If you’re planning on leaving the UK, do you understand the tax implications? Here are some of the main considerations you need to take into account when moving overseas:
How your income is taxed
When you leave the UK, it’s important to understand how you will be taxed in each country on your sources of income. Generally speaking, if you are non-UK resident, you are only subject to tax on your UK income. However, if you live in one country and receive income in another, this rule may be overruled by the tax treaty in place between the two countries.
In the year of exit from the UK and re-entry to the UK, you can be subject to tax in more than one country. Don’t assume that the moment you leave, you are no longer liable to UK tax.
It is therefore important to ensure you’re aware of where you should be paying tax on your income and, if any double tax relief is available, to ensure that you are not paying tax twice on the same income.
Tax compliance
If you leave the UK, you may still be required to complete a self-assessment tax return if you continue to receive income from the UK. Your affairs may be especially complicated in the tax year when you leave or arrive in the UK if you are eligible for split-year treatment.
It’s also important to understand your compliance obligations in the country you have arrived in. Just because you may pay taxes in the UK, it doesn’t mean that this will exempt you from taxes in the country where you have moved to.
Temporary non-residence rules
If move abroad after spending four of the last seven years living in the UK, then return within five years, you may find that you have Capital Gains Tax due on assets sold while you were abroad.
You usually do not pay Capital Gains Tax on assets when you are a non-UK resident (even if they are UK assets), except for UK property. However, if you sell an asset while resident abroad, and then return to the UK within five years, you may have Capital Gains Tax due in the tax year you return.
Payroll implications
If you remain employed by a UK employer and go to work abroad, your tax residence position is important. As a non-UK tax resident, you are only liable to UK Income Tax on your UK workdays. It is also highly probable that you will be liable to tax in the other country. In this instance, advice should be taken to ensure if any relief is available under a double tax treaty, and to ensure that you are not overpaying in the UK and underpaying or not paying at all in the other country.
Non-Resident Landlord Scheme (NRLS)
If you move abroad and rent out a property in the UK, the letting agent or tenant may be required to withhold 20% of the rents and pay this to HMRC under the NRLS. You can elect to receive the rents in full, provided you agree to file a self-assessment tax return and have a history of submitting your returns and paying tax on time.
Private Residence Relief (PPR) issues
If you move abroad, we recommend you take advice regarding your UK Capital Gains Tax exposure.
Inheritance Tax position
It is important to understand your exposure to Inheritance Tax in the UK, and also in the country you have arrived in. Broadly speaking, if you were born in the UK, you will continue to be liable to Inheritance Tax on your worldwide estate, even if you don’t live here any more.
ISAs
If you move abroad, you cannot invest any further money into ISAs. You can keep your ISA open while you are outside the UK and invest further once you return to the UK. You will carry on receiving tax relief on investments made before your departure from the UK.
Wills
We always recommend having a UK will alongside a will in the other country. Different tax and legal systems have different impacts on your estate.
This is not an exhaustive list and, if you need any UK advice, we are always happy to help. We can also refer you to one of our Kreston member firms for overseas advice. Get in touch with a member of our Private Client team or call 0333 123 7171.
