There has probably never been a time when so many UK citizens are living abroad either on a temporary or permanent basis. More people are choosing to move abroad indefinitely, usually to retire in sunnier climes whilst increased globalisation and cheaper air fares mean that more and more of those still working are choosing to do so overseas. Unless, of course, you are suddenly recruited to work on a contract in a foreign country, the chances are that you will have sufficient time to plan your financial affairs in advance and not fall victim to the many pitfalls that can lie in wait, especially where tax is concerned. In a timely reminder to clients, international tax services specialists, Baker Tilly, have recently published a note on some of the main aspects of tax to watch out for and, if possible, to plan well ahead for.
One of the main considerations that leading providers of international tax services focus on is the opportunity to split one’s tax year in the event of moving abroad. This involves timing your departure, wherever possible, in order to leave part way through the tax year so that you obtain the full personal allowance on UK income before you leave.
The same international tax services experts point out, that, if you intend to eventually return to the UK permanently, then the same applies when you come home. Careful timing could therefore net you over £21,000 in tax-free income. However, the conditions under which tax year splitting is allowed are now quite limited and it is essential that you seek advice on this from your own international tax services professional. Broadly speaking, you should be either leaving to work fulltime overseas or be ceasing to have a home in the UK.
Something else that international tax services specialists suggest you watch out for is the fact that, if you return to the UK within the same tax year after working abroad, you are almost certainly going to be assessed for UK income tax on your earnings overseas. This is particularly worth bearing in mind if you are going to work in a low tax territory like the UAE and you have put little or nothing aside for tax. If your contract is cut short for whatever reason and you return home unexpectedly within 12 months, practitioners in international tax services warn that you could find a nasty shock in store when you get back.
Even if you return from a prolonged stay overseas within 5 years, international tax services providers counsel that certain types of income and capital gains realised when non- resident could still be liable to a tax charge.
Those who manage to make a clean break should not automatically assume that they are totally immune from UK taxes. Those who work in international tax services advise that certain UK sources of income will still attract the attention of the taxman. For instance, non- residents often retain a property in the UK, which they let out and they normally come under the non-resident landlord scheme which means that income tax has to be withheld and handed over to HMRC.
There are many other major tax considerations to be taken on board before leaving on an extended or permanent stay overseas. A possible implication for UK Inheritance tax liability on worldwide assets is another item that requires very close attention. The message from international tax services providers is to seek appropriate advice and act on it as early as possible before your departure and anyone who thinks they might be leaving these shores for any lengthy period of time are invited to contact Baker Tilly’s international tax services department.