Moving from... the UK

Welcome to your tax information guide on leaving the United Kingdom. Our detailed Q&A guide has been split into 6 key areas in order to help you find the information you need - quickly and easily!  

This guide is for reference only and professional tax advice should be taken before any action is taken.

 
Before/Once you depart
 

Q. Should I complete any Inland Revenue forms prior to leaving the UK?
A. You should submit a form P85 ('Leaving the United Kingdom') or P85(S) ('Leaving the United Kingdom at the end of my assignment') to the tax office handling your employer's payroll. Your employer should issue you with form P45 showing details of your pay and tax to date of departure.  This should be submitted with form P85 or P85(S).

Q. Should I open an offshore bank account?
A. If you are not resident in the UK you will be liable to UK tax only in respect of investment income arising in the UK. Therefore interest income from an offshore bank account will not be liable to UK tax.

Tax - Basics
 

Q. Will I be regarded as not resident in the UK during my period overseas?
A. Assuming that you are resident and ordinarily resident in the UK before you leave, you will cease to be UK resident from the day after you leave the UK if;

• you leave the UK;

• you go abroad for at least a complete UK tax year (6 April to 5 April);

• while abroad you work in full time employment,

• your return visits to the UK total less than 183 days in any tax year, and average less than 91 days a tax year (the average is taken over the period of absence up to a maximum of four years)

If you meet all the above conditions, you are treated as not resident and not ordinarily resident in the UK from the day after you leave the UK.

If you commute weekly or fortnightly between the UK and your overseas work location, but otherwise maintain your UK lifestyle, you will be treated as remaining UK tax resident unless you work abroad for more than three years.  If you commute regularly between the UK and your overseas work location but work abroad for more than three years you will be regarded as not resident in the UK as long as your visits to the UK are less than 91 days per year on average.

Q. Can I continue to contribute to my employer's pension scheme?
A. You and your employer may continue to make contributions up to the allowable limits for up to 10 years after you leave the UK. You may not, however, make Free Standing Additional Voluntary Contributions (FSAVC) during a period of non residence.

Q. Can I continue to contribute to my personal pension plan?
A. If you are a member of a personal pension scheme and you move overseas, but no longer have UK taxable earnings, you may still pay up to the earnings threshold to your personal pension scheme in a particular tax year if you are, or have been, resident and ordinarily resident in the UK at some time in that year, or at some time during the previous five tax years.
 
Changes to the taxation of pensions will be introduced with effect from April 2006, specifically limiting the lifetime limit for pension savings and the annual allowance for tax-favoured contributions. Although these changes may not affect you during your time overseas, you should take advice on the implications of these changes for you in the future.

 
Tax - Administration
 

Q. Will I still need to complete a UK tax return after my departure?
A. If all your UK taxable income is subject to UK withholding tax and you are not a higher rate (40%) taxpayer you may not have to file a tax return. Nevertheless, if the Inland Revenue issue you with a tax return you are obliged to complete and file the tax return. Most higher rate taxpayers will have to file a tax return.  If the Revenue does not send you a tax return and you need to file a return you must notify the Revenue that you should be issued with a return by 6 October following the end of the relevant tax year.
 

Tax - Income from employment
 

Q. Will I have to pay tax in respect of the employment income I will earn overseas?
A. If you remain resident and ordinarily resident in the UK you will be liable to UK tax in respect of worldwide income, including employment income from overseas.

If you are not resident in the UK you will be liable to UK tax only on income arising in the UK (e.g. UK pensions, rental income from UK properties, interest income from UK banks and building societies, dividend income from UK corporations). You will not be subject to UK tax in respect of work duties carried out in the UK assuming that these are incidental to your overseas duties (e.g. reporting to the UK company, training).
 
Q.  I was granted stock options during my stay in the UK. Will the income from exercise be taxable in the UK?
A. The UK stock option legislation has been re-written by the 2003 Finance Act and you should seek professional advice with regard to your specific situation.

