Last update on August 13, 2019

We explain how Brits abroad can ensure they are paying the correct UK taxes for expats and maximize the opportunities available to them living abroad.

When leaving the United Kingdom to live abroad, there are a number of financial considerations to ensure you’re paying the right taxes. Filing UK taxes for expats abroad doesn’t have to be hard, but it needs to be done correctly.

Organizing your income when you leave the UK

First and foremost, ensure that you take the necessary steps to be considered non-resident for British tax purposes. This is an area that has evolved dramatically over the past few years, with case law showing that assuming a non-resident status is not always straightforward.

Administrative duties for UK taxes for expats

Many departing expatriates overlook the possibility of claiming an income tax refund upon departure. If you’ve been employed in the UK before leaving, you may not have received the full benefit of the personal allowances you’re entitled to through your salary. You might be able to recover some of the tax you have already paid. Make sure to assess your position for the full tax year of departure to ensure that you claim all of the UK allowances that you are entitled to.

Also, if you are letting out property in the United Kingdom, take the time to register under the Non-Resident Landlord Scheme. Without this, your letting agent or tenant would be obliged to deduct tax from rents paid to you and pay this over to HMRC. Approval under the scheme means that you can receive money without any tax deductions.

Filing returns for UK taxes for expats

If you have continuing sources of UK income, you may need to file an annual tax return. Be warned: a more stringent penalty regime applies to those who send their tax returns late. This means that a £100 fixed penalty will apply for any return that is submitted late, even if there is no tax to pay or if the tax due is paid on time. If you still refuse to send your tax return to HMRC, you will incur additional penalties; this includes automatic penalties of £10 per day.

Reduce any remaining liabilities

Look at any chance you have to lessen your liabilities. For example, ensure that any immovable assets situated in the UK (most often, this is property) are held in joint names with your spouse/partner for tax mitigation.

Also, if you have movable assets in the UK, such as cash on deposit, it may be beneficial to transfer the funds offshore, perhaps to the Channel Islands or the Isle of Man; these areas sit comfortably outside the UK tax system but within the UK banking system. This will ensure that any interest you earn is not subject to tax while you remain overseas.

Maintain your non-resident status

If there are any changes to your circumstances while overseas, review whether this affects your non-resident status. Should your family move back to the UK or you perform duties of employment in the UK, seek individual advice.

Also, keep an accurate record of your movements to and from the UK. You must spend fewer than 91 nights in the UK per tax year to maintain non-resident status. HMRC may take other factors into account, as well.

Export your UK pension rights

Since April 2006, it has become possible to transfer rights in any UK occupational pension scheme or Personal Pension Plan to a Qualifying Recognized Overseas Pension Scheme without incurring a charge to UK taxes for expats on income. This may allow an expat to consolidate your UK pension entitlements in a way that was not possible before. This is an area that you may want to take special advice on.

Take local advice

It’s important to make sure that you achieve non-resident status and keep your UK tax position as closely monitored as possible. Equally, it’s also vital to ensure that you look after your tax affairs in your new country of residence. Before acting on any UK tax efficient recommendations, make sure that your local tax position would not be jeopardized.

Always seek local support from a reputable local advisory. Alternatively, speak to a company that has global outreach and can support you, wherever you may be.

Plan your return to the UK carefully

Real care is needed if, having been treated as a non-resident, you decide to return. The UK has an evolved system of taxation, including income tax of up to 45%, a wide ranging capital gains tax (up 28%) and inheritance tax on estates (up to 40%), as well as a not-insubstantial social security levy.

Any exposure to the UK tax system as a resident requires careful planning in advance. This is particularly the case where substantial assets and shareholdings are concerned.

You must also ensure that you disclose and document your return to the UK (though this shouldn’t be difficult after Brexit happens). Ensure that you properly plan your taxes and account for the potential in wild swings in currency exchange rates; this will lessen your liabilities once you return to the UK. With a little forward planning, this is often possible.

The above does not constitute definitive tax advice as everyone’s personal circumstances vary. Thus, it is crucial to seek bespoke advice based on your individual needs. I do hope, however, that they have given you some food for thought for becoming as tax-efficient as possible.