A Complete Guide to Tax Implications for Expats Returning to the UK

At Hoxton Wealth, we specialise in helping globally mobile professionals navigate the financial transition of moving abroad and coming home again.

Hoxton Wealth supports a large and diverse global client base across multiple jurisdictions.

Services are delivered only by the appropriately regulated Hoxton entity based on the client’s location and regulatory permissions. Hoxton Wealth does not provide formal tax or legal advice; we work alongside qualified tax specialists where required.

This experience allows us to present the UK’s return-migration tax landscape with clarity and real-world insight.

For expats returning to the UK, understanding your tax residency status is a critical first step, as it determines which income, pensions, and capital gains are subject to UK taxation. The UK uses the Statutory Residence Test (SRT) to decide whether an individual is considered a tax resident in a given tax year. The SRT is a structured, rules-based approach that examines the amount of time you spend in the UK and your connections, or “ties”, to the country.

The test considers three main elements:

• Days spent in the UK: The SRT looks at how many days you are physically present in the UK during the tax year. Spending 183 days or more in the UK usually makes you automatically a tax resident. Fewer days trigger further analysis based on your ties.
• UK ties: Ties include owning a home in the UK, having family residing here, working in the UK, or having spent significant time in the country in previous years. The more ties you have, the fewer days are needed to be considered resident.
• Previous tax years: Your residency in the preceding three tax years can affect your status. If you were a UK resident previously, fewer days and fewer ties may be required for you to be deemed resident again.

The outcome of the SRT is crucial because UK tax residency determines what income and gains are taxable. Residents are generally taxed on their worldwide income, including foreign earnings and overseas pensions, whereas non-residents are typically taxed only on UK-source income. Misunderstanding your residency status can lead to unexpected tax liabilities or missed reliefs, particularly when returning to the UK after living abroad.

Given the complexity of the SRT and the impact on your tax obligations, many returning expats seek professional advice to assess their ties, plan their return carefully, and optimise tax outcomes. Ensuring clarity on your residency status early can help prevent surprises and support effective financial planning as you reintegrate into the UK tax system.

Residency outcomes can be complex and are often dependent on individual circumstances. Professional assessment may be required to ensure accurate classification under the Statutory Residence Test.

Once you are classified as a UK tax resident, the UK operates a worldwide income tax system, meaning you are generally liable to pay UK tax on your global income.

This includes earnings from employment or self-employment abroad, overseas pensions, investment income, rental income from foreign properties, and capital gains on assets held outside the UK.

Understanding the scope of taxable income is crucial for expats planning their return, as it directly affects how much tax you may owe and which reporting obligations apply.

UK-Resident vs Non-Resident Tax Treatment

Tax obligations differ significantly depending on your residency status. UK residents are taxed on worldwide income, subject to available reliefs, allowances, and double-taxation treaties that may reduce the overall liability. In contrast, non-residents are typically taxed only on UK-source income, such as UK employment, UK property rental income, or certain investment income.

Non-residents may also be eligible for specific exemptions or reduced tax rates under UK law or relevant treaties. For returning expats, determining the correct status is critical to avoid double taxation and ensure compliance.

Common Taxable Income Sources for Returnees

Overseas employment income: Salaries or bonuses earned abroad may become subject to UK tax once you regain residency, although foreign tax credits or exemptions under double-taxation treaties may apply.

Pensions and retirement income: UK pensions, occupational pensions, and some foreign pensions can be taxable, with rules varying depending on the pension type and source country.

Investment income: Interest, dividends, and capital gains from overseas investments generally fall within UK taxation once you are resident.

Rental income from property abroad: Income from foreign real estate is taxable, though double-taxation treaties often prevent the same income being taxed twice.

Other income streams: Freelance work, royalties, or business profits earned overseas may also be liable for UK tax depending on residency and local treaty rules.

Navigating UK taxation as a returning expat requires careful planning to optimise tax efficiency, leverage treaty benefits, and avoid unexpected liabilities.

Double taxation treaties can prevent the same income from being taxed twice, but their application depends on your specific circumstances and treaty interpretation.

Professional guidance ensures that all income is correctly reported and that your return to the UK is financially smooth.

Returning expats often hold income streams, investments, or business interests abroad, all of which may be affected by UK taxation once residency resumes. Understanding how these assets are treated is essential to ensure compliance, avoid penalties, and optimise your tax position.

Income Earned Abroad

Income from foreign employment, self-employment, or business activities is generally taxable in the UK once you regain residency. This includes salaries, consulting fees, and profits from overseas businesses. Double-taxation treaties may reduce or offset the UK tax due if you have already paid tax abroad, but accurate reporting is required to claim relief.

Offshore Savings and Investments

Interest, dividends, and gains from overseas bank accounts, stocks, bonds, or other investments must be declared to HMRC. If you were previously non domiciled in the UK and claimed the remittance basis, foreign income and gains may have been taxable only when remitted to the UK. The remittance basis is being phased out for most individuals from April 2025, and returning expats will generally be taxed on worldwide income and gains once resident again. As a result, all offshore income and gains are normally taxable in the UK, whether or not the funds are brought into the country.

Property and Capital Gains

Capital gains from the sale of foreign property or other overseas assets after becoming UK-resident are generally subject to UK Capital Gains Tax. Exchange-rate fluctuations can affect both gains and losses, so it’s important to calculate the gain in sterling at the correct date of acquisition and disposal. Rental income from foreign property is also taxable, although double-taxation relief may apply if you already paid tax in the property’s country.

Correct Reporting to HMRC

All overseas income and gains must be disclosed through the UK self-assessment system. This includes salaries, business profits, interest, dividends, investment gains, rental income, and foreign exchange gains or losses.

