Just when you fancied working in the City of London, the UK government plans to up the tax on overseas workers.
Right now, Aussies living in the UK who are non-domiciled in the country are exempt from paying tax on income earned abroad (e.g. from renting out Sydney apartments).
The proposed rules will require all ‘non-dom’ people in the UK who have been working in the country for seven years to either pay progressive UK tax on income they generate overseas, or to pay a flat tax of 30k (AU$67.4k) on it.
The proposals are designed to snare crafty cosmopolitan millionaires in the UK tax net, but they’re causing consternation among less wealthy adoptive Brits, who fear life will become more expensive. Non-dom couples with overseas income have the most to fear – they could end up paying AU$134k.
There could be problems if antipodeans decide London is less attractive as a result. The City of London financial centre is reliant on 5,000 Australian and New Zealander accountants and 2,675 South Africans. Attracted by bigger earning potential and better career prospects, London has called on the southern hemisphere to fill the dearth of home-grown talent.
Antipodean accountants who have been working in the City since 2001 can expect to be caught up in the new rules next year. However, given that the vast majority come here on two to five-year secondments, it’s not likely to affect numbers arriving on UK shores.
John Witing, tax partner at PWC, says: “A good number who have been here for some years will have stored up a nice little nest egg. It might not be vast, and they would have paid tax already, so it will be seen as an irritation. Will it mean less people come? Probably not. Is it going to mean less people stay? Yes, possibly.”
However, Chris Nangles, head of tax policy at Ernst & Young, believes those who stay in the UK long term tend to keep their money here: “If you’ve stayed here for seven years, by that time you would have consolidated most of your worldwide wealth within the UK, or you would be relatively happy for that wealth to be taxed within the UK. I think it’s dangerous to assume that suddenly, because of this, we will see a large cut-off.”
This is likely to be good news for investment banks, and their accounting recruiters, who would, we suspect, be a little lost without their antipodean amigos.