It has been reported recently that many of the UK’s higher earners are currently feeling ‘soaked’ by taxes and therefore considering quitting the UK for greener pastures. Are you one of them?
While the thought of moving abroad to work or retire is very exciting, planning before your departure needs to be meticulously organised and well thought through.
Finding somewhere to live in a new country, arranging the necessary visas and booking a suitable removal firm are just some of the issues you are likely to have to arrange prior to leaving. It’s also vital that during this busy time, you pay careful attention to financial planning and the tax consequences of leaving the UK.
Your residential status will be the main factor in determining your continued liability to UK tax. In the past, it was quite difficult to become a non-UK resident for tax purposes, but since 6th April 2013, a new set of statutory tests made it far easier to establish your status. With this in mind, before moving abroad or if you currently live abroad and are now returning to the UK, it is highly recommended that you try and gain at least a basic understanding of these concepts.
Your residential status will be determined separately for each tax year; so even if you are treated as a remaining resident in the UK after living abroad, it might be possible to change your status in subsequent years. The more days you spend in the UK during a tax year, the fewer UK ties you will be permitted before being treated as a resident.
If you are currently considering leaving the UK to live abroad, then the following ties also need to be thought through for tax purposes:
• Do you have a spouse, civil partner or minor children in the UK?
• Do you have accommodation in the UK, which is made use of during the tax year?
• Will you work in the UK for 40 days or more during the tax year?
• Were you in the UK for more than 90 days during either of the two previous tax years?
• Will you spend more time in the UK than in any other country during the tax year?
If you are UK resident, you will have to pay UK capital gains tax (CGT) on gains from disposing of your assets wherever they are situated globally. The tax treatment doesn’t change if you are only temporarily non-resident – where you are away for a period of five years or less.
However, if you are non-resident for a longer period of time, then you will not be liable to UK CGT even if your assets might be situated in the UK. Tax may be payable in your new country of residence, and this could be higher than the CGT that would have been paid in the UK.
Unlike income tax and CGT, the determining factor when it comes to inheritance tax (IHT) is the status of your natural or permanent home. The governing law states that you can only have one permanent home, which is in most cases, the country of your birth.
Many countries charge IHT (or its equivalent) based on residence; so when you die your estate may be liable to tax both in the UK and also abroad. There is tax relief from the double charge, but should you be retiring abroad then you might also like to think about changing this natural home status.
When it comes to property considerations, you’ll need to decide how to manage your home before moving abroad. Even if you can afford to, simply leaving your property empty could be deemed ‘in breach of your mortgage agreement’ and may invalidate your household insurance. Should you decide to sell your property prior to leaving, always allow plenty of time to do so and should you decide to rent it out, you will normally still be liable for income tax if the rent exceeds your personal allowance. Your letting agent will normally be required to deduct tax at source and pay it to HMRC unless HMRC agrees otherwise.
If you are moving abroad permanently, you should consider keeping your UK bank account active and at least one credit card until you are settled in your new country. In some countries it can be difficult to borrow before you have an established credit history there.
Another option could be opening a local currency bank account in your new country as well as an offshore bank account. The latter can provide tax breaks by paying interest and may offer 24-hour internet banking, multi-currency facilities and mortgages.
Claiming tax back before you leave the UK can be very advantageous but completing a tax refund application can be a daunting task for anyone. However, PSS International Removals can happily refer you to one of our tax-back agents who will prepare and submit a claim on your behalf.
This will ensure that all of the information and evidence is provided correctly to the HMRC who can also review tax payments dating back 6 years and claim back any over payments for the same period. Furthermore, our tax-back agent is based in the UK and can offer a free, no obligation initial consultation.
Please select the country that you are moving to via this link and then scroll down to ‘Tax Rebate’ for more information or if you would like our partner to contact you.