Maintaining accurate records, such as bank statements, contracts, and investment documentation, is essential. Working with a regulated tax adviser experienced in cross-border matters can ensure that remittance rules, double-taxation treaties, and reporting obligations are correctly applied.

The remittance basis, overseas reporting rules, and mixed-fund treatment are specialist areas. Errors can lead to unexpected tax liabilities or penalties.

Foreign income and gains must be correctly disclosed via the UK Self Assessment tax return.

For returning expats, pensions are often the most significant and complex asset class. Understanding how HMRC treats foreign and UK pensions is essential for effective income planning.

UK Pension Rules on Return

Once you are a UK-resident again, your pension withdrawals are typically subject to UK income tax, regardless of where the pension is held. If you contributed to a UK-registered scheme while abroad, those funds continue under UK rules. Withdrawals are taxed according to the prevailing income-tax rates, with 25 percent usually available tax-free.

QROPS and International SIPPs

Many expats transfer pensions into Qualifying Recognised Overseas Pension Schemes (QROPS) or International SIPPs for flexibility and currency diversification.

Upon returning to the UK, these structures remain valid, but withdrawals become taxable under UK rules. Importantly, if you transferred a UK pension to a QROPS within the last five years, an Overseas Transfer Charge could still apply if you move back.

Important:
• If you returned to the UK within five tax years of transferring to a QROPS, the 25 percent Overseas Transfer Charge may still apply.
• QROPS income and withdrawals are generally taxable in the UK once you resume residency.
• Transferring pensions overseas is not suitable for everyone and must be supported by a regulated suitability assessment.

An International SIPP is a UK-regulated pension structure and is not considered an offshore pension.

When returning to the UK, becoming a UK-resident again can have important implications for Capital Gains Tax (CGT). Any gains realised on the disposal of assets after your residency resumes are generally subject to UK CGT, including profits from the sale of overseas property, shares, or business interests. It’s crucial to understand how your return affects tax liabilities, especially if you sold assets while temporarily non-resident.

The Temporary Non-Residence Rule

The UK’s temporary non-residence rules are designed to prevent individuals from avoiding CGT by moving abroad temporarily. If you were non-resident for less than five full tax years and disposed of assets during that period, any gains on those assets may still be taxable when you return to the UK. This rule applies to shares, investments, and certain business assets.

Property and Business Sales Examples

Overseas Property: If you sold a foreign rental property while non-resident and returned to the UK within five years, CGT may be due on the gain, even if you already paid tax abroad. Double-taxation treaties may provide relief, but reporting is still required.

Business Assets: Selling shares in a company or other business interests while temporarily non-resident can also trigger CGT when you return, depending on the timing and residency status.

Proper documentation, including purchase and disposal values and foreign tax paid, is essential.

CGT calculations on foreign assets must be converted into GBP at the correct historic exchange rates. This can materially affect the gain and requires precise record keeping.

From April 2025 the UK moved from a domicile based system to a residence based system for determining the scope of IHT on worldwide assets. For returning expats the key question is now the length of UK residence in the years before death or a chargeable event. An individual who has been UK resident for at least ten of the previous twenty tax years is treated as a long term UK resident. In that case their worldwide assets, including overseas property, investments and business interests, fall within the scope of UK IHT.

Individuals who leave the UK may still remain within the IHT net for a period of years after departure. This is because a residence tail can apply for those who previously met the long term residence test.

Domicile of Origin and Domicile of Choice

Domicile remains a legal concept but it is no longer the primary connecting factor for IHT for deaths and chargeable transfers from April 2025. It continues to matter for certain transitional situations and for the historic treatment of trusts where the rules in force at the time of creation were domicile based. For most individuals, however, it is their residence history that now determines whether their worldwide estate is subject to UK IHT.

Managing Cross Border Inheritance Exposure

Returning expats should:

• Review their estate planning
• Consider trust arrangements where appropriate, especially where existing structures were set up under the former rules
• Obtain specialist legal and tax advice on residence status, residence tails and the interaction with any foreign tax regimes

Although domicile is no longer the main factor for IHT, changes to your intended permanent home and your pattern of residence can influence the IHT treatment of worldwide assets. Specialist guidance is essential, particularly during the transition from domicile based rules to the long term residence model.

The best way to manage UK tax efficiently is to plan early. Many advantages can be gained by acting before your residency restarts.

Pre-return planning

• Review timing
• Realise gains before returning
• Clear mixed-fund accounts
• Use local allowances
• Re-base assets

Post-return planning

• Register for Self-Assessment
• Optimise pension withdrawals
• Claim double-taxation relief
• Reassess offshore investment structures
• Review estate planning, with particular focus on long term residence status and the IHT residence tail

These planning steps are general examples and may not be appropriate for all individuals. Tax outcomes depend on personal circumstances, timing, and the specific rules of the jurisdictions involved.

Returning to the UK after living abroad brings financial familiarity, but also renewed exposure to complex tax rules. Your residency status, overseas assets, pensions, and domicile can all reshape your tax obligations.

If you are preparing to return to the UK, contact Hoxton Wealth today to speak with a regulated adviser who can help you understand which tax and financial considerations may apply to your situation. We can work alongside your tax specialists to support your repatriation planning.

This article is for information only and does not constitute personal financial advice or tax advice. UK tax treatment depends on individual circumstances and may change. Hoxton Wealth does not provide tax or legal advice. Clients should obtain advice from a qualified tax professional in the UK and any relevant overseas jurisdiction.

Any recommendations are provided only by the appropriately regulated Hoxton Group entity based on your location and regulatory permissions. The value of investments can fall as well as rise, and you may get back less than you invest.