As soon as you are aware of the fact that you are leaving the United Kingdom you should make contact with Her Majesty’s Revenue and Customs and request that they send you a copy of form P85 (Leaving the United Kingdom). This form should be completed in the week you leave the UK, or after, and will inform revenue and customs of the fact that you are no longer resident in the UK.
To be classified as non-resident, you will need to prove the following:
- You have moved abroad permanently or your absence from full time work will last for longer that a complete tax year.
- You visit the UK less than 183 days in a tax year, or average less than 91 days over a four year period.
These same considerations will be applied to your spouse or civil partner.
Once officially classified as a non-resident you will not be eligible to pay any tax (e.g. PAYE and National Insurance contributions) to the UK government. If, however, your employment involves working partly in the UK, you will be eligible to pay tax on these earnings accordingly. Your local HMRC tax office can provide you with further information.
There are certain types of professions where UK tax will still be applicable. These are as follows:
- Crown employees
- Gas and oil workers
- Sports people and entertainers
Should you fall within any of the above categories, you should contact your local HMRC tax office.
If you are eligible to pay any tax on your UK income, your personal tax allowance will be taken into consideration. For the tax year 2010-2011 this was standing at £7,475.00, which is the basic rate for individuals below the age of 65. If you leave the UK part way through an applicable tax year, which runs from the 6 April to the 5 April the following year, you may well be entitled to a rebate on the tax amount already paid. This is another good reason for making sure that you contact the HMRC before you leave to live in another country.
The HMRC have a guidance leaflet available through their website called ‘Residents and non-residents – liability to taxes in the UK’, which you will find highly beneficial in this regard. This leaflet is labeled by code ‘IR20’. This may be accessed through the following link: http://www.hmrc.gov.uk/pdfs/ir20.pdf
Capital Gains Tax
You will not be eligible to pay this form of tax if you are able to prove that you were a non-resident or not ordinarily resident for at least 4 full years out of the last 7 before you became a non-resident. This provision comes from ‘Extra Statutory Concession D2’, which can be found at the following link: http://www.hmrc.gov.uk/specialist/esc.pdf
If any gains accrue through an establishment that remains connected with the UK, even if you are living in another country, these will continue to be liable to the payment of capital gains tax. This would include where such establishment is being managed through a third party (e.g. an agent).
For more information pertaining to this specific form of tax, please refer to the ‘Selling Property’ section below.
Double Taxation Treaties
It is important to note that the UK has double taxation treaties established with over 100 other nations across the world. In fact, with 1,300 such agreements in existence worldwide, one in thirteen of these is an agreement that involves the United Kingdom.
Such double taxation treaties/agreements are an important consideration for you when moving to another country. This is because the treaty aims to divide the amount of tax more fairly between the UK and the other country that has agreed to the treaty. This eliminates the requirement to pay tax in both countries (hence paying double tax). The provisions of such a treaty are incorporated into each country’s domestic law. As an example, within the UK, treaties are incorporated into law by way of statutory instruments, which are similar to Acts of Parliament, but do not have to go through the rigorous approval procedures through the bi-cameral chambers and gain Royal Assent.
When you research this specific topic on the HMRC website, you will find the details for each double taxation treaty that is currently in force. Moreover, you will also be able to access information on new agreements that may be due to come into force in the near future. Use the following link to access this information: http://www.hmrc.gov.uk/si/double.htm
Pensions are always a source of some concern for people when they move abroad. Many become confused as to whether or not they are entitled to maintain a UK pension, and if so, for how long.
When you leave the UK and settle in another country you are entitled to continue to contribute to your pension fund for a further three years. This is strictly providing you were contributing into this exact scheme when you departed the UK. After this three year period, you are no longer able to pay into the pension. It is at this point that you should seriously contemplate transferring your fund into a scheme offered through the country to which you have moved. This is known as the ’Qualifying Recognised Overseas Pension Scheme’ (QROPS) and details of this will be available from your local HMRC tax office.
Tax On UK Bank And Building Society Accounts
If you are a non-resident of the UK, but still hold a British bank or building society account which is accruing interest, you may be eligible for a refund on the tax that is due. Complete a form R43 in order to apply for a refund on this particular income tax. You may obtain this form through http://www.hmrc.gov.uk website, along with extra guidance notes.
You may be classified as ‘not ordinarily resident’ (whereby you normally live outside of the UK) and by using a form R105 (as for R43 above), you may be able to submit this to the relevant bank or building society to obtain relief on the tax due. You would need to check to make sure the bank or building society participates in this type of scheme.
If you hold an Individual Savings Account (ISA), this will remain a source of tax free income for you even if you move abroad. However, you should be mindful of the fact that you will not be able to contribute new funds to the account once you are no longer a UK resident. The only exceptions to this are if you are a serviceman or diplomat.