For South African expats living in the UK, recent developments in both the South African and UK tax systems could have significant implications for your financial future. With both countries tightening their tax systems, it’s critical to understand your obligations on both sides and take proactive steps to protect your wealth. Here’s what you need to know about the changes and how FHBC can help you navigate them.
Why this matters?
SARS has been ramping up efforts to track South African tax residents living abroad. In addition, the UK has also introduced changes to its tax rules, affecting foreign income and pensions. Without proper planning, you could face unexpected tax liabilities, even if you’ve been residing outside South Africa for years. To avoid this, it’s essential to take a closer look at your tax status and structure in both countries.
5 Key tax considerations for SA expats
- Clarify your emigration statusIf your financial emigration hasn’t been formally processed with SARS, you may still be considered a South African tax resident. This means your global income could be subject to South African tax laws, even if you’re no longer residing in the country.
- Leverage double tax agreements (DTA)The South Africa-UK DTA is a powerful tool to avoid double taxation. Understanding how it applies to your income streams—particularly pensions, salary income, and other forms of income—is critical to minimizing tax burdens.
- Foreign income exemptionSouth Africa’s R1.25 million foreign income exemption only applies if you meet certain criteria. If your income exceeds this threshold, you could face additional tax liabilities in South Africa.
- Managing local assets in SAAny investments, property, or retirement savings in South Africa remain subject to local tax laws. Strategic planning ensures you’re staying compliant while optimizing returns on those assets.
- Plan for the exit taxWhen you cease to be a South African tax resident, SARS may impose a “deemed disposal” tax on your worldwide assets. Careful planning can help reduce the financial impact of this tax.
New changes in the UK
In addition to South African tax updates, the UK has introduced changes affecting expats’ tax obligations. These changes primarily impact income from overseas, particularly regarding pensions and investments. The UK tax authorities are increasingly focusing on ensuring that all foreign income, including that from South Africa, is properly reported. Here are the key changes to keep in mind:
- Changes to pensions: New regulations make it more challenging to claim tax relief on contributions made to foreign pensions. If you’ve been contributing to a South African pension scheme, these changes could affect your tax position in the UK.
- Global income reporting: The UK tax authorities are now requiring more thorough reporting on foreign income and assets. Any South African income—whether from salary, rental property, or dividends—could trigger increased scrutiny.
- Exit tax and residency rules: The UK has updated its exit tax rules for those ceasing UK tax residency, which may coincide with South African rules if you’re planning to transition out of both countries.
How FHBC can help
At FHBC, we specialize in simplifying complex tax issues for expats. Our team offers tailored solutions to ensure you remain compliant while optimizing your tax position in both South Africa and the UK. Here’s what we can do for you:
- Assist with financial emigration and formalize your tax residency status with SARS.
- Ensure compliance with SARS while leveraging the South Africa-UK DTA to avoid double taxation.
Don’t wait until it’s too late
With both SARS and UK tax authorities tightening their grips on expats, the sooner you act, the better your position will be. Taking the time to address your tax obligations now can save you significant stress and expense later.
Let FHBC be your trusted partner in navigating these changes.
If you are a current client of the FHBC Group of Companies, please contact the director managing your account. Otherwise, reach out to Adri Britz in our tax department via email at abritz@fhbc.co.za.
Contact us today to schedule a consultation. Together, we’ll discuss your financial future while ensuring compliance with tax laws in both South Africa and the UK. Stay compliant. Stay protected. Let FHBC guide the way.
Source Reference:
South African expats in the UK must act before the tax net closes – Moneyweb