Tax considerations for British Expats

A move abroad is not a simple affair, aside from the worries of finding a new job, house and deciding what to pack; you also have to be aware of one of the more unpleasant and sadly, certain aspects of life…taxes.

Once you have decided on the big move you will need to make contact with Her Majesty’s revenue and customs (HMRC) to notify them of your move. They should then send you a P85 form for you to complete before leaving the UK. Ideally it should be done the week of your move or a week after. The completed form will inform HMRC that you are no longer a British citizen and you will become a non-resident.

To prove this you and your spouse(if you have one!) will need evidence to show that you have moved abroad permanently, or that you will be out of the country for longer than one tax year (6th April till the following 5th April). You must also prove that you have not visited the UK for more than 183 days in a tax year or have averaged less than 91 days in the country over a 4 year period.

Once it is proven that you are classed as a non-resident you are ineligible to pay any tax, including national insurance to the British government. There are a few professions that can still be taxed regardless of a move abroad.

These jobs are; Gas and oil workers, Students, crown employees, seafarers and entertainers/sportspeople.

It’s best to check with your HMRC tax office to check to see if your occupation is classed as one of those.

There are three main taxes that you may come across during your move and it pays to be aware of them, it can save you a lot of hassle and cash in the long run.

Double Taxation treaties

These treaties are implemented between the UK and over 100 other countries around the world. These treaties are important for anyone looking to emigrate as they aim to split the taxes between the UK and the other country.

Their main purposes are:

  • Protect against the risk of double taxation where the same income is taxable in two states.
  • Provide certainty of treatment for cross-border trade.
  • Prevent tax discrimination against UK business interests abroad.

Further details and a list of all nations’ part of the treaty can be found on the HMRC website.

Tax on UK banks and building societies

Many Expats like to keep a bank account in the UK as well as their new chosen destination. Unfortunately this means that their account back in the UK could be taxed; there is a way around this however. If your account is creating interest then you may be eligible for a tax refund. Contact HMRC and fill out the R43 form to apply for one. If you maintain an ISA account then it will remain a tax free source of money once you go abroad. The downside to ISA’s is that you will no longer be able to contribute funds to them once you are no longer a UK citizen.

Capital Gains Tax

This is a tax on any profit you make from the selling of assets. You will not be eligible to pay this tax if you can prove that you were not a resident for 4 full years out of the last 7 before you became a non-resident.  If you make a profit or ‘gain’ on any asset connected with the UK you have to pay this tax even if you are living in another country. This includes any assets being run by an agent on your behalf.

For more information it always pays to research the HMRC website or pop into your local branch.

You may now think ‘Hooray I’m free of taxes’ but sadly taxes will still exist in your new homeland. Bummer.

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