How does tax work for UK residents?
A UK resident pays tax on all his/her worldwide income while a non-resident generally only pays UK tax on income or (some) gains arising in the UK. In calculating the amount of income tax due the taxpayer may receive a certain amount tax free (this is the personal allowance – see Personal tax rates), then a certain amount is taxed at the basic rate and the rest is taxed at the higher rates. National Insurance Contributionss payable by non-residents unless they wish to preserve their rights by making voluntary payments.
Will I get a tax refund on leaving the UK?
If you have been an employee in the UK the taxation of your income was dealt with by your employer under the PAYE scheme. This scheme assumes that your allowances and entitlement to the basic rate of tax are spread evenly over the year. This means that if you leave half way through the year you have only had half your tax free allowance (“Personal Allowance”) and only half the amount at the basic rate to which you are entitled. The result is that for that tax year, once you have emigrated, you will have paid too much tax if you have no other income arising in the UK. If you have other income such as property income or deposit interest you may still have paid too much tax. You may claim a refund on leaving the UK on form P85 (use form P85S if you are a foreign national and were in the UK for employment only). The form will ask you about the income you expect to have arising in the UK after you have left (including property income) and this will be taken into account in calculating your refund. As with any calculation made before the end of the tax year, this will only be an approximate calculation, so do remember to submit your Tax Return following the end of the year in which you emigrated if you want a precise calculation.
Get in touch to find out how we can help you with your Tax Return both before and after you leave the UK
What if I have other income in the UK?
Other income arising in the UK, including rental income, is still taxable even though you may be non-resident. See Non-Resident landlord.
Do I still have to pay Capital Gains Tax if I have left the UK?
An individual is liable to Capital Gains Tax (CGT) on all disposals if he or she is resident in the UK. A person who is not domiciled in the UK but who is resident and who sells an overseas asset may be subject to CGT to the extent that the proceeds are remitted to the UK. The exception is that non-residents are liable to Capital Gains Tax on the disposal (or removal from the UK, or cessation of business) of business assets where that business was carried from a permanent establishment in the UK.
Gains arising after 5th April 2015 on disposals of residential property made by non-residents after 5th April 2015 are subject to Capital Gains Tax but only on the gain accruing after 5th April 2015.
What happens in the year that I leave the UK?
The “split year” treatment is a means of treating people as being non-resident for tax purposes from the time they leave the UK to the time they return to become resident. If you do not use the split year treatment, you may be UK tax resident until 5th April after you emigrate and on return from 6th April before you return.
If you make a disposal while non-resident, gains accruing before 5th April 2015 (residential property) or 5th April 2019 (non-residential land or buildings) and realised on the disposal are outside the scope of UK tax. However, to qualify for this treatment you must remain non-resident for five full UK tax years. If you are not non-resident for five full tax years, you will pay Capital Gains Tax on the whole gain.
If the split year concession does NOT apply to you, and you dispose of an asset between the date of emigration and the following 5th April, then the whole of the gain made on that disposal remains liable to UK Capital Gains Tax subject to the normal reliefs and allowances. If you dispose of a UK property after 5th April following emigration, and you remain non-resident for five full tax years (or more) then the gain accruing before 5th April 2015 (residential property) or 5th April 2019 (non-residential land or buildings) and realised on the disposal is outside the scope of UK taxation. The reverse applies on your return to the UK: if the split year concession does not apply to you and you sell an asset after the 5th April preceding your return to the UK (and becoming resident once more), then the gain on the disposal is subject to Capital Gains Tax, subject to the normal reliefs and allowances.
How is my pension taxed after I leave the UK?
The tax treaties between the UK and most other countries removes a pension paid from the UK from UK tax and it becomes taxable only in the country where you take up residence, but UK State Pension and most local government pensions are taxed in the UK. If your UK pension has been taxed after you left the UK then you may reclaim the tax either through your Self Assessment Tax Return or through an overpayment relief claim. There is a four year cut-off for claims.
Do I have to pay Inheritance Tax if I have left the UK?
The taxation of the estate of a deceased person differs from country to country. In some countries there are rules as to who inherits what. If you die abroad you may be subject to the Inheritance Tax (or its equivalent) in several different countries. It is vital that you take professional advice not only in the UK but also in the country in which you intend to become resident before going there. You will probably be advised to make a will in each jurisdiction.