Expat Tax Rebate Guide
If you’re in the middle of moving or have already left the UK, one of the less appealing tasks on your long to do list will be to ‘organise tax affairs’.
Granted, it’s not as exciting as ‘book flights’, but nevertheless – just as essential for a successful move. Not dealing with your UK tax can create a false economy, and mean you pay too much tax – whilst at the same time risking penalties from HMRC.
Use our expat tax rebate guide to find out more about expat tax returns, your non resident tax status and exactly what you need to do to ensure more of your money stays where it belongs.
Expats – Where to begin? Tell HMRC!
When you know you are definitely leaving the UK, you must inform HMRC by filling in form P85 ‘Leaving the UK’. It’s important that HMRC update your record, as it will help in reclaiming any tax you are owed. You don’t need to complete a P85 if you submit a Self Assessment tax return.
Am I due an expat tax rebate?
If you leave part way through a tax year you will probably be owed an expat tax refund. The amount you are due back will depend on how much you have earned and the tax you have paid. We can also assess your tax position to check if there are other reasons you might be owed a tax rebate from across the last four tax years.
Am I a ‘non-resident’ for tax purposes?
Tax rules for non residents are complex and working out your status can be complicated. It depends largely on your own personal circumstances and a number of factors need to be taken into consideration to get things right. The statutory resident test now exists which can help you decide your non-resident status.
As a general rule you and your spouse or civil partner, if you have one, must provide two pieces of evidence to show that you are a non resident for tax purposes:
1. Provide evidence that your move abroad is permanent, or that you will not be working in the UK for more than a complete tax year.
2. Provide evidence that you will only visit the UK, and remain in the UK for less than 183 days in one tax year.
I am working outside the UK should I still be paying UK tax?
To stop paying UK tax you need to be classed as non resident. To achieve this if you are working outside the UK you generally need to meet the following criteria:
- You spend no more than 90 days per tax year in the UK
- You have 30 or fewer workdays in the UK in any tax year
- Both a period of continuous, full-time overseas employment and any absence last for at least one complete UK tax year
I am non resident, should I be paying tax on my UK earnings?
The answer is no. However it does depend on the type of income you have. If, for example, you have paid tax on income from a private pension, you should be entitled to a refund on all of the tax paid. On the other hand if you pay tax on a UK government pension, this would not normally be refundable unless the country you reside in has a particular double taxation treaty with the UK.
You can reclaim tax you have overpaid for the last four tax years so it’s worth considering if you are entitled to a refund of tax in all of the last four years.
I will be renting out property in the UK – what do I need to do?
It’s common for expats to keep one or more rental properties in the UK meaning you become a non resident landlord. You will have to meet your obligations on time to avoid penalties and pay tax on your rental income. It’s not all bad news though; you can often claim a tax rebate on tax paid on your rental income. In addition reliefs and allowances are available which will reduce your tax bill now and in the future. You can also carry forward any losses and set them against future profits.
If you haven’t already, you will need to tell HMRC so they can set up a Self Assessment record for you.
You will normally have to complete a Self Assessment tax return each tax year declaring your UK rental income.
If you use an agent to look after your property, tax will automatically be deducted from the rent. Depending on your circumstances you can claim some or all of this tax back.
A successful application to the Non Resident Landlord Scheme will mean you will stop paying tax on any rental income. This does not mean you won’t have to complete a Self Assessment tax return.
Am I going to have to pay tax in the UK and in the country I move to?
The quick answer is that it depends on the country. Countries all across the world have acknowledged this issue by inventing the ‘Double Taxation Treaty’. Britain has these agreements with more than 100 countries such as Cyprus, Canada, Australia and New Zealand.
This basically means that any UK income is UK tax free when you are a non-resident as you will pay tax in the partner country. If there is no treaty then you still pay UK income tax. The idea is to share out the tax takings more fairly between Britain and any other country hosting its expatriates and means that you are not paying ‘double tax’.
Will I lose my UK state pension?
Well, the rules around this can be confusing and the issue is of great concern to many. Once you leave the UK you are allowed to continue paying money towards your state pension for up to three years only.
So if you are going to come back to live in Britain, it might be worth considering making these payments to avoid any gaps in your National Insurance contributions. Not only do gaps reduce the amount of your pension, but they can mean that you do not have full access to all state benefits when you return. Alternatively, you can think about transferring your pension into a ‘Qualifying Recognised Overseas Pension Scheme’ in your new home country.
Do I have to close my British bank and building society accounts?
No! As a non-resident you may even be due a tax refund on any account which is earning interest. Usually banks and building societies take tax off interest you have been paid or that has been credited to your account and will give you a Tax Certificate showing this transaction. A ‘not ordinarily resident’ person can use form R105 to apply to get interest paid without having the tax deducted. You do have to check if your financial institution participates in the latter scheme.
Another alternative is to move your money to an offshore account where interest will be paid to you gross.
You can keep ISAs going and they can continue to build, but you cannot put new money into them if you are not resident here unless you are service personnel or a diplomat.
There are tax breaks on ISAs which amounted to be worth £11,280 for 2012-13 and £3,600 per minor on JISAs.
Does Capital Gains Tax still apply when I leave?
Yes, on any current investments, until you have been a non-resident for five full tax years. This includes any properties that are managed by someone else.
However, if you have travelled widely in the last seven years and can prove that you were a non resident or ‘not ordinarily resident’ for at least four of the last seven years, then you are not eligible to pay Capital Gains Tax.
Expat tax services
Our team of expat tax experts are on hand to support you with your UK tax affairs. Our expertise will get you through what needs done, with minimal fuss at a very competitive cost. Get in touch today by filling in our contact form below or call us on +44 (0)1228 530477.
- Automatic overseas test (AOT)
- Split year treatment
- Sufficient ties test
- Dual residence
- Seafarers tax deduction
- Double taxation treaties
- Statutory residence test
- Non domicile
- Remittance and arising
- Temporary non residence
- Having an overseas employer and your tax
- What is a DT Individual Form?
- UK secondment tax relief
- Tax Refunds for Offshore Workers
- What is a P85?
- Non resident pension tax relief
- Foreign Service tax relief
- Overseas Workday relief guide
- What is HS302?
- What is a HS304?