UK tax laws are never straightforward and arguably become more complex if you are or are about to become an expat. Despite living overseas, you may still need to pay tax to HMRC. This involves registering for Self-Assessment to obtain your Unique Taxpayer Reference (UTR) number. The process takes around two months to complete, therefore it is in your best interest to begin the process before your international relocation takes place.
In this post, we look at the procedure to follow for British expats to register and complete their self-assessment tax forms.
To do before your International Relocation
To register for Self-Assessment, complete an SA1 form. Once complete, HMRC will issue you a UTR number which you’ll need to complete your tax return so keep it safe. Alternatively, you can call HMRC on 0300 200 3310 to arrange your UTR. Try to this at least two months before your international move.
Tax typically takes the form of Capital Gains Tax and income tax.
This can wait until after your international move
Determine whether you have to pay Income Tax
HMRC has recently introduced a residency test to determine whether you owe tax to the British Treasury. If HMRC decides you are a non-UK resident you should not have to pay UK income tax on your overseas earnings.
That said if you earn money from an asset in the UK, this will still be subject to tax. Rental income from a UK property is a good example of this. This income is classed separately from your overseas income even if you are classed as a non-UK resident.
HMRC’s residency test is in four parts. They are:
In simple terms, if you pass the Automatic Overseas Test and fail the Automatic UK Test and Sufficient Ties Test you will be classed as a non-UK resident. Should you pass the Automatic Overseas Test and pass one of the other two tests you may be classed as a UK resident and subject to UK income tax.
Bear in mind HMRC operates in tax years that run from April to April.
To take the tests complete the SA-109 as well as the S100 Self-Assessment forms. Once complete, send the forms to HMRC who will inform you how much tax you have to pay.
If you sell a residential property in the UK and have been declared a non-UK resident for five or more consecutive years you shouldn’t incur Capital Gains Tax (CGT). Under any other circumstances, your property sale will be subject to CGT.
There are similar tax laws surrounding other assets such as shares and inheritance.
Given the complexities surrounding tax, it is always best to seek a tax professional experienced in expat matters, to navigate UK tax laws and act on your behalf.
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