Residence
Even if your home, family, and work are located abroad, spending a significant amount of time in the UK can result in being classified as a UK resident and, consequently, being obligated to pay income tax on your foreign income.
The HMRC employs a statutory residency test, consisting of automatic tests and sufficient ties tests, to determine residency status. If you spend more than 183 days in the UK during the tax year or if the UK is your sole home, you are automatically considered a UK resident.
If you believe you are not a UK tax resident, the next step is to determine if any of the automatic overseas tests apply to grant you non-resident status. You are automatically classified as a non-resident if either: you spent fewer than 16 days in the UK (or 46 days if you were not a UK resident in the previous three tax years), or if you left the UK to work full-time abroad and spent less than 91 days in the UK, with no more than 30 days spent working in the UK.
If you do not meet the requirements of the automatic overseas tests, the number of days you can spend in the UK depends on the ties you have to the country, such as family, work, and accommodation.
For more detailed information on this matter, it is advisable to consult with your Financial Adviser.
Domicile
Domicile is another important aspect. Individuals who are domiciled in the UK are subject to Inheritance Tax (IHT) on their worldwide assets. It can be challenging to relinquish UK domicile status even if you move abroad for an extended period.
Domicile of origin refers to the domicile acquired at birth, usually that of the child’s father. It is possible to acquire a new domicile, known as a domicile of choice, by fully settling in a new country without the intention of returning to the UK. However, residing overseas for an extended period does not automatically indicate that a new domicile has been acquired.
Factors such as maintaining voting rights and holding assets in the UK suggest that you still consider the UK your home, thereby maintaining UK domicile status. Individuals who have been UK residents for fifteen out of the last twenty tax years are deemed to be domiciled in the UK.
Retiring back in the Britain
Repatriating: How are funds taxed in the UK?
If you are a UK-domiciled individual who has effectively ceased UK residence and is not considered ordinarily resident in the UK (i.e., an expat), you can bring funds into the UK without being liable for UK income tax. However, being cautious of the temporary non-residence rules is crucial if you have been living abroad for less than five years. These rules may require you to pay taxes on gains realised during your absence once you return.
If you suspect that you may be a resident in the UK, UK-domiciled but not ordinarily resident, it is advisable to seek professional tax advice as your tax situation can be complex.
Furthermore, if you are a UK non-domiciled individual, you have flexibility in how you are taxed. By consulting with a professional tax adviser, you can effectively plan your tax strategy to make the most of the available options.
Income tax
National contributions
Insurance
When returning to your home country, it is essential to review your insurance coverage.
From home insurance to car insurance, life insurance, and boiler breakdown insurance, the array of insurance options can be overwhelming. It is crucial to assess the validity and suitability of your existing insurance policies upon your return.
In recent years, the Law Society has introduced new regulations concerning home insurance for property purchases, stipulating that buyers must have insurance in place before moving into the property. To streamline the process and save time, you can consider using UK comparison websites that enable you to obtain multiple insurance quotes simultaneously. This way, you can efficiently explore and compare different insurance options.
Wills/ Power of Attorney
When you return home, reviewing and updating your will and considering establishing lasting power of attorney is advisable. A lasting power of attorney is a legally binding document that allows you to designate one or more individuals to assist you in making decisions or make decisions on your behalf. This can be particularly helpful in situations where you may experience an accident or illness that could potentially result in a loss of mental capacity.
We have in-house legal specialists to help you with the above. Get in touch to find out more