Expat tax advice

01

Personal allowance

An individual who is non-UK resident you will still have access to the tax-free personal allowance if any of the following applies:

You hold a British passport

You are a national of an EEA (European Economic Area) country

You have worked for the British government at any time during the last tax year

You are a resident and a national in a country which holds a relevant Double Taxation Agreement

This may help you reduce tax on any income arising in the UK.

This may help you reduce tax on any income arising in the UK, as may a review of the Double Taxation Agreement in your country of residence.

02

Disregarded income

As a non-UK tax resident, you can elect to be taxed on what is known as a “disregarded income” basis. By claiming this basis, you forfeit your right to a personal allowance and in return, your UK Income Tax liability on the sources of income listed below is then limited to any tax deducted at source (which is usually nil). Specialist advice should be sought to understand whether electing for the disregarded income basis of taxation should be claimed.

UK Interest

Dividends from UK companies

Unit trusts

Some social security benefits, such as State or widows’ pensions

Taxable income from life annuities, with the exception of annuities under personal pension schemes

03

Capital Gains Tax for non UK residents

Capital Gains Tax (the tax on the profit you make when you sell something that has increased in value) can also apply to non-UK -residents.

As a non-UK resident you will not be subject to UK Capital Gains tax, unless you are disposing of UK land and property and assets used in a UK trade. Such sales must be reported within 60 days to HMRC, with the associated tax liability settled.

When disposing of UK property as a non-UK resident, three possibly basis of calculation are available to you, often meaning that you will pay less tax as a non-UK resident.

Care however should be taken to ensure that when returning to the UK after a period of non-UK residence, you are not caught by ‘temporary non-resident’ legislation. This legislation will look to bring back into charge, in your year of arrival, certain disposals of assets and receipts of income, in a non-resident period when that period was less than 5 years.

04

Residence in another country

Prior to the introduction of the Statutory Residence Test in 2013, an individual’s residence was based on HMRC guidance. Such guidance embedded a concept of ‘breaking’ residence with the UK and gave an impression that once an individual had left the UK, any requirement to report to the UK or consideration of residence in a future year was unnecessary.

However, and strictly, the Statutory Residence Test should be reviewed each year and within the framework factors as such where an individual intended to be resident or their residence in another country, bear no relation to the outcome of the test. In fact, it is possible for an individual to be resident in two countries at the same time, a concept called ‘dual residence’. Dual residence will occur when an individual is resident in each country under their respective residence rules i.e. their domestic law position’.

Whilst respective Double Taxation Agreements will look to eradicate double taxation, individuals finding themselves dual resident will be subject to a complex and possibly subjective tie breaker tests to determine where an individual is ‘treaty resident’ for the purposes of determining where income and gains will be taxed.