Leaving The UK: Make Sure To Tick All The Tax Boxes

Moving abroad can be an exciting time, with the many opportunities that lie ahead and the countless new memories to be made. However, dealing with the financial side of things may not always be as exciting and can be rather daunting. From declaring your UK-based income and expenses to arranging your rebate and meeting all tax obligations, there are several complex situations to handle and sort through before becoming a compliant expat.

Written exclusively for Expat Network by Taxd

Planning your move

Residency plays a big part in how you are taxed as an individual. Your tax residency is different to Immigration/Visas/Citizenship, which is a common misconception.

Tax residency is based on your days, workdays and ties to a country. You can use this calculator which is based on HMRC’s Statutory Residence Tests (SRT), to calculate your tax residency.

As a UK tax resident, you are taxed on worldwide income. As a non-resident, you are only taxed on “UK-sourced” income. We like to think of this as income generated on UK soil, such as a UK rental property or if you are physically working in the UK – UK workdays.

If you leave the UK during the tax year and you are still deemed to be a UK tax resident, you can opt for split-year treatment. Provided you are moving because:

• You are working overseas.
• Your spouse/partner is working overseas.
• You no longer have a home in the UK.

To qualify for split-year treatment, you also need to qualify as a non-resident for the following year. This is important to note, and we’ve seen big tax bills where individuals may not qualify, and therefore are deemed UK tax residents over 2 tax years and end up paying UK tax on their foreign-earned income.

Taxd Tip! Tax may not be top of mind when you are moving abroad, but planning when your move and the tax residency side of things can save massive financial headaches in the long run.

Keeping your home in the UK? Renting it out?

Many individuals and families who leave the UK may continue to own and let out their homes in the UK. In doing so, you become a non-resident landlord.

UK rental income is always taxed in the UK, as it is UK-sourced. It’s declared on the Self-Assessment tax return (SA105) along with the declaration for non-residence (SA109). If you’re a UK citizen/passport holder you will always receive the UK tax-free personal allowance (currently £12,570 for the 2024-25 tax year).

We recommend filing an NRL1 form with HMRC, this declares to HMRC that you are a non-resident landlord and will file your taxes annually. It also means that your letting agent or tenant can pay you ‘gross’ – i.e. without tax being withheld. Non-resident landlords will generally have 20% tax deducted from their rent and paid to HMRC. This does not take into account your expenses or your tax-free personal allowance, so it often results in a tax refund, but it’s generally better for cash flow to file the NRL1 form.

Taxd Tip! Maintaining an up-to-date spreadsheet of all your UK income is the best way to know where your money has come from and a great way to prepare for what you owe when it comes to filing.

Claiming tax back while abroad

If you left the UK partway through the year, you’re most likely due a tax refund. This is because when you are paid through payroll (or making payments on account to HMRC). You are paying tax monthly on the basis that you are going to be in the UK and earning money for the full tax year. So, if you leave early, you often can be refunded a fair amount of money.

The idea of claiming back overpaid tax can seem like a daunting task, but it can actually be quite simple if you keep all your affairs in order.

For those who have submitted their annual self-assessment tax return, there is nothing to do other than sit back and wait to receive your refund, as the HMRC will process any refunds due through that form.

For those who have not submitted a self-assessment, you will need to submit either a P87, if it is a refund for business expenses, or a P85 if it is just a standard refund. But don’t forget to add your P45 form to this which details your departure.

Taxd Tip! Submitting your tax assessment earlier always pays off in the long run as the HMRC has more time to process your case and allows you to start the process of getting your refund earlier.   

Navigating investments and pensions

Setting up for your future is an important step that many people want to keep, even once they have moved abroad. Although it may look different for each individual, the good news is that it is possible to continue to supplement both your government and private pension!

If you meet the criteria, you can make voluntary NIC payments which will allow you to continue to make payments to your state pension allowing you to have that extra bit of financial security. To start making these payments, you will either need to apply online or send the HMRC a CF83 form.

For those who had a private pension in the UK before moving abroad, the quick answer is yes, you can still pay into that pot. However, you may not always be eligible for tax relief on these payments. There are qualifying overseas pension schemes too, but it’s worth contacting a financial advisor to talk through in detail if appropriate.

Taxd Tip! You can back-pay voluntary NIC contributions, so there’s no rush to get it done as soon as you move and you need a total of 10 years to qualify for the state pension. Or 35 for the max amount!

Selling a UK property?

If you sell a property in the UK, you may have a capital gains tax reporting requirement.

If you’ve only ever lived in the property as your main residence, you’re likely covered by Principal Private Residence Relief (PRR).

However, if you rented out the property or had a secondary residence there may be capital gains tax to pay. You need to report this within 60 days of completion and pay any CGT due. It is then also reported on your Self-Assessment tax return to HMRC.

As of April 2024, you have a £3,000 tax-free allowance and thereafter you are required to pay tax on any gains you receive from the sold asset.

Taxd Tip! Keep track of the costs you can deduct such as purchase costs, stamp duty, home improvements and professional fees on purchase/sale.

Staying on top of the obligations

The most important thing to do is ensure that you have met all the necessary and relevant tax obligations. From informing the HMRC about your move to declaring capital gains and the impact of your non-residency duration, all of these factors can play a huge role in your tax bill and whether you are still tax compliant.

Not only is it important to stay on top of understanding UK tax law, but it is also key to have a good understanding of what is required of you from the country you are residing in because each country has their own tax recipe.

Also, plan your move back to the UK too. From ring-fencing capital or filing a split-year tax return on the way back, it’s important to avoid complications when bringing money from abroad into the UK.