There is a lot to plan when moving country. This article summarises some of the key financial considerations for your move to the UK.
Independent advice will help you to avoid any pitfalls and maximise the opportunities available to you in your last months of UK non-residence, and after your return to the UK, giving you more time to focus on shipping, leaving parties, and all the other things that come with moving country!
We would be delighted to discuss your plans with you.
Understanding when you will begin to pay UK taxes is important when planning transactions. You should also understand your tax position in your country of residence.
In general, UK non-residents are only subject to UK taxes on UK sourced income and gains, whereas UK residents are subject to UK taxes on their worldwide income and gains.
The prescriptive UK statutory residence test dictates if you are a UK resident for a given tax year, based on a combination of factors such as the number of days you spend in the UK, whether you work in the UK, and whether your have any ‘ties’ to the UK.
In the year of your move to the UK you may be eligible for ‘split-year’ treatment, meaning you are taxed as if you were not UK resident for the first part of the UK tax year, and as a UK resident for the remainder of the year.
A note on non-domicile status:
Domicile is a complex subject, but can be broadly thought of as your permanent home. Individuals originally from the UK are likely to be considered UK domiciled if they are UK resident.
If you are not originally from the UK, you may not be UK domiciled, and different (often preferential) tax rules may be available to you, presenting other planning opportunities. We have not covered these rules in this article but would be delighted to discuss the opportunities with you.
Before you return to the UK, you should consider how each of the properties you currently own will meet your requirements in the future and what your optimal property position looks like. You can then plan the most efficient way to move from your current position to the desired position.
Given the time and effort required to buy and sell properties, you may be tempted to maintain the status quo. However, there can be significant differences in the tax implications depending on the timing of your transactions; making progress while you are not UK resident is often beneficial. You should consider both the capital gains tax implications and the stamp duty implications of transacting in property while you are not UK resident compared to when you are UK resident.
You should also consider how the net cost of (or capital released from) selling and purchasing properties will impact the balance of your other investments and assets, which you may plan to rely on to fund expenditure.
Once you move to the UK, you are likely to be subject to UK taxes on income and gains from your investments, possibly at a higher rate than your current country of residence. However, a positive is that the UK has some of the best value financial services in the world, and investing through UK investments and investment accounts on your return may represent significantly better value than any accounts and investments purchased while overseas.
To maximise your net investment returns, before you move you should review each of your existing investments and investment accounts to ensure they are both tax-efficient and cost-effective. You should then consider if it is most efficient to make any changes while resident in your current country or once you return to the UK.
On return to the UK, you should consider contributing to tax-efficient pension and ISA accounts. However, the contribution allowances are limited, and you may also need to hold investments through taxable accounts. The two main accounts available are the UK taxable investment account and the offshore bond account. Choosing the right account can make a significant difference to net returns over the long-term. This article provides further information.
If you plan to retain investments outside of the UK, you should understand the tax treatment of the investments in both the UK and the country the investment is held.
If you have accrued significant cash balances in your current country of residence, for example from surplus income, or from selling property, you should consider converting your surplus cash to reduce volatility in your future currency(ies) of expenditure. This probably means buying pounds sterling.
Predicting extremely efficient currency markets is, at best, extremely difficult. So, converting currencies sooner, rather than later, should provide clarity and make planning easier.
UK banks charge notoriously high fees to convert currencies, though banks in some countries are far more competitive and there are many specialist currency conversion companies that exchange currencies at much lower margins and can help manage unnecessary international bank transfer fees.
We will partner with you to build a long-term financial planning strategy that maximises the efficiency of your assets and income streams, considering your move to the UK and your long-term plans. We will then work with you to implement your strategy, avoiding any pitfalls and maximising the opportunities available to you in your last months of UK non-residence, and once you return to the UK.
Notes:
This article is meant as a summary only and we have simplified many of the areas for brevity.
Before purchasing any investment, you should receive personalised advice from an independent financial adviser.
You risk losing capital when you invest.
Any reference to legislation and tax is based on our understanding of UK law and HMRCs practice at the date of production. These may be subject to change in the future. Tax rates and reliefs may be altered.
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