Budget 2012: delay on HMRC residency rules for expats Cuts to tax allowances for the over-65s have been the major talking point of this year's Budget, with far-reaching effects for UK residents and those living overseas. But advisers say next year will prove crucial to expat financial planning, due to the creation of new tax brackets. In April 2013, residency rulings from HMRC will categorise expatriates as either A, B, C or D, to determine their UK tax liabilities, with A being a non-resident and D, a fully fledged UK resident. The residency test was due to come into effect this year but has been delayed for 12 months while a consultation takes place. The measures are expected to be included in the Finance Bill 2013 and take effect from April 6 of the same year. Paul Gregson, head of business development at AML Global Solutions, says that while there are still many unanswered questions, there is at least now a clear time frame to prepare for the imminent changes. "The grey areas of quasi-residents - those in categories B and C - are likely to be the main focus for the taxman and non-residents will have to demonstrate clear demarcations from UK residents to ensure they steer clear of the slashed tax relief," he said. The new rules will provide much-needed clarity, but they could throw up some concerns for expats who were not in a category they had initially envisaged. Individuals who are domiciled outside the UK, and who have a UK-domiciled spouse or civil partner, are to be permitted to elect to be treated as domiciled in the UK for the purposes of British Inheritance Tax (IHT), under legislation to be included in 2013's Finance Bill. Expats are expected to start separating their financial affairs from the UK as much as possible, to aim for the A category. An independent financial adviser will be able to offer pointers during the wait for the finished guidelines. But expats are being warned to take note of other changes to tax relief in the Budget and adjust their wealth management plan accordingly in the meantime. "There are a number of changes that will affect international individuals - and in some cases, force them to consider making amendments to their existing wealth structures," said David Russell of Guardian Wealth Management. For example, a new 15 per cent charge is being implemented on the use of foreign companies to purchase UK residential properties worth more than £2 million, a time-honoured method many have used to legally avoid UK stamp duty.