Returning To The U.K.
Introduction
Many expats feel the need to return to the U.K. in light of all the turmoil and uncertainty around the globe. Some may be considering moving to the U.K. because of changes in their personal or professional lives, or it’s time to retire. However, no matter your reason for moving to the United Kingdom, you must understand and consider the tax implications and the broader financial consequences.
Returning to the U.K. or spending more time there than you previously have could impact your finances more than you realise, especially if you have lived abroad for a while or if this is your first visit to the U.K.
Understanding the U.K. tax system can be challenging, but you must do it. A clear plan can help you avoid paying more tax when you move. This guide is designed to help you consider the most common areas before moving.
This guide does not constitute advice and is meant to be a general guide. It hopes to give you some good talking points with your financial planner to make your time with them more productive. But, of course, your tax position will ultimately depend on your circumstances.
We strongly recommend getting personalised professional tax advice before returning to the U.K. As always, we can introduce you to one of our highly vetted panel of professionals. One of our preferred tax experts can help you find tax-efficient solutions. They can also create a plan outlining all tax planning options for you.
Timing
Timing is the most critical aspect of any plan. You would assume that the day you arrive in the U.K. is when you become a tax resident, but this is only sometimes the case. Your circumstances will determine the date you become a U.K. resident. This is defined under legislation called the Statutory Residence Test (SRT).
The SRT includes many tests, but not all may apply to your circumstances. For example, while most tests measure your time in the U.K., some consider other factors such as family, home, and work.
The SRT’s basic rule is that an individual must reside in the U.K. for the entire tax year. However, some circumstances allow for split-year treatment, such as if an individual arrives from overseas and begins to live in the U.K. during a tax year.
Split-year treatment allows a portion of a tax year not a U.K. resident to be subject to tax and the rest to tax as a U.K. resident. Split-year treatment is available for five different types of people moving to the U.K. Each case has its own set of complicated qualifying conditions. You should seek specialist advice to ensure that you fully understand when you will become a U.K. resident
Becoming U.K. Resident
Why is it important to know when your U.K. residency will be? First, knowing the date you become a U.K. resident is crucial. This will be when your worldwide income and capital gains will be subject to U.K. tax.
Non-U.K. residents may have different rules. For example, your capital gains and income can be exempt from U.K. tax. This complex area requires professional advice. It is essential to fully understand the implications of your domicile for your tax situation in the U.K.
Income Tax
The progressive tax rate schedule is used to calculate income tax. This applies to all income that arises in a particular tax year. For example, the U.K. tax year runs between the 6th of April and the 5th of April. Each tax year may change the percentage rates and bands of taxable income.
Residents of Scotland may be subject to different rates and bandings.
The Personal Allowance is reduced by £1 for each £2 where your income exceeds £100,000. Your personal allowance will be reduced to zero if your income exceeds £125,000.
These income rates apply to earned income, such as employment income, self-employment profits, and rental income. They also apply to pensions, trust income, and certain state benefits. Dividends and savings income each have their own allowances and tax rates.
Click on the link for the most recent tax rates from HMRC: HMRC Income Tax Rates and Allowances.
Allowances
There are also various other allowances available to individuals in addition to the personal allowance. To be eligible for the respective allowances, you must meet certain criteria.
Some sources of income, in addition to the allowances mentioned above, are exempted from tax like:
1.Income from tax-exempt accounts such as Individual Savings Accounts or National Savings Certificates.
2.Certain social security benefits, such as winter fuel allowances and housing benefits for pensioners, are available. Some benefits may be taxable, so it is essential to take care.
3.Premium Bonds and National Lottery winnings.
4.Rent from a lodger who isn’t within the Rent-a-Room limit (£7,500 pa)
Capital Gains Tax (CGT)
When you become a U.K. resident, you are subject to U.K. Capital Gains Tax (CGT), which means that you may be liable for CGT on any disposal of assets anywhere in the world. Although you are not a U.K. resident, you will be subject to UK CGT for U.K. land and property sales or U.K. assets used in trade.
Review your assets and investments before applying for U.K. residency. This will ensure that any tax-efficient restructuring can be done.
You would be considered a temporary non-resident for five years. This is a sign that you should seek advice as capital gains realised during non-residence could be subject to U.K. tax.
Capital gains tax is payable at a rate that depends on your income’s nature and tax rate. CGT exemptions for individuals are generally tax-free.
This exemption was available at £12,300 in 2020/21 but has reduced significantly in recent years to £3,000 in 2024/25, making tax planning even more potent before your repatriation.
Click on the link for the current and CGT Allowances, Exemptions and Rates: HMRC Capital Gains Tax Allowances.
Special rules exist for U.K. property and land sales when a non-U.K. resident is involved. HMRC must be notified of these sales within 30 days after the sale, together with any tax.
If you plan well before becoming a U.K. resident, you can save significant tax if you sell property or land while not a resident. Professional advice is highly recommended to ensure you aren’t seen as a resident by HMRC at the time of the gain. Sometimes, staying outside the U.K. until the next tax year is safer
Inheritance Tax
Your exposure to U.K. Inheritance Tax is determined by where you live, not your residence. Any U.K.-domiciled or deemed U.K.-domiciled is subject to inheritance tax on all their assets. The current threshold for inheritance taxes is £325,000 per individual, with 40% tax.
There are many ways to mitigate an IHT liability other than the £325,000 allowance. You can use the new Residence Nil Rate Band, make gifts, or set up trusts. Knowing your options to reduce or remove IHT exposure is essential to avoid any unnecessary liability.
For more information on IHT, click the link: U.K. Inheritance Tax.