Tax - Other
 

Q. Will I have to pay tax in respect of UK investment income earned while overseas?
A. You will be liable to tax in respect of investment income arising in the UK (e.g. income from a UK property, UK bank or building society, dividends from UK corporations).

Taxable rental income is calculated by deducting from gross rental receipts any qualifying business expenses, so long as they are incurred wholly and exclusively for the rental business and are not capital in nature (e.g. mortgage interest, management fees, repairs, insurance, rates, 'wear & tear' allowance equal to 10% of gross rent where the property is furnished).

If a property is held jointly with your spouse the income and expenses must be split equally between you and your spouse, and reported on each of your UK tax returns.

Letting agents (or tenants where there is no letting agent, and the rent payable is more than £100 a week) of any non-resident landlord must deduct basic rate tax from the landlord's UK rental income, and pay the tax to the Inland Revenue. Non-resident landlords can apply to the Inland Revenue for approval to receive their rental income with no tax deducted. (Note: This does not mean that the rent is exempt from UK tax.) In return the Inland Revenue will usually ask the landlord to complete a Self Assessment Tax Return to calculate whether he or she has any liability to UK tax. This application is made by completing form NRL1, `Non-resident landlords - Individuals`.

Q. I plan to sell my UK property while overseas. Are there any capital gains tax implications?
A.  If you sell your home in the tax year you become non-resident, any capital gain may come within the scope of UK tax, even if the sale takes place after you have become non-resident. However, if you have ? or are deemed to have - occupied the property as your main residence to within three years of the date of sale, the gain is fully exempt. You are entitled to full relief to the extent that your house was used as your only or main residence during the whole period of ownership. The final 36 months of  your period of ownership always qualify for relief if the house has ever been your only or main residence, and some other periods when you were not using the house as your only or main residence will also still qualify for relief. You should therefore contact a tax advisor if you are uncertain about whether you will qualify for full relief due to periods of absence from the property.

Q. I have a number of UK company shares. Will I remain liable to UK capital gains tax if I sell any of these while outside the UK?
A. If you were resident or ordinarily resident for at least part of four out of seven tax years prior to your year of departure, and you will be not resident for fewer than five full tax years, any gains and losses accruing on disposals during your period of absence will be treated as accruing in the tax year of your return to the UK. However you will be allowed to offset any net gains against one annual capital gains tax exemption (i.e. for your year of return only).

You may acquire assets after leaving the UK for a period of temporary residence abroad and if such assets are disposed of in an intervening year any gains or losses on such assets are excluded from the  charge upon your return to the UK.

Q. Will my Individual Savings Accounts (ISA) be OK while I am out of the UK?
A. You must be resident and ordinarily resident in the UK for tax purposes in order to contribute to an ISA. If you start an ISA in the UK and then go abroad, you cannot continue contributing to the ISA during your period of non residence. You can however make the full annual allowable contribution prior to leaving the UK. You can also keep your ISAs during your absence from the UK and you will still get tax relief on investments held in the ISAs. When you return you can start putting money in again (subject to the normal annual limits).

Q. What about my Personal Equity Plans (PEPs) and Tax Exempt Special Savings Accounts (TESSAs)?
A. PEPs and TESSAs opened prior to 6 April 1999 will retain their tax efficient status during a period of non residence, and so the income and gains will continue to be exempt from UK tax.
 

Social Security
 

Q. What Social Security contributions will I pay when abroad? Will my contributions record with the Department of Social Security be affected by my absence from the UK?
A. Your requirement to pay UK or foreign social security contributions during your absence from the UK will depend upon how long you are leaving the UK for, what country you are going to and whether you will be employed by a UK or foreign employer. Your eligibility to qualify to claim UK benefits in the future will also depend upon these factors.

If you are going to work in a country within the European Economic Area or to a country with which the UK has a reciprocal agreement it is likely that any contributions made in the foreign location will be used for the purposes of determining your total contributions period at retirement. You may also decide to make Class 2 or 3 voluntary contributions in order to maintain a full UK contributions record. You should however note that these do not provide the same benefits as Class 1 contributions and therefore you should check with the UK Department of Social Security before determining your course of action.