Over the last year, Brexit combined with the COVID-19 pandemic have undoubtedly made it more likely that UK expats living overseas will decide to return home.
That could be temporary, to spend more time with loved ones, or as a permanent move.
In doing so, there are many considerations:
- Will you sell your overseas property, or keep it as an investment?
- Do you need to transfer savings and bank accounts over?
- Is your pension in a foreign currency, and can you switch it back?
- Will your move change your tax residency status?
- Who do you need to inform about your move?
- How long can you stay in the UK without needing to reorganise your finances?
Each of these questions is equally important, and careful planning alongside professional financial advice is crucial.
Here the Chase Buchanan teams have collated our checklist of the most important considerations when planning to return to your country of origin.
Clarify Your Residency Status
Firstly, you need to know whether you are a tax resident in your existing home country. For example, if you live in Cyprus, France, Spain or Portugal, if you have been living there for most of the year, you will probably already pay local taxes as a tax resident.
However, being an expat doesn’t necessarily mean you are no longer a UK resident. If you are considered a resident in Britain for taxes, likely, your move won’t have a substantial impact.
The general criteria for being treated as a UK resident are:
- You spend 183 days or longer in Britain during the tax year.
- Your primary residence is in the UK, you have lived in it for at least 91 days, and at least 30 days in the tax year.
Residency isn’t always straightforward, and it may be that you have properties, assets, businesses and family ties in two places, in which case professional advice is vital.
Think About Your Property Assets
Property is usually a stable investment, as most homes will appreciate over time. If you own a home in the EU and decide to move permanently to the UK, there are practicalities and tax implications.
If you are a British resident and rent out a property abroad, you will still need to declare this on your HMRC tax returns and pay UK income tax. Likewise, if you have a UK rental property, you’re likely to have been paying tax in your host country on that foreign income if you are a tax resident.
As a rule of thumb, you usually pay local taxes on income earned from anywhere in the world, in the country where you are a permanent resident, or resident for tax purposes – however, that isn’t a hard and fast rule!
Should you be considering buying a UK property to live in, it’s best to do this once you are already resident. Investing in a property as a foreign resident is generally not ideal as non-residents typically have higher blanket tax rates, and do not qualify for any available exemptions.
The same applies to selling your overseas property. If you plan to move and don’t wish to keep your home, it may be advantageous to sell it beforehand and temporarily rent to avoid higher than necessary Capital Gains Tax.
Plan for Your Investment Portfolio
Many expats will have a range of investments – that might include:
- Savings accounts.
- Offshore investments.
- Pension schemes.
- Stocks and shares.
- ISAs and Premium Bonds.
Every country has different tax regimes, and it may be that efficient investments in, say, Spain or France are not in the UK.
You might have some international assets, and the only impact will be in the tax rate you pay on any gains. Still, quantifying that tax change is essential, as it may substantially affect your retirement budget.
Inheritance tax is also a critical consideration. UK nationals are subject to IHT at rates that might be higher than in your existing country, so planning for contingencies and restructuring your assets is essential to avoid steep tax obligations.
Again, the only way to safely plan in adherence with the current tax schemes is to consult a financial adviser with comprehensive knowledge of both countries’ taxation criteria.
Decide On How Long You Will Stay
Even if your visit is temporary, there is the chance that your tax status will change depending on how long you remain in the UK.
In this case, you might need to make declarations to HMRC and the tax office overseas. If you have a Will, this also requires review since probate laws differ between countries.
Having a Will in a different country doesn’t necessarily mean that it won’t be recognised. However, it usually requires an official translation, and to be notarised in the country where it was made, and again in your country of residence, which can be costly and time-consuming. Some expats choose to have two Wills, one in the UK and one in their host country. These must be prepared correctly to ensure that they are valid and do not have any conflicting clauses.
International pension transfers are another consideration. UK private schemes can be transferred into Recognised Overseas Pension Schemes (ROPS) – and if you hold an overseas pension, you should give careful thought as to whether this requires another transfer.
Remember that transfers can attract taxation charges and that pensions received in a foreign currency may fluctuate in value where exchange rates are volatile. You may need to pay bank fees to access funds paid to an overseas account.
Time Your Relocation
It may be that your move date is set in stone, or is scheduled around family obligations. If not, it’s wise to seek guidance from an experienced adviser, as you could streamline your relocation by timing this strategically.
For example, the UK tax year runs from 6th April, and many rules such as residency status depend on the amount of time you have spent in the country within a tax year, rather than a calendar year. Similarly, many European countries account for taxes alongside the calendar year, so moving just before the end of a tax period might make your affairs more straightforward to manage.
As we have seen, there is a lot to think about when moving back to the UK from overseas.
The key to a successful relocation is always to plan carefully, and work through your position with the benefit of professional guidance to ensure that any assets or income streams are restructured where necessary to protect your future wealth.
For more advice around international relocations and the most tax-efficient options available, contact your nearest Chase Buchanan team for a private consultation.