What are the tax implications if I leave the UK to live abroad?

Sometimes the grass is greener on the other side and some 4.5 million Brits in 2022 have done just that and moved abroad. But there can be significant tax considerations as well as the emotional and physical ones. Have a look at our top considerations:

Residence Status

Your UK tax liability will largely depend on your residence status. The UK uses a residency test called the Statutory Residence Test (SRT) to determine your tax residence status. If you are considered a UK tax resident, you will generally be subject to UK tax on your worldwide income. If you become a non-resident, you will only be liable for UK tax on income earned in the UK. Read our blog on the Statutory Resident Test to find out more.

Income Tax

If you are a UK tax resident, you will still need to report and pay UK income tax on income generated in the UK. However, you may also be subject to income tax in your new country of residence. Many countries have double taxation agreements with the UK to prevent double taxation, which may allow you to claim tax credits or exemptions.

Capital Gains Tax

If you are a UK resident and you sell assets like property or investments after moving abroad, you may still be liable for UK Capital Gains Tax (CGT) on those gains, depending on your residence status and the nature of the assets. Some countries also tax capital gains, so it’s essential to understand both the UK and your new country’s CGT rules.

Inheritance Tax

If you are a UK domicile, you may still be subject to UK Inheritance Tax on your worldwide assets, even if you move abroad. Non-domiciled individuals may have different rules apply. You should consider estate planning to minimize potential tax liabilities.

Pensions

If you have a UK pension, you can usually transfer it to an overseas pension scheme, but the tax implications can be complex. Seek professional advice to ensure you make the best decision for your retirement savings.

Double Taxation Relief

The UK has double taxation agreements (DTAs) with many countries to prevent double taxation. These agreements can impact how your income is taxed in both the UK and your new country of residence. You may be able to claim tax relief or credits under these agreements.

Tax Reporting

You may need to report your overseas income and financial assets to both the UK tax authorities and the tax authorities in your new country of residence. Failing to do so could result in penalties.

Exit Tax

In some cases, the UK may impose an exit tax on individuals who cease to be UK residents, especially if they have substantial unrealised capital gains.

We have been helping clients plan for and manage this issue in the UK and also support clients overseas in Spain and USA amongst others.

If you need help or want to discuss this before you move then get in contact with us.