Tax Advice for UK Expats
Whether you are planning to leave or return to the UK, expat status is complicated. Sorting your residence status and understanding the rules around Income and Capital Gains Tax is essential.
In this blog, SCS Financial Management want to ensure that you have all the information you need to become or return as a UK expat.
Call our team on 01737 373707
Residence Status
Ensuring your residence status is correct is an essential part of the expat process. If done incorrectly, you may end up paying more tax than you need to or even be liable for punitive tax.
To know whether you are a UK or non-UK resident, the UK has the Statutory Residence Test (SRT). There are four elements to the SRT including:
- Length of Time You Have Been in the UK in the Tax Year
- Automatic Overseas Test
- Automatic UK Tests
- Sufficient Ties Test
Your results will indicate what type of resident you are. You are considered a non-UK resident if you meet the conditions of the Automatic Overseas Test. However, if you instead meet with either the Automatic UK Tests or Sufficient Ties Test then you are considered a UK resident.
Income Tax and Personal Allowance
The basic tax rule for non-residents of the UK is that you can only be taxed from income that comes from the UK, whether that be via your profession, trade or vocation. If your profession takes place in the UK, you may have to pay tax depending on certain criteria.
Even as a non-resident British citizen, the tax-free personal allowance is still available if you:
- Have a British Passport
- Are a Citizen of a European Economic Area Country
- Work For the UK Government During a Tax Year
If any of the above criteria apply, you are eligible for the personal allowance which in the 2020/21 tax year is £12,500. You will be taxed anything you earn above the personal allowance.
If you are a resident of more than one country, there is probably a double tax treaty in place. This will ensure that you do not pay tax on the same taxable income more than once.
SCS Financial Management
Capital Gains Tax
For the most part, non-residents of the UK are not subject to capital gains tax. There are exceptions, including when a non-resident is trading in the UK through an agency or when anti-avoidance legislation considers capital gains as income.
Another exception is when a non-resident who has been a citizen of another country for less than five complete tax years returns and is assessed on gains earned during their absence. No matter what, however, expats and non-residents who have sold or plan to sell a UK property will owe capital gains tax on any profits made.
Find Out More
Contact SCS Financial Management for more tax advice for UK expats, whether you are leaving or returning. Call us on 01737 373707 or fill in our contact form for a prompt response.
