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UK Treasury may strip non-resident migrants of tax-free allowance

by 1st Contact | Aug 15, 2014
  • The UK is looking to clamp down on the benefits received by temporary migrants. If the Treasury’s proposal goes through, temporary workers from outside the UK will no longer receive their £10,000 tax-free personal allowance.
    Tax refunds

    At present, anyone who works in the UK – whether they are a British citizen or not – receives the first £10,000 of their income tax-free in the form of a ‘tax-free allowance’. What this means in practice is that low-wage earners do not pay tax on their earnings. Under the new proposal, thousands of non-residents working in temporary, low-paid jobs would have to pay tax for the very first time.

    According to John Dunn, Manager at 1st Contact Tax Refunds, the people most affected “will be migrants who are not classed as residents for tax purposes, who live and work for short periods, and do not contribute towards National Insurance (NI) for at least six months.”

    Furthermore, Dunn emphasises, “these workers will be mandated to pay 20p per Pound earned and will not be able to claim Jobseeker’s Allowance unless they have six months of NI contributions (the current level is three months).”

    There are an estimated 250,000 European migrants working temp jobs in the UK, and thousands more from countries of the old Commonwealth like Australia, New Zealand, South Africa and Canada. The ruling would, however, only apply to those workers who live and work in the UK for less than six months a year. Other affected parties would be the more than 100,000 international professionals who spend only part of the year working in the UK, and non-resident landlords who live outside the UK but receive rental income from a UK property.

    The scrapping of the personal allowance for non-resident was first introduced in Chancellor David Cameron’s Budget Speech in March 2014, following consistent rhetoric from the Conservatives about clamping down on benefits for migrant workers.

    According to a Treasury spokesperson, “The increases the government has made to the personal allowance support hardworking people by helping them to keep more of the money they earn and, as a result, is one of the most generous in the world. At the same time, we believe that it is reasonable to consider whether non-residents who receive income from the UK are paying a fair share of tax on that income, in this country.”

    1st Contact Tax Refunds will keep you up to date with any developments following this proposal as and when they come through.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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