Moving back to the UK after spending time abroad can be a significant transition, not just personally but financially as well.
Understanding your tax obligations is crucial to ensure you don’t encounter any surprises.
We have put together some points to help you understand what your tax status will be and what steps you need to take upon your return.
Understanding Your Tax Residency
Upon returning to the UK after living abroad, you’ll generally be classified as a UK resident again. This classification means you’re liable to pay UK tax on:
- UK income and gains: This includes any income you earn within the UK or any capital gains on property or assets sold in the UK.
- Foreign income and gains: This covers income from abroad, such as rental income from overseas properties or earnings from foreign investments. However, if your permanent home (‘domicile’) remains outside the UK, different rules might apply, potentially exempting some foreign income from UK tax.
It’s important to note that if your stay abroad was less than a full tax year (from 6 April to 5 April the following year), you’d still be considered a UK resident for tax purposes for the entire duration you were away.
What to do when you’re back
If you’ve returned to the UK and are earning, here’s how you can manage your tax responsibilities:
- Register for self-assessment: This is necessary if you’re self-employed or have other forms of income or gains from both the UK and abroad that need to be reported.
- Employee registration: If you’re returning to employment, you usually don’t need to register for Self-Assessment as your employer will report your income via PAYE. However, if you have other untaxed income, even if its income from an eBay shop, you may need to register for Self-Assessment.
National Insurance Contributions
Upon your return, if you start working in the UK, you’ll typically begin to pay National Insurance contributions again.
If you didn’t make these contributions while abroad, it’s advisable to check your National Insurance record to see if and how your State Pension might be affected.
Be aware that you don’t necessarily have to pay National Insurance if your return to the UK is not permanent.
Special considerations if returning within five years
If you come back to the UK within five years of moving abroad, you might face additional tax liabilities under the ‘temporary non-residence’ rules. These rules could apply to you if:
- You return to the UK within five years of your move (or within five full tax years if you left before 6 April 2013).
- You were a UK resident for at least four of the seven tax years before moving abroad.
Under these rules, you may need to pay tax on certain income or gains made while you were non-resident.
This generally does not include wages or employment income but could encompass gains from selling property or stocks while overseas.
Getting ready to move?
Moving back to the UK involves various considerations, from where you’ll live and work to how you’ll manage your finances.
Understanding the tax implications is a crucial step in this process. Planning ahead and knowing your obligations can help you make a smooth and successful transition back to life in the UK.
If you need more detailed information or specific advice tailored to your situation, please speak to our team today.
