Why the 2010 tax changes may make claiming the remittance basis more attractive

We've looked in various articles at the impact of the changes to the tax rates and allowances as from 2010. These rules will apply to non doms just as much to other UK residents. Terefore non doms who have taxable income above £100,000 will see their personal allowance restricted/withdrawn and anyone earning over £150,000 will need to pay the new income tax rate at 50% or 36.1% (effective rate). For any non doms with overseas unremitted income they should take these new rules into account when deciding whether to claim the remittance basis or the arising basis. If for instance you will be subject to the 50% rate of income tax due to having a large UK income and you have substantial overseas investment (non dividend) income you would have a choice of either: • Claiming the remittance basis and paying the £30,000 tax charge. You could then keep the income abroad to avoid UK tax. There would be no loss of the UK personal allowance as it would be lost anyway due to having income above £100,000. • Opting for the arising basis and paying income tax at 50% on the overseas income. The fact that you would now be paying UK tax at a much higher rate and filing a claim for the remittance basis would not mean you would lose your personal allowance would certainly impact on your decision. We've already explained in other articles that for 2009/2010 if you are a higher rate taxpayer you should claim the remittance basis if your overseas unremitted income is above £81,475. This is because at this point the loss of the personal allowance and the saving of tax at 40% would cover the £30,000 remittance tax charge. However for 2010/2011 if you're paying tax at 50% there would be no loss of personal allowance to take into account. In this case if you had overseas unremitted income of £60,000 or more this may make claiming the remittance basis more attractive.