Moving to the UK? Don’t get caught out
When moving between countries, understanding your new tax position means you may save tax, and avoid making costly mistakes.
When planning a move to the UK, it is preferable to take personal tax advice before your move, so that you have time to make suitable adjustments to your plans.
Here is a beginners’ guide to the UK tax system.
What are the dates of the UK tax year?
The UK tax year runs from 6 April to the following 5 April.
What is my liability to UK tax?
Your liability to UK tax depends primarily on your residence and domicile status. The main direct taxes for individuals are income tax and capital gains tax. You may also be required to pay UK social security (National Insurance) on employed or self-employed income.
If you die owning UK assets, or make significant gifts while living in the UK, your estate may also pay Inheritance Tax.
How will I know when I become UK tax resident?
The UK has a complex statutory residence test to determine your residence position, but if you spend 183 days or more in the UK during a tax year, you will be treated as UK resident. You may still be treated as UK resident if you spend fewer than 183 days in the UK, depending on your work, accommodation, and family ties with the UK.
There is no specific tax paperwork which needs to be completed when you arrive in the UK, however you will need to register with HMRC to obtain a Unique Taxpayer Reference (UTR) number before you can file a UK tax return.
What is domicile?
Domicile is a general legal concept and is quite different from residence since it rarely changes. You will generally be domiciled in the country where you consider your ‘roots’ are. It is not the same as nationality or citizenship.
What are the benefits of being non-UK domiciled?
If you are UK resident and UK domiciled, you pay tax in the UK on your worldwide income and gains as they arise. If you are UK resident but non-UK domiciled, you will be taxed on your UK source income and gains, but have the option of sheltering your foreign income and gains from UK tax, as long as you don’t remit or benefit from that money in the UK.
For example, a non-UK domiciled individual could hold a portfolio of non-UK stocks, outside the UK, and can shelter the foreign income and gains from UK tax.
Managing your assets and affairs to make best use of the remittance basis of taxation requires planning and a deep understanding of the legislation. Professional advice should be taken if you want to benefit from the remittance basis of taxation.
What are the UK tax rates?
Income tax is currently charged at 20%, 40% and 45% depending on your level of income. Most individuals also have access to an income tax personal allowance so the first £12,500 (for 2020/21) of income is tax free.
Depending on the level of other income in the year, capital gains tax is currently charged at 18% or 28% on gains from residential property, and 10% or 20% on gains from other chargeable assets. Most individuals also have access to a capital gains tax annual exemption so the first £12,300 (for 2020/21) of gain is tax free.
Inheritance tax is currently charged at 40% of the estate value after accounting for allowances and reliefs. Everyone has a nil rate band allowance of £325,000, which will pass free of inheritance tax.
What are the tax return filing deadlines?
The deadline to electronically file your UK tax return is 31 January after the end of the tax year. So to report for the 2019/20 tax year, the deadline is 31 January 2021.
Get in touch
If you are planning a move to the UK and would like tailored UK tax advice in order to understand your UK tax obligations and arrange your affairs tax efficiently, get in touch with our specialists today.