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Tax and other financial requirements for British expats returning to the UK

With so many British people looking to return home in 2022, we've written this article to help you understand your tax and financial responsibilities if you are looking to return to the UK.

Written on 20 January 2022

Between the Covid-19 pandemic and the UK’s protracted exit from the EU, the last few years within the UK have been nothing short of eventful – especially for British citizens living abroad.

The uncertainty from so many structural changes within the country leaves us with enough to think about but throwing on top your worries as a returning British expat may leave you with more questions than most.

We have broken down some important tax and other financial considerations that all British expats should be thinking about upon their return to the UK, with the aim to encourage a smooth, tax responsible transition.

Carefully time your return to the UK

While you will not have full control over where you hold official tax residency, you should consider the importance of timing your transition back to the UK.

This opens the possibility of effectively minimising your tax liabilities both within the UK and the country that you currently reside.

If and where possible (and if you hold the luxury of choosing when you plan to return to the UK), planning your return date in advance to suit your financial needs and other personal circumstances can avoid unnecessary tax implications on your income and other assets.

Understanding your tax residency responsibilities

Following on from above, upon your return to the UK, it is vitally important to consider exactly when your official return will cause you to become a UK tax resident.

It is even possible to be considered a UK resident before you leave your current home country to come to the UK.

Actions such as the following can trigger you being recognised as a UK resident immediately:

  • Declaring your foreign home as no longer your main residence
  • Owning UK property/ purchasing UK property before your return to the UK
  • Spending time within the UK while you prepare for a permanent return (due to a 16-day maximum rule if you have been a non-UK resident for under three consecutive years)

The Statutory Residence Test (SRT) can determine your residency, based on multiple tests which consider all the factors of your return, including the amount of time you have spent within the UK, and any other connections you hold to the UK.

If the reason for yourself being outside of the UK is for work and you are asked to return on a temporary basis due to Covid-19, HMRC have clarified that this is treated as an ‘exceptional circumstance’.

Further to this, any other days spent within the UK (to a maximum of 60 days) can be ignore when counting your active days of presence within the UK.

However, it is important to understand that the number of days that it takes to be a tax resident in the UK will always vary depending on each individual case.

Non-resident tax obligations

You may have to pay tax on certain income or gains made while you were non-resident.

This does not include wages or other employment income.

These rules (called ‘temporary non-residence’) apply if both:

  • you return to the UK within 5 years of moving abroad (or 5 full tax years if you left the UK before 6 April 2013)
  • you were a UK resident in at least 4 of the 7 tax years before you moved abroad

Asset and estate planning

If you have been doing your tax research on what you may be liable for, you may be familiar with the term ‘main residence relief’.

Unfortunately, due to the implications of Brexit, if you are returning as a non-EU resident to a non-EU country, you will not be granted main residence relief, which is classed as preferential tax treatment.

If you are planning on purchasing a new UK property, it is important to seek out professional advice. An expert can advise you on the most tax-efficient way to handle exactly what country you will benefit from buying or selling in the most, with the aim of providing you with an effectively smaller Capital Gains Tax bill.

Put simply, any transferring of assets, buying or selling may be more tax-efficient to be carried out depending on timing of what country you are currently a tax resident of.

Other estate planning such as the following should also be reviewed before returning to the UK, to ensure the details do not depend on yourself only being foreign-domiciled:

  • Your Will
  • Trust arrangements and contracts
  • Probate
  • Succession Law
  • Inheritance Tax

If you are unsure on any of the above, it is important to seek specialist advice.

Additional challenges due to Brexit

Besides the legal complications of your return to the UK, Brexit has also brought with it some ‘logistical’ challenges.

Transferring ‘speed’

The process involved for the transferral of important factors within your return such as currency and other documentation is not as exercised as it once would have been.

With no surprise, the process of repatriation involves a hefty amount of legal documentation and official sign-off's to be approved. But due to no longer holding our old trade and movement agreements that we once held with the EU within the UK, the transferral is effectively slower and frankly, still relatively new.

Potentially increased costs of returning to the UK from the EU

Due to our now lack of trade agreement, you may find that you also incur some additional costs when trying to transfer important information back and forth from country to country.

Additional costs may also accrue when attempting to book removal companies in attempt to transport your belongings back to the UK.

Demand for these specific limited companies has naturally risen within the past 2 years due to the volume of returning expats, therefore driving up the hire prices and decreasing the speeds and availability.

Staying informed on the current exchange rates before your return is also important when planning your return in order to allow for emergency financial planning in case it is needed.

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