Considering moving back to the UK from Europe? Five key considerations...
Planning a tax-efficient return to the UK
Expatriates returning to the UK after being resident overseas will benefit from carefully reviewing tax planning, residency, pension and Brexit implications before they leave Europe.
An easy mistake is assuming that, since the UK is your home country, moving back is straightforward. But when it comes to tax and financial planning, various aspects can trip you up. Careful, early planning is essential to make your move as straightforward and tax-efficient as possible.
1. Residency considerations
As soon as you resume UK residence for tax purposes, your worldwide income and gains becomes taxable. It can be costly, however, to assume that you will only become a UK resident again when you step back on British soil. In some cases, residency can be triggered before you even leave Europe, potentially bringing you into the firing line for British taxation sooner than expected.
This could happen, for example, if you still own a UK property or buy one before moving back. Even if you keep your property in Europe, as soon as you are seen to stop using it as your main home, you are likely to be considered a UK resident.
If you plan to spend time in Britain preparing for your return, take care not to accidentally bring forward the date you become UK resident. It can take as little as 16 days back home to trigger residency if you have been non-UK resident for under three years. If you have been non-resident for longer, you could become resident after 46 days of a tax year, or 30 days if staying in a UK property seen as your main home.
While generally you cannot decide where you are resident for tax purposes, you may have some control over the timing of your UK residency. With guidance, you can plan to transition at a time that will minimise your tax liabilities in both your current country of residence and the UK.
2. Tax considerations
Your financial arrangements today should be designed to suit your personal circumstances and current residency status. But once you move back to the UK, assets and structures that work favourably for you now in your current country of residency may not be so beneficial. On the other hand, you could find more tax-efficient opportunities in the UK once you become a British resident again.
As well as the tax implications for income, such as pensions, your residency will influence your tax liabilities when buying, selling or moving any financial interests. Before buying a new home, for example, make sure you understand how tax rules locally and in the UK might restrict or eliminate the availability of main home reliefs, especially once the UK is no longer a member of the EU.
Capital gains tax is also important – it may be more beneficial to sell or buy when resident of one country over the other.
Depending on your situation, you might find it beneficial to either bring forward or delay selling or transferring any assets according to where you are a tax resident. In particular, careful planning of the date of sale of your overseas home is crucial.
3. Pension considerations
If you transferred your UK pension into a Qualifying Recognised Overseas Pension Scheme (QROPS), you need to take specialist advice on the best way forward. If you made pension decisions based on tax-compliant opportunities where you are resident now, you need to establish what you should do once you are liable to UK taxation.
4. Estate planning considerations
Similarly, your estate planning will need a thorough review to consider inheritance taxes, succession law, probate etc. If you have trust arrangements, there could be tax consequences you need to explore before returning to the UK. You should also take specialist advice if you have any UK inheritance tax planning structures set up on the basis that you had a domicile of choice in your current country of residency.
5. Brexit considerations
Although the March 2019 exit date is just months away, there is still much uncertainty about what form Brexit will take and when changes will take effect.
Remember: if you return to the UK after the Brexit cut-off, you will be moving to a non-EU country to become a non-EU resident. This could trigger higher taxation in terms of exit taxes on the sale of shares or capital gains tax on selling property within the EU.
Whatever your reasons for returning to the UK, it is important to plan carefully in advance, and review all the tax and wealth management considerations before you leave Europe. Ideally, if you can be flexible around the timing of your move, you should plan your return date around your tax planning – but beware the ticking Brexit clock. An adviser with cross-border expertise can help you avoid punitive tax implications and make use of tax-efficient opportunities in both countries.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.
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