As a UK citizen moving abroad, your tax responsibilities depend largely on your UK residency status, which determines whether you owe tax in the UK on your global income. This post outlines the key tax considerations for UK citizens relocating overseas, including the implications of moving mid-tax year.
- Notifying HMRC When Leaving the UK
When you move abroad, it's essential to inform HMRC to avoid being taxed incorrectly. If you are not filing a Self Assessment tax return, you can notify HMRC using form P85. This form helps HMRC determine whether you're owed a tax refund for the portion of the year you were in the UK and adjust your tax obligations moving forward. If you're completing a Self Assessment, you should report your change in residency status through the return, especially by completing the residence section (SA109).
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UK Tax Residency Rules
The UK uses the Statutory Residence Test (SRT) to determine whether you are considered a UK resident for tax purposes in a given year. The main factors considered are:
- The number of days spent in the UK.
- The ties you have to the UK, such as family, property, or employment.
You will generally be considered a UK resident if you spend 183 days or more in the UK within a tax year. If you move mid-tax year, the tax year can be "split" into a UK-resident period and a non-resident period, meaning you only pay UK tax on foreign income earned during the UK-resident portion of the year.
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Split-Year Treatment
When moving abroad part-way through the tax year, you may qualify for split-year treatment, which can significantly reduce your UK tax liability. This treatment applies in specific circumstances, such as:
- Moving abroad to work full-time.
- Accompanying a partner who is moving to work abroad.
- Leaving the UK to live abroad permanently.
If split-year treatment applies, you will only be taxed as a UK resident for the portion of the year you were in the UK. The rest of your income while abroad will typically be taxed according to the rules of your new country of residence.
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Income Tax on UK-Based Earnings
Even after moving abroad, you may still owe UK tax on certain types of income, such as:
- Rental income from UK properties.
- Pensions paid by UK sources.
- Savings interest or dividends from UK-based accounts.
In these cases, the UK generally retains the right to tax income sourced within its borders, although double taxation agreements with other countries can help avoid being taxed twice.
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National Insurance Contributions (NIC)
You may be able to continue paying voluntary National Insurance contributions while living abroad, which can help protect your eligibility for certain UK benefits, such as the State Pension. This is especially relevant if you plan to return to the UK or intend to qualify for UK benefits.
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Dealing with Double Taxation
If you are taxed in both the UK and the country you move to, double taxation treaties exist between the UK and many other countries to prevent you from being taxed twice on the same income. You can usually claim relief through the Self Assessment tax return process.
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What If You Return to the UK?
If you return to the UK within five years of leaving, and you had certain capital gains or income while non-resident, these may still be taxable under the temporary non-residence rules. This includes assets sold while abroad that would have been subject to UK Capital Gains Tax if sold while resident.
Conclusion
Understanding your tax obligations when moving abroad as a UK citizen is crucial for managing your financial responsibilities effectively. Always inform HMRC of your departure, assess your eligibility for split-year treatment, and consider the potential implications of double taxation agreements. For complex situations, it's advisable to consult a tax professional familiar with UK expatriate tax law to ensure compliance and optimization of your tax position.