As UK and Australian tax agents we specialise in bridging the gap between the UK and Australian taxation systems.
With a team of experts experienced in both jurisdictions, we can apply our knowledge and practical experience to assist you with your tax planning and compliance obligations.
For individuals relocating to UK, there are important tax considerations that should be considered in advance of the move to avoid unintended tax consequences for you.
Tax Residency Status
The first consideration is to determine the point in which you are deemed to be UK tax resident.
The UK has a rigorous test to determine an individual’s tax residency position called the Statutory Residence Test (SRT).
The UK tax year runs from 6 April to 5 April the following year. An individual may be deemed to be tax resident for the whole tax year despite only arriving part way through the tax year.
Issues may arise where an individual is also considered to be tax resident in their departing country and therefore you should seek to obtain professional advice from an international tax specialist.
Income Tax
Individuals who are tax resident in the UK are subject to UK tax on their worldwide income and gains. However, where an individual has a domicile outside of the UK, an election for the remittance basis of taxation can be made. In such cases, offshore income and gains are only subject to UK tax to the extent that they are remitted to the UK.
Determining an individuals domicile status can be a complicated process that requires a full understanding of the UK definition of domicile from a tax perspective. Due to personal circumstances, some individuals may require a full domicile review.
After 7 years in the UK, a claim for the remittance basis of taxation will incur an additional tax charge. In these cases, it is advised to review your tax affairs to determine if it is more tax efficient to claim the remittance basis or be taxed on your worldwide income and gains.
Prior to arriving in the UK, if an individual intends to claim the remittance basis then separate bank accounts should be set up to prevent accounts containing income earned prior to becoming UK tax resident from being mixed with income earned once you have established UK tax residency.
Inheritance Tax
An individual’s liability to UK IHT is dependent on their residence and domicile status. Where an individual is UK resident, they will be liable to IHT on their UK assets if they are deemed to be non-UK domiciled. If they are UK domiciled also, they will be liable to IHT on their worldwide assets.
Individuals who have lived in the UK for 15 of the prior 20 tax years, or who have had their permanent home in the UK in the last 3 years of their life, will be deemed to be UK domiciled for IHT purposes. In such cases, IHT will be due on any UK assets owned by an individual.
IHT planning is a useful service for individuals wishing to mitigate their exposure to UK IHT both now and in the future.
Trusts
The tax issues surrounding trusts are complex when dealing with individuals becoming resident in the UK and it is recommended that professional tax advice be obtained.
The residency of a trust will depend on the residency status of the trustees and the residence and domicile status of the Settlor at the time the trust was settled.
The IHT implications of a trust will depend on the Settlor’s domicile and the situs of any trust assets and so a trust may still be liable to IHT even if you relocate overseas. Depending on the assets within a trust, IHT may be due when assets are put into trust, when assets leave a trust, or at a 10 year anniversary of a trust.
Individuals should start planning well in advance of an overseas move to ensure there are no unintended tax consequences and there is sufficient time for tax planning.
Where individuals have already relocated, there will still be merit in seeking tax advice to ensure you remain fully compliant with any tax obligations and tax advantage of any tax planning opportunities available to you.
We can help provide advice in relation to this.