Stamp Duty Land Tax (SDLT)
SDLT must be paid on land or property purchased above a threshold in England or Northern Ireland. The rules for purchases in Scotland or Wales are different.
The current threshold for residential properties in England and Northern Ireland is £250,000 (2024/2025). This rate has reduced and increased again significantly in the last few years.
The amount of SDLT that is payable will depend on:
1.You are a first-time buyer.
2.The property can be residential or non-residential.
3.The property can be leased or freehold.
4.The purchaser owns another residential property in another part of the world.
5.Transactions are interconnected
6.A qualified solicitor should provide professional guidance regarding SDLT.
National Insurance (NI)
To be eligible for certain benefits or the state pension, you must pay National Insurance Contributions. You may be eligible to contribute to your pension if you are a foreign national.
You can ask the National Insurance Office to forecast your state pension entitlement if you need clarification on your current entitlement. This forecast will show how many years you are eligible for and which years you can contribute voluntarily. You may be able to make voluntary contributions in years where you haven’t paid enough N.I.
Planning for Success
It doesn’t matter if you are returning to the U.K. or new to the U.K.; the tax system can be complicated. If you do not plan well, your tax exposure could be severe. You should ensure you do the following before you become a U.K. resident: For tax purposes, identify the date you will become a U.K. resident. Review your assets and income to understand how they will be taxed when you become a U.K. resident.
When necessary, take advice from qualified financial advisors to determine the best way to restructure your assets, such as property, pensions, and life insurance. Recognise and take advantage of any pre-residence planning opportunities available to you. You must ensure that all tax reporting obligations to HMRC are current.
Local Jurisdiction
While this guide is focused on U.K. tax implications, it is important that you also consider the country where you are moving. You should seek professional advice in your home country to ensure your tax affairs are fully resolved before leaving.
Each country has its tax system, and many will have different tax years. However, you can still be a U.K. resident even if you are not a U.K. resident.
Dual residents should check the double taxation treaty to ensure they don’t pay too much tax. Again, this complex area requires professional guidance.
Non-Tax Considerations
Financial Planning
As with tax planning, relocating to the U.K. after living overseas requires careful financial planning, ensuring you don’t make costly mistakes. It is essential to combine tax planning and financial planning. Planning should take into account how long you have been living abroad. Based on the length of your stay abroad, income (including gains from asset disposals) you bring into the U.K. may be subject to U.K. capital gains and income tax rules.
If you are a U.K. resident and have lived in the U.K. for less than five years and have made some gains, these gains may be subject to U.K. taxes if you return to the U.K. This is usually not true if you’ve lived in the U.K. for longer than five years. It all depends on what assets you have sold. The rule of thumb is first to crystallise any gains before you return. It is a good idea to review your pensions and insurance.
Everyone is unique, and each person’s needs and plans will be considered. The advice you receive will be tailored to your specific situation.
The regulation states that when you become a U.K. resident, you must use a UK-regulated financial planner to advise on all your U.K. assets, such as savings and investment products such as ISAs, UK pensions, and insurance products.
Wills & LPA
Money Transfers & Banking
Moving money to the U.K. is a common requirement when returning to the U.K. You should be able to transfer money directly to a British bank account if you have one. Bank transfers may be subject to charges and uncompetitive exchange rates. Consider an online currency exchange specialist if you need to transfer or exchange large amounts of money, or reach out, as we have the best ones in our network
Housing
It can be challenging to find a home that is right for you. You should plan ahead before you go. If you have limited time, you may need to temporarily stay in a hotel, rented accommodation, or with your family.
You must budget for all costs involved in purchasing a property, including legal fees, SDLT, and estate agent fees.
It may be easier to have a U.K. property. However, you must notify the local authority about changes affecting your council tax bill. You must give the correct notice period and follow the proper procedures if you have tenants.
Medical
Registering with a local G.P. when you return to the U.K. is essential. A GP can perform routine health checks, and they can refer you to hospital-based specialists for specialist advice or treatment. To make an appointment with a dentist, you don’t need a referral from your G.P. To find a local dentist, you can search on the NHS website. While most NHS services are free, there may be fees for prescriptions, eye exams, glasses and dental care. You may be eligible for a local authority needs assessment if you have special care or support needs
Logistics
It can be confusing to move your belongings from the United Kingdom. However, there are many options for transport and many companies offering relocation services in the U.K. Many options are available to help you ensure that your belongings arrive in the U.K. safely, regardless of where you are moving. However, to ensure that your international move is cost-effective, avoid breakages, and arrive on time, there are many things you need to keep in mind. While most NHS services are free, there may be fees for prescriptions, eye tests, glasses, and dental care. You may be eligible for a local authority needs assessment if you have special care or support needs.
Once You've Arrived
You will be subject to tax for the rest of your life if you live in the U.K. So you must check if annual tax returns are required and ensure they are filed on time and accurately. After the end of the tax year on the 5th of April, the filing deadline is the 31st of January. Professional assistance may be beneficial for you. It would be best to plan for the future even after you arrive, and this will ensure that you take advantage of all available reliefs and allowances and react to any changes to the tax system so you don’t have to pay more tax.
Summary
Book your 30-minute discovery meeting with Mark, where he will cover topics such as:
- How the Offshore Financial services sector operates and how it could be holding you back.
- Ways you can increase your current and future cash flow using advanced cash flow modelling techniques.
- A comprehensive review of your current investment, tax and protection strategies.
- A full review of your current fee schedule.
- How the standard asset allocation promoted by most advisers may hinder your progress to becoming wealthy.
- Why would using me as your financial coach mean access to the best professionals for your specific needs?
- Why being a part of Marks Network' will give you access to opportunities outside of your standard financial planning remit.