Planning your return to the UK after living overseas
After time working or living abroad, you may choose to return to the UK. Returning back is typically a busy time and you may need to consider securing employment, looking for a new home and shipping your personal goods. As a result your finances can often be bumped down the priority list. However, any return to the UK could expose you to unexpected tax liabilities, so it makes sense to plan accordingly and take any necessary steps to protect yourself.
Returning to the UK after living abroad
UK tax liabilities depend on your resident status. Generally, if you’re an expat returning to the UK and have lived abroad for less than five consecutive tax years, you’re likely to be considered a temporary non-resident by HMRC. If you’ve lived overseas for more than five years, you’ll face different tax rules regarding your income and capital gains.
However, if you’ve spent time visiting the UK during your overseas employment, establish a home in the UK or sell or move away from your overseas accommodation, it’s entirely possible to become a UK tax resident before the date you actually move back to the UK. The date you become a UK resident is crucial to your expat tax status and you need to be aware of the financial implications before fixing the date for your return.
Key financial considerations
If your move back to the UK is governed by your employment, you may not have the luxury of choosing the date of your return. However, ignoring your personal tax situation and the current changes in UK tax could be an expensive oversight.
If possible, start to make financial plans for your international relocation at least one full tax year before returning to the UK. Most tax advisers recommend returning at the start of the tax year (6 April) to keep everything straightforward. Ensure that you are up to date with your filing obligations with HMRC and that you review all your financial interests before you go, including any pensions, investments, accounts and property.
Structuring your wealth
Depending on your financial situation and the length of time you’ve lived overseas, organising your wealth could be complex. As well as arranging to sell assets such as your home and cars, it may be helpful to restructure your finances. Notable factors to be aware of are:
- It can be more tax efficient to chose different investments
- Capital Gains Tax complications can occur if you own property, both overseas and in the UK
- Particular tax planning considerations can be used – through the use of offshore assets and holding structures – if you or your spouse is not British.
Key tax considerations
When planning your return to the UK, it’s sensible to understand any other tax charges that could impact you including Income Tax, Inheritance Tax, Capital Gains Tax and National Insurance. A good financial adviser and tax specialist will be able to help ensure that your financial affairs are in order before you make the move.
Your UK residence status is determined by the Statutory Residence Test (SRT). Although the rules can be complex, the SRT gives you certainty when deciding your UK residence status. It’s this that determines how much UK tax you pay on your sources of income and gains.
Other factors to consider
Property
Some expats choose to rent their property in the UK whilst living overseas. If you’ve chosen to do this you’ll need to make arrangements with tenants or letting agents ahead of any return. Alternatively you’ll need to find a new home or choose to rent in the short term whilst settling back in the UK. It’s important to note that setting up a home in the UK is a deciding factor of UK residency and may place you back in the UK tax-net.
Income
Moving money internationally is complex in its own right. Your funds can be exposed to currency exchange rates and transfer charges, so planning will ensure that you limit exposure to tax. Additional complications can arise for transferring funds to the UK if the UK is not your home country. If this is the case specialist UK tax advice will be required.
Other factors to consider when returning to the UK include:
- Establishing a credit rating as soon as possible if you have not retained a UK bank account
- Registering your return to the UK with HMRC
- Checking whether you need to make up any missing years for National Insurance
- Enrolling for self-assessment
- Ensuring your investments are structured efficiently for UK tax residence
- Checking any early-exit penalties if you decide to sell your overseas investments
- Understanding your pension rights in both countries
For more guidance on returning to the UK, our team of professionals are here to support you, contact us for more information.
