Impact Of The 2012 UK Budget On UK Expats Living In The USA

The 2012 UK Budget was delivered on March 21, 2012. A few of the provisions have an impact on UK expats who are Green Card holders or have become US Citizens.

Age Allowance To Be Abolished
Starting from April 6, 2013 the additional personal allowance will no longer be available for those who reach 65 after that date. Existing age allowances will be frozen at their 2012/13 level of £10,500 for those aged 65 and over and £10,660 for those aged 75 and over. Once the standard personal allowances reach these frozen levels there will just be one personal allowance.

The effect of this will be to increase the tax on the elderly. For UK expats over 65 living in the USA who receive UK income that remains taxable in the UK they may pay more tax than they would have done in the past. Examples of income covered by this would include interest, dividends, rental income or business income. Note that under the UK/US Tax Treaty, UK state pension, company pension and personal pension income is only taxable on the US tax return.

Statutory Residence Test
The introduction of a statutory residence test has been delayed until 6 April 2013. The UK Government will publish draft legislation in the spring.

Any UK expat living in the US who intends to have extended visits to the UK will want to keep an eye on this test. It will set out detailed rules on how to determine if somebody is a UK resident for tax purposes and so potentially subject to a wider range of UK taxes than they might otherwise have been.

Inheritance Tax and Spouses/Civil Partners Domiciled Outside The UK
Currently there is a £55,000 IHT-exemption for transfers to a non-UK domiciled spouse or civil partner. This compares to unlimited transfers if they are UK domiciled.

The UK Government will consult on increasing the £55,000 exemption and also on allowing individuals domiciled outside the UK but with a UK domiciled spouse or civil partner to elect to be UK domiciled for Inheritance Tax purposes.

How this affects UK expats living in the USA will depend on which assets they still have in the UK, how long they have lived in the USA and whether they have changed their domicile.

In summary, although there were not too many changes in the 2012 UK Budget that would affect UK expats living in the USA it will be worthwhile keeping on eye on these to make sure they do not adversely affect your own situation.

Posted by Mark Smith a tax preparer and accountant with over 28 years tax and accounting experience. He is the owner of Cranmere Accounting and Tax Services LLC. Contact Mark on (480) 363-4808 or by email at

Disclaimer – This article does not constitute personal tax advice to the reader and is only offering general information. You should seek professional advice for your own situation as the most appropriate tax planning depends on your personal and unique circumstances.

Posted By Mark Smith

Mark Smith, EA is an Enrolled Agent and accountant with over 30 years tax and accounting experience. He is the owner of Cranmere Accounting and Tax Services LLC. He can be contacted on (480) 363-4808 or by email at if you need assistance with any of the above.

Comments are closed.