When you leave the UK to live or work in another country, you need to understand what that means for your financial situation — in short, you need some UK expat advice.
In today’s article, we’ll go through some key points to be aware of to help you stay on top of your taxes, no matter where you are in the world.
Understanding your residence status
Your residency status largely determines your tax liability in the UK. There are three main residency categories:
- temporary non-resident.
The number of days you spend in the UK and your ties to the country of residence are factors that influence your status. You can work out your residency through a series of tests.
If you’re a UK resident, you’re subject to UK tax on your worldwide income. Non-residents are usually only taxed on their UK-sourced income, such as income from employment within the UK.
Either way, your foreign income will likely be taxable in your new country of residence — if you’re a UK-resident, the difference is your income will also be taxed in the UK, although double taxation relief is available.
Income tax and personal allowance
Even if you’re non-resident, you might still be able to claim UK personal tax allowances.
The UK uses a progressive income tax system with different tax bands and rates. The tax rates can change, but there are typically three basic rates: basic rate, higher rate, and additional rate.
Your personal allowance is the amount of income you can earn before you start paying income tax. It varies depending on your circumstances and can change from year to year.
The current standard Personal Allowance is £12,570, which is the amount of income you do not have to pay tax on.
Go above that, and you pay tax at different rates depending on how much you earn.
This is a social security tax that funds various public services in the UK, including healthcare and state pensions. Both employees and employers are required to make National Insurance contributions.
The UK has tax treaties with many countries to avoid double taxation. These treaties outline how tax should be paid when you have income in both your home country and the UK, or if you have foreign income as a UK resident that is taxable in the UK and the other country in question.
It’s worth making sure you’re aware of the taxation laws of the country you’re living in as well, just in case. Some countries require employees to file a tax return, for instance, while others have a system similar to the UK’s PAYE.
Some expats are required to complete a self-assessment tax return, reporting their income and calculating their personal tax liability, even if they live in another country.
This is typically the case for people who live abroad but are still UK residents and have complex income sources, self-employment income, or income from abroad.
Capital gains tax
As a UK resident, you may be subject to capital gains tax on gains from selling assets like property, stocks, and other investments.
Non-residents who carry on a trade in the UK are liable to CGT. You may also be liable to CGT if you are a non-resident (including during the overseas part of a split year).
There are special rules for CGT purposes that apply to individuals who are normally resident in the UK but are temporarily resident outside the UK
This tax is levied on the estate of a deceased person if it exceeds a certain threshold.
The rules regarding inheritance tax can be complex, and they might involve considerations of domicile and residency. Again, just because you live abroad doesn’t mean you won’t get taxed on inheritance in the UK.
The tax treatment of pensions can be complex and depends on various factors — expats should consider the implications of their pensions both in the UK and in their home country.
Expats may enjoy high salaries, but pensions are not a statutory requirement in many countries. So, you’ll need to ensure you have a robust pension plan.
If you’re an expat, you may have options for tax-advantaged savings and investment accounts. These options can provide benefits, but the specific tax rules depend on your circumstances.
For example, expats often ask if they can still set up an ISA savings account.
The answer? Yes — if you’re still a UK resident taxpayer, but no, if your main home is outside the UK and you’re tax resident in another country.
ISAs offer up to £20,000 tax-free savings every financial year.
Proper planning with a tax expert can help you minimise your tax liability while staying compliant with UK laws.
By talking to a professional like us, we will give you advice to ensure you’re taking advantage of all available opportunities and staying tax-efficient.
While it can seem like there are lots of things to be aware of, taking time to understand the different tax laws will make a huge amount of difference to your overall financial situation.
Get in touch with us today to get some tailored uk expat tax advice.