Split Tax Year

Split Tax Year Treatment

• You may be eligible to split the tax year into two parts if you have been a UK non-resident for some of the tax year but for the remainder of the year, you were considered a UK resident.
• In this scenario, you may only be liable for split year tax in the part you were considered a UK tax resident. 
• To see if you are considered a UK tax resident, you would need to view the criteria in the Statutory Residence Test.
• Anyone who is a tax resident in the UK must pay tax on any income worldwide and capital gains to HMRC.
• The advantage to ex-pats and non-UK citizens is significant if a proportion of the tax year is spent in a country with NT (nil rate) tax rules. Nil rate tax rules mean that you are not taxed on income. 
• Popular countries that have NT agreements with the UK are Saudi Arabia, the UAE, and GCC countries. It is prevalent for working ex-pats to move abroad mid-tax year and therefore, eligibility for a split tax year should be investigated to see if you can benefit from this rule.

How do I know if I am eligible?

Below we will run through split year tax rules and common scenarios for leaving and returning to the UK. 

I am leaving the UK. Am I eligible for a split tax year?

If you began the tax year as a UK resident (6th April) and decided to leave the UK before the end of the tax year, you may be eligible for a split tax year.

Below are three scenarios that we have found most common and may mean that you are eligible.

Starting full-time employment outside of the UK

If you currently work overseas for over 35 hours per week and spend less than 30 days working full time in the UK (full time is classed as more than three hours per day) and spend fewer than 91 days in the UK per tax year, you would now be considered a non UK resident based on the sufficient hours overseas test.

Your partner leaves the UK to work full time overseas, and you decide to join them.

Suppose that your partner (this is someone you live with) qualifies as a non-UK resident due to the sufficient hours test mentioned above and you also decide to move overseas during the tax year.

You may now be eligible to benefit from split-year treatment. This is providing that you spend more days living overseas and do not spend too many days in the UK (more than 91 days or over 30 days full-time working).

You no longer have a home in the UK.

If you move overseas during the tax year, cease to have a home in the UK, and spend less than 16 days in the UK, split-year tax treatment may apply to you. This rule can only apply if you are a tax resident overseas within six months of leaving.

I am returning to the UK. Am I eligible for a split tax year?

If you began the UK tax year (6th April) as a non-UK resident and returned to the UK mid-tax year, you may be eligible for a split tax year. You must also have been a non-UK resident for the previous tax year before returning. 

If this scenario applies to you, you may be eligible for a split tax year. Below are some scenarios which we have found most common and may mean that you are eligible.

Entering employment in the UK

If you were not considered a tax resident in the previous year, began employment in the UK mid-tax year and began working 35+ hours a week long term (for over a year).

Ceased working overseas, or are the partner of someone who has

If you have been considered a tax resident in at least one of the previous five tax years, excluding the previous tax year, and you were working full time overseas but then stopped working (and have spent a limited number of days in the UK while working abroad) you may benefit from split year treatment upon your return to the UK. 

This is a more complicated scenario; therefore this will require a much more detailed analysis of your situation to establish whether you would be eligible.

Similar to the above scenario, if you are the partner of someone who has stopped working overseas using the above criteria and you remained a UK tax resident, you may be eligible for split-year treatment. To qualify for this, you would have to have no home in the UK or have spent more time in your overseas home and spent a limited number of days in the UK.

Establish a home in the UK

This is a similar scenario to establishing a home overseas. 

If you enter the UK and establish a home and remain a UK tax resident for the following year after this and you were not considered a UK tax resident before you established your new UK home, you may be eligible for a split tax year.