Residential Taxation Proposed for American Expats Abroad
Republican Representative Darin LaHood has been instrumental in putting forward a motion for residential taxation for US expats abroad, thus limiting the current complex and expensive taxation arrangements. Under these new proposals, if you are a US expat, you would only have to pay tax on income earned in the USA, not on income earned abroad (although you will need to have lived abroad for three years). This should be welcomed by US expats, many of whom have had to spend money on tax advisers to deal with the IRS – particularly galling if you don’t actually owe them anything.
LaHood told the press that the Residence-Based Taxation for Americans Abroad Act would mean that
“… an electing taxpayer would be subject to U.S. tax only on U.S.-sourced income and gains (such as income from ownership in a U.S. business), distributions from U.S. retirement and deferred compensation plans, income from assets physically located in the U.S. (such as rent from real-estate investments), and other U.S.-sourced income or gains.”
If this affects you, keep an eye on the situation. The incoming President, Donald Trump, says that he supports the measure. Brandon Mitchener, executive director of Tax Fairness for Americans Abroad, has also praised the motion, and if passed, it should give the ‘accidental Americans’ – those who were born in the USA but who returned home with their parents shortly afterwards – a break. LaHood also says:
“…foreign financial institutions would not be required to undertake burdensome reporting requirements under FATCA, which frequently discourage them from offering banking services to Americans living and working abroad.”
Australia: Can British Expats Evade Inheritance Tax?
Brits living in Australia will be aware that the latter country does not impose inheritance tax, unlike the UK, where this form of taxation has dominated headlines recently. New regulations from April will mean that British expats won’t have to pay IH if they’ve been out of the UK for ten years – but does this apply to Brits in Australia?
Australia does not have an inheritance tax, so you won’t need to pay any on your Australian assets, such as property. However, if you don’t apply for citizenship or residency, you may be subject to other tax rules for foreign nationals. For example, you could be liable for capital gains tax on your family home, as it is considered an investment property under Australian regulations—something that does not apply to Australian citizens.
Tax experts warn that until the new rules come into force in April, inheritees could be liable for both CGT (from Australia) and inheritance tax (from the UK): a double taxation whammy for anyone unfortunate enough to be caught between the two sets of regulations. You could currently also be liable for an IH charge on your Australian property until the new rules in the UK come into force.
However, there is light at the end of the tunnel in April, and moreover, financial experts say that the rules on what counts as tax residency in Australia are not at the moment all that tight. Mark Chapman of HR Block told the UK press that:
“There is no set period [that you] have to be in Australia for, but a general rule of thumb is that you should be here for at least six months, and not have a permanent abode abroad, to be [an] Australian resident. The availability of the main residence exemption isn’t linked to citizenship – it’s linked to tax residency, which is completely different. So, if you are tax resident in Australia, you or your deceased estate will be able to claim the main residence exemption, regardless of whether you are a citizen or not.”
A number of the estimated 1 million British citizens currently resident in Australia have been there for a long time, and should easily comply with the criteria above. So if you’ve been resident in Australia for six months, have had one job and one house, you won’t be subject to Australian CGT – and soon, you won’t be liable for UK inheritance tax either.
Gatehouse Expand Dip Products for Expats
Gatehouse Bank recently expanded its Decision in Principle service to include British expats as well as UK residents. Its Sharia compliant Home Purchase Plans (an alternative option to a mortgage) can now be approved in a very short time – you will then need to upload supporting documents on the bank’s secure platform. Head of Customer Propositions Gemma Donnelly told the press:
“Being able to independently obtain a decision in principle at a time that is convenient for them will substantially improve the customer journey, especially in instances where time difference is a factor.”
UK Investors Post-budget
Rises in stamp duty in the last budget were predicted to be offputting to expat and overseas property investors, but these predictions seem to have been on the unnecessarily gloomy side, according to recent reports. Mortgage experts say that the appetite of investors for property here does not seem to have diminished, and there are signs of increased investment in 2025, particularly in more affordable areas outside London. So the pattern of buying is changing, but not actually decreasing.
Liquid Expat Mortgages CEO Stuart Marshall told the press:
“UK expat and foreign national investors have been seeing great returns from affordable properties in areas like the North East. These properties have a lot of room to grow in value, which greatly contributes to their capital growth potential. However, they are also presenting great rental yields, with high asking prices for rents, while remaining highly mortgageable for UK expat and foreign national investors utilising some of the available mortgage products from specialist mortgage brokers.”
Non-dom Changes Impact on South African Expats in the UK
The upcoming changes to the non-dom system in the UK are likely to affect South African expats, tax advisers warn. If you moved to Britain before April 2022, you are likely to be liable for tax on your worldwide assets and income, such as property held in South Africa. Capital gains tax, for instance, will be charged at the UK’s 24% rather than the current 18% rate in South Africa.