allowances and tax relief offered in the UK as a higher tax jurisdiction. However, with the ever changing UK pension landscape, individuals earning over £150,000 have a tapered UK pension allowance, making funding US pensions as part of the overall retirement saving strategy slightly more attractive.
Many Americans who live in the UK maintain a level of assets in the US post-arrival. So, what are the considerations needed when you decide that you want to bring money from the US into the UK?
The 2016/17 UK tax year will come to a close on 5 April 2017. Each year UK resident individuals paying tax on the Arising Basis are provided a capital gains tax allowance whereby the capital gains are exempt from tax until surpassing the relevant threshold for the year. For the 2016/17 tax year, the UK CGT allowance is £11,100. So, from a UK perspective, the first £11,100 of gains realised per individual is excluded from tax regardless of income levels.
Many Americans living in the UK are considered to be non-domiciled for UK inheritance tax purposes. Under new rules set to take effect in April this year, a non-domiciled individual becomes deemed domicile for inheritance tax purposes when they have been resident in the UK for more than 15 out of the last 20 years. When an individual is deemed domicile for UK inheritance tax purposes, the UK will generally apply its inheritance tax rules on an individual’s worldwide assets.