ProACT Sam on when non-resident UK Expats can relocate to the UK and start UK Tax Residence without taxing overseas foreign income.

We are often asked when I can go back to the UK without a double taxation issue back in the UK.

The UK allows a split year treatment if you have been outside the UK for more than 3 full tax years with great tax benefits.

If split year treatment is granted your UK income is only considered to or from that point.

If returning to the UK, even early in the tax year, say June, a split year treatment means you can earn overseas until June, return to the UK on 30th June, with no UK tax on the April to June overseas income. Plus you still have a full years of allowances for the 9 month year July to March.

If leaving the UK the reverse is true.  You may have earned around £12,000 April to June.  You  receive a full year personal allowance against this income meaning a tax rebate over £2000 is possible for employees taking up a new contract working abroad from July.

If a split year is granted on your way out then the income earned abroad after that date is not part of your UK return.

Working Abroad Contracts

That is 3 full UK tax years, 6th April to 5 April to qualify for split year treatment.

Consider that 8th April 2020 to 1st April 2023 is only 1 UK tax year.

You may need to stay outside the UK before returning to the UK until a new tax year has started, or leave before the end of the tax year on the way out.

When relocating overseas on a short term working contract plan your period out of the UK for maximum tax savings.

Living Abroad More Than 3 Years

UK Expats avoid close scrutiny after 3 years and altogether after 7 years if they maintain their non residence status. This relates to UK ties including family, days visiting, working in UK and other reasons.

Generally if more than 3 years abroad as an expat you can benefit from split year treatment going out and back in.

Back Track

If you don’t meet the split year rules then on returning to the UK at anytime during the year leaves you open to a full UK tax year assessment on worldwide income.

If you took a 2 year contract finishing in June, at £80,000 per year, that gave you a £20,000 end of contract bonus before returning to the UK.

Returning on 30th June to the UK 3 months into the tax year could mean the April-June income and bonus of £40,000 is added to the current year's UK taxable income.

Worse still, the previous years £80,000 overseas income from working abroad could also fall under UK tax.

Plus the first 9 months of the overseas contract from the previous year.

Reversing all the tax savings of living and working abroad, this could be painful if working in a no tax jurisdiction, more tax is payable in the UK.

ProACT Know How

ProACT Partnership have the expat experts to guide you online to make the correct decision with timing of contracts and relocations.

We offer expats a year round retained client service as well as personal consultancy for family and business Living and Working Abroad.