If you sell-up completely in the UK and set-up home overseas, making no return visits you will become non-UK resident. Of course this is not usually practical, as you may have family or friends in the UK that you want to visit. To what extent then can you keep UK connections whilst becoming non-resident?
If you leave the UK you will be conclusively non-resident for UK tax purposes if:
- You spend less than 16 days in the UK in the tax year in question OR
- You are working overseas full-time without any significant breaks, and not spending 30 days or more working in the UK, or more than 90 days in the UK for any purpose.
Keeping a home in the UK
If you go overseas for reasons other than full-time work, you have a home overseas and make return visits to a UK home of 16 days or more in a tax year, you may be treated as UK resident for tax purposes. Therefore you will need to make sufficient use of your home overseas on a continuing basis to keep non-resident status. However this is a complex area, as your status is also affected by your ‘ties’ with the UK. See Tax facts – Statutory rules: coming to the UK.
If you leave the UK you can be treated as non-resident from the date of your departure, not from 6 April the start of the next tax year. Split year treatment requires meeting certain criteria and you should seek specialist tax advice.
Tax position after acquiring non-resident status
You are liable to tax on sources of UK income although there are some exceptions. If you are retaining sources of UK income after leaving the UK, you may still be required to file self-assessment tax returns. Key points:
- Rents from UK property or income from a UK trade remain fully liable to UK tax. You can apply for exemption from the Non-Resident Landlord Scheme (where tax is deducted from rents by collecting agents) so that income can be declared on tax returns in the normal way.
- UK state pension, bank interest and dividends paid by quoted and unquoted companies are not liable to tax. Dividends from family companies are liable to tax if paid to a shareholder who is non-resident for five years or less and the dividend is paid out of retained profits up to the company's accounting period ending in the year when the shareholder leaves the UK. This is designed to prevent shareholders taking out accumulated profits tax-free by leaving the UK for one or two tax years.
- Non-residents are liable to capital gains tax (CGT) on any gains arising after 6 April 2015. Essentially, this will involve a re-calculation of the gain as if the UK asset had been acquired at Market Value on 6 April 2015.
- Gains on assets held at the time of leaving the UK and sold during a period of temporary non-residence (five years or less) remain liable to CGT.
- The tax liability on temporary non-residents in respect of capital gains arises in the year of return to the UK.
If you already hold ISAs at the time of leaving the UK, you can retain them and keep the applicable tax exemptions, but no further ISA subscriptions can be made once you are non-resident for tax purposes.
Download the PDF version Tax facts – Statutory residence rules: going abroad