Obviously, financial considerations are crucial when you are planning to move from the UK to another country. Tax affairs are certainly not the most glamorous part of your planning, but a little bit of knowledge could save you hundreds of pounds. Our 8 Tax Tips should get you thinking in the right direction.
1. Informing HMRC
An evite to your leaving ‘do’ might be the best way to tell peripheral colleagues, but HMRC need something more individualised! If you don’t submit a Self-Assessment Tax Return, then you need to complete Form P85 ‘Leaving the UK.’
2. Taxed Twice?
Over 100 countries have a ‘Double Taxation Agreement’ with the UK government in order to avoid people paying tax on the same income in both countries. It is possible to check the list of these participating countries before you decide to move, and it currently includes New Zealand, Cyprus, Australia and Canada.
If you live in a country with such an agreement, then you will be paying tax in your new home and any UK income would be tax-free. It would also mean that you could get tax relief on government pensions.
3. UK Bank and Building Society Accounts
You do not have to close your UK accounts when you move abroad. In fact, your bank or building society may belong to a scheme whereby you can apply to have you interest paid without any tax being deducted. You just need to fill in Form R105.
ISAs can be maintained, but only those in diplomatic or military services are allowed to pay in new money.
If you do decide to open an offshore bank account, then all interest is paid without any tax deductions.
4. Not Selling up UK Property
It is very common for expats to keep and rent out their UK property. Again, you must inform HMRC that you are now a ‘Non-resident landlord.’ You will have to submit annual Self-Assessment forms to state your rental income, and benefit from any applicable tax allowances and reliefs. Any losses can be carried forward to the next year.
If you are leaving matters in the hands of a property agent, then the tax is taken off automatically.
It is possible to stop paying tax on your UK rental income if you make a successful application to the Non-Resident Landlords Scheme. Self-Assessment forms must still be completed, but you will not have to pay any tax on the income from your property.
5. Tax Rebates
If you are leaving the UK, there are a number of circumstances in which you are probably due a tax rebate:
- You have not used up your full Personal Allowance amount for the tax year in which you leave Britain
- You are redefined as a ‘UK Non-resident’ or ‘Non-resident landlord’
- You have not claimed for all the available work expenses tax reliefs, such as: professional fees, Trade Union fees, using your own vehicle for work journeys, buying tools for work usage, laundering your uniform at home. This is just a small sample of the host of work-related expenses for which you are entitled to claim tax relief.
The only paperwork you need is your P85 Form (if you don’t submit a Self-Assessment tax return) and your P45 from your UK employer.
The amount you get is dependent on your income streams, how much UK tax you paid and the specifics of your personal financial circumstances. The good news is that there is no upper claim limit!
6. Being ‘Non-resident for tax purposes’
In order to stop paying UK tax, you must achieve non-resident status. This is complex and each case is considered individually. There is now a Statutory Evidence Test to enable categorisation, but there are two main factors that you need to evidence:
- During one tax year, you will not be in the UK any more than 183 days.
- Your move abroad is either on a permanent basis or over one tax year long.
When you are working outside the UK, you also need to:
- Be in full-time, continuous employment for a minimum of one tax year in your new country
- Spend a maximum of 30 days working in Britain during any tax year
- Only spend a maximum of 90 days in the UK (during any tax year)
7. Capital Gains Tax
If you are able to evidence that you have not been ‘ordinarily resident’ in Britain for four of the previous seven years, then you will not be eligible to pay Capital Gains Tax.
Otherwise, you are eligible to pay Capital Gains Tax on any properties or investments until you have maintained non-resident status for five years.
8. Coming Back and Worried about your State Pension?
If you are intending to return to Britain, it might be worth maintaining your National Insurance Contributions so that you can still access state benefits and a higher state pension amount. You are only allowed to do this for three years after your initial departure. The rules can be rather confusing in this area.
If your move is permanent, then you may want to transfer your existing State Pension amount to a ‘Qualifying Recognised Overseas Pension Scheme’ in your new country.
Completing all the necessary forms correctly is time-consuming and labour-intensive. But accuracy is crucial in order to avoid penalties for ‘carelessness.’
Many people planning a move overseas feel it is wise to consult a tax expert to guide them through these complex regulations and systems. This also ensures that you receive all the tax reliefs and allowances you are entitled to.
This article was provided by the tax experts at www.taxrebateservices.co.uk. If you are looking to move abroad, claim your tax rebate today.
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