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Moving to the UK? Understand the Tax Implications Thumbnail

Moving to the UK? Understand the Tax Implications

Andrew Talbot

Moving to the UK involves considering your domicile status and the impact of the remittance basis for taxation. We provide a simplified overview:

Domicile and Its Significance: Domicile is a common law concept determined by your permanent home. It's often inherited from your father at birth but can change if you move permanently to a new place. Unlike citizenship, which can be held in multiple countries, you can have only one domicile at a time. This legal status is crucial for personal matters like birth legitimacy, succession, marriage, and taxation. Under English law, there are three forms of domicile: domicile of origin, domicile of dependence, and domicile of choice.

Becoming a British Citizen: There are various routes to becoming a British citizen, with naturalization being the most common for those born outside the UK to non-British parents.

Domicile for Tax Purposes: For tax purposes, individuals may be considered domiciled in the UK, notably if they are long-term residents. Your domicile status is vital for UK tax matters because:

  • Non-UK domiciled individuals can use the remittance basis for taxing non-UK income and capital gains.
  • They're subject to inheritance tax (IHT) only on UK assets and certain offshore assets linked to UK residential property.

Proving non-UK domicile can be straightforward if you're living in the UK temporarily with a clear plan to leave. However, there's a risk of HM Revenue & Customs (HMRC) challenging your domicile status if they believe you intend to make the UK your permanent home.

The Remittance Basis: UK residents are taxed on worldwide income and capital gains (arising basis) by default. However, UK-resident individuals who are non-UK domiciled can choose the remittance basis. This means they're taxed on UK income and gains when they arise, but non-UK income and gains aren't taxed unless remitted to the UK.

Examples of remittances include transferring foreign income and gains to a UK bank account or paying UK expenses with non-UK income. Seek advice to ensure you don't inadvertently remit non-UK income to the UK.

Cost of Using the Remittance Basis: You can use the remittance basis for free in your first seven out of nine years of residence. Afterwards, you'll pay a £30,000 charge, which increases to £60,000 after 12 out of 14 years. After 15 out of 20 years of residence, you are deemed domiciled in the UK and can't use the remittance basis.

Pre-Arrival Planning and Advice: The UK can be an attractive place to live due to the remittance basis and limited IHT exposure during the first 15 years of residence. Consider pre-arrival planning to make the most of these benefits:

  • Create a pool of funds (clean capital) for tax-free use in the UK.
  • Rebase assets with gains to reduce future UK tax liability.
  • Explore more complex strategies, like using trusts for long-term protection.

Understanding domicile and the remittance basis is crucial when moving to the UK, helping you make informed decisions about your tax obligations and long-term financial planning.

A general review of your affairs can identify areas of UK tax concern, including investment selection, non-UK resident trusts, control powers in trusts, and company ownership. Contract Avrio Wealth to navigate these complexities.

This material is intended for educational and informational purposes only. It is not intended to provide specific advice or recommendations for any individual. Additionally, you should consult with your Financial Advisor, Tax Advisor, or Attorney on your specific situation. The views expressed in the material are that of the author and do not necessarily reflect those of any market, regulatory body, State or Federal Agency, or Association. All efforts have been made to report or share true and accurate information. However, the information may become materially outdated or otherwise rendered incorrect due to subsequent new research or other changes, without notice. The author nor the firm are able to always verify the content from third-party sources. For additional information about the firm, please visit the MAS Website at https://www.mas.gov.sg/  and the SEC Website at www.adviserinfo.sec.gov. For a copy of the firm's ADV Part 2 Brochure, please contact us at info@avriowealth.com.