Tax If You Leave the UK to Live Abroad

If an individual decided to leave the United Kingdom after working and staying in the UK, it is imperative that he/she informs the HM Revenue & Customs (HMRC) about it. An individual may not inform the HMRC, if he/she is only travelling outside the UK on a business trip or holiday. It is essential to the HMRC if an individual is either:

• Going abroad to work full-time for a minimum of one complete tax year (a tax year is defined as a complete year starting 6 April to 5 April of the subsequent year)
• Moving out of the United Kingdom to permanently stay abroad

Before moving abroad, an individual must send certain forms to HMRC. For example, if an individual receives form P45 (form issued by an employer when an individual stops working for them) from his/her employer, they must send Parts 2 and Part 3 of the form P45 to HMRC along with form P85 (this form is used to claim tax refund or tax relief – if an individual has left the UK, he/she can use the online P85 form service). Along with these two forms an individual will also be required to send a self-assessment tax return prior to leaving the United Kingdom. He/she must complete the ‘residence’ section of the Self-Assessment tax return to notify HMRC that they are moving out of the country.

It must be noted that an individual will not be able to use the online service at HMRC if he/she has informed that HMRC about them moving out of the country. As an alternative, an individual will be required to either use commercial tax software or post a paper Self-Assessment to send his/her tax return to HMRC. On the other hand, an individual can take help of a tax professional to send the tax return to HMRC. It the return is sent by post, an individual must complete the ‘residence’ section in the tax return form i.e. SA109-2018. If the deadline (see below table) is missed, an individual will be charged penalty.

Deadline to submit the applicable forms for tax year 2017-18 (starting 6 April 2017 and ending 5 April 2018)

What happens once HMRC is informed

If an individual is categorised as a non-resident of the United Kingdom, he/she will not be required to pay any United Kingdom tax on any gains or earnings made outside the United Kingdom. Depending on an individual’s circumstances, he/she may be categorised as a non-resident or transient from the day he/she leaves the United Kingdom. This treatment is referred to as ‘split-year treatment’ – in such a scenario the tax year is divided into 2 parts – one part represents the UK resident period and the other part corresponds to a non-resident period. In case an individual is eligible for a tax refund, the HMRC will compute it and inform the person about the payable amount. For any further communication with HMRC, such as change in circumstances while an individual is out of the country, the National Insurance (NI) should be kept handy. Also, if an individual decides to get back to the United Kingdom, he/she must inform HMRC.

Additionally, if an individual continues to earn (for example, income from rental property) while he/she is not in the UK, they will have to pay UK tax. Usually, even if an individual is not a UK resident anymore, he/she has to pay tax on the UK income for income sources such as rental income, income from pension funds, interest for savings etc. Non-residents are not liable to pay United Kingdom tax on interest from UK government securities (‘gilts’) and State Pension. To keep its citizens protect, the United Kingdom has ‘double taxation agreements’ with numerous countries to make certain that an individual does not have to pay tax twice. However, if an individual is taxed twice, depending on the treaty, an individual can either get a refund after he/she is taxed or full or partial respite before he/she has been taxed. Each double-taxation treaty defined the country where an individual pays tax, the amount of tax relief an individual can get, and the country where an individual can apply for relief.

Individual Must Carry Their National Insurance (NI) number if they Plan to Get Back to the UK

An individual must carry his/her NI number if they have plans to get back to the UK and plan to file in a claim for State Pension later. An individual can continue their National Insurance (NI) contributions while they are out of the country so that they are still able to claim state remunerations, comprising of State Pension. An individual cannot claim back any NI (National Insurance) when he/she is moving out of the United Kingdom. In case the country, where the individual is moving to, has a social security agreement with the United Kingdom, the NI paid by the person might be considered in the direction of reliefs or supports in the new country. There are a few United Kingdom benefits such as Jobseeker’s Allowance that an individual can claim if he/she plans to work in a European Economic Area (EEA) country.

Visiting the United Kingdom again

An individual is permitted to visit the United Kingdom without becoming a resident again. This will be influenced by the time period for which an individual will be visiting the UK and the reason for the visit. If an individual is working out of the country full-time, he/she can typically visit the United Kingdom for a period of up to 90 days in an annum – as long as he/she isn’t working in excess of 30 out of these 90 days.

However, an individual can become a UK resident again on the basis of certain activities such as purchasing a new property or getting involved in a business activity. Individuals can check their residence status online – rules differ for computing the residence status prior to 6 April 2013.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.