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Tax considerations for Expats Returning to the UK

Every year, many UK expats return to the UK without having robust tax planning measures in place or being fully aware of the tax system that they will be subject to going forward. Unintended tax consequences can arise and this can be quite a shock for expats that may have worked in a low or zero tax country for many years.

Tax Considerations for UK Expats Returning to the UK

Here are a number of areas that returning expats should research to ascertain whether or not they have an effect on their personal circumstances:


Becoming UK Resident

To avoid ambiguity and confusion, HMRC introduced a Statutory Residence Test in 2013. An expat will be able to determine whether or not they meet the definition of UK resident by following these tests.


Many expats still rely upon anecdotal knowledge and as a result become UK resident much earlier than they anticipated. The SRT is in three parts; the automatic overseas tests, the automatic UK tests and the sufficient ties test. The basic rule is that an individual is resident in the UK for a tax year and at all times in that tax year (although the effect of this rule is relaxed under split year treatment), if they do not meet any of the automatic overseas tests and they either:



HMRC recommends that these tests are worked through in a particular order, looking initially at the first of the automatic UK tests, then at all of the automatic overseas tests, followed by the remaining automatic UK tests and only then, if the residence position is still not clear, considering the sufficient ties tests. It is recommended to consider each category in turn as this is far simpler.


If you are a UK resident, you are subject to Income Tax on your worldwide income and Capital Gains Tax on your worldwide gains.

Expats who return to the UK mid-way through the year will have to pay tax on their income

for the entire tax year, unless they qualify for ‘split year treatment’. If split year tax treatment cannot be claimed then it is very important to look at when it is most tax efficient to return.


Changes in legislation since they left the UK

Over the last 10 years there have been a significant number of changes to UK legislation that the expat may not be aware of. One key area is that of Domicile in that irrespective of how long an expat has been non-resident, if they have a UK domicile of origin, they will reacquire their UK domicile whilst they are UK resident. If you are UK domiciled your worldwide estate is subject to UK Inheritance Tax.


Planning undertaken whilst non-UK resident

Many UK expats may have undertaken planning to return to the UK as a non-dom and take advantage of the tax benefits that this particular tax status affords however, for the reasons stated above this is no-longer possible. As such, any planning undertaken whilst non-resident should be reviewed to ascertain whether or not it still works.


Assets acquired whilst non-UK resident

You should determine the likely tax treatment of those assets and in particular the difference between disposing of them as a non-resident or resident of the UK.


What to do when you return

You may need to register for Self-Assessment (Linked to https://www.gov.uk/topic/personal-tax/self-assessment), for example if you are self- employed or still have other income or gains from the UK or overseas.


You generally don’t need to register if you’re an employee and don’t have any other untaxed income to report.


If you are returning to the UK within 5 years

You may have to pay tax on certain income or gains made while you were non-resident. This doesn’t include salary or other related employment income.

These Temporary Non-Residence rules apply if:


  • 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

Taking financial planning advice is imperative for British expats returning to the UK. And because finding a good financial adviser is like sorting the wheat from the chaff, here are a few tips: Finding a good financial adviser.