Top tips: Leaving the UK

1. Seek professional advice early

You should seek advice both in the jurisdiction to which you are moving and in the UK. Taking comprehensive advice and then implementing any recommendations can take time, particularly when trying to align advice from two or more jurisdictions. We recommend you start the process well in advance, ideally near the start of the UK tax year prior to the year in which you are intending to move.

2. Immigration: Visas

Unless you already have nationality or residence rights in the country to which you’re moving, it’s likely you’ll need to apply for a visa to live and work there. Each country has its own visa routes and requirements, and it will be important to take advice in the relevant jurisdiction to make sure that you get the right visa for you, including one that permits you to work if that is what you are intending to do.

3. Residence

The UK has a statutory residence test to determine whether an individual is UK tax resident in a particular tax year. This test is actually made up of multiple sub-tests. Under these tests, residence in the UK is determined based on a number of factors, including how many days you spend in the UK and how many days you spend in other countries in a tax year, where you own properties and how long you spend in each property in a tax year, where you undertake work and where your family are living. The tests can sometimes produce unexpected results so it’s important to take advice based on your specific circumstances, to ensure that you cease to be UK tax resident at the expected time.

As well as understanding at which point you will cease to be UK resident, you will need to understanding when you will start to be treated as tax resident in the country you are moving to. The UK tax year runs from 6 April to 5 April the following year, whilst many other countries operate on a calendar year. This can result in an overlapping tax year between the UK and the country you’re moving to, meaning you may be tax resident in two jurisdictions at the same time. If this happens, you will need to understand whether there is a double tax treaty that may assist with preventing double taxation.

4. Tax: Income and gains

The standard position is that an individual is resident in the UK for a whole tax year and taxable in the UK on all their income and gains in that tax year.

However, in some specific cases “split year” treatment can apply. This allows an individual to split the tax year into a UK resident and a non-UK resident part. Certain types of income earned, and gains realised, in the non-UK part of the year should not be subject to UK tax. However, split year treatment does not apply to all income and gains, and there are very specific requirements to qualify for split year treatment, so advice should be taken to confirm whether you can benefit from this regime or not.

In addition, if you have created trusts, and in some cases if you have funded non-UK companies, you may be taxable on income and gains arising in those structures.

5. Tax: Inheritance tax

The UK has an inheritance tax (“IHT”) regime, which charges assets on death at a rate of 40% and can also apply to certain lifetime transactions.

UK situated assets are always within the scope of IHT, regardless of where the owner is resident.

Where an individual has been UK resident for fewer than 10 out of the last 20 tax years, only their UK assets will be within scope of IHT.

Once an individual has been UK resident for at least 10 out of the last 20 tax years, their assets outside of the UK, will also come within scope of IHT. In addition, any trusts that they have created will come within the scope of IHT.

When an individual who has been UK resident for at least 10 out of the last 20 tax years ceases to be UK resident, they will remain in scope of IHT for a period post-residence. This is referred to as the “tail” period and the length of the tail can be between 3 and 10 years, depending on how long the individual had been UK resident prior to leaving the UK.

Whilst an individual is within scope of worldwide IHT, they may have immediate UK tax liabilities if they put assets into trust. And when an individual comes to the end of their “tail” period, if they have transferred assets into a trust, that trust may have an “exit” charge at a rate of up to 6% of the trust fund.

It’s important to understand exactly how IHT will continue to apply to you, and any trusts you’ve created, once you’ve left the UK.

6. Notifying authorities

There are several different UK authorities that you should notify if you are leaving the UK to move permanently abroad.

You should notify HMRC, either through your tax return, or using form P85 if you do not complete self-assessment tax returns.

You should also notify your local council and your pension provider.

7. Dealing with UK property

If you are retaining a UK property and it will be available for you to stay in when you visit the UK, this will count as a connecting factor when considering your UK residence status.

If you are renting out your UK property after you have left the UK, you will have UK income tax liabilities on the rental income.

If you sell your home after you have ceased to be UK resident, you may have to pay capital gains tax on any gain realised, with relief available for periods of time for which the property was your main residence.

8. Reviewing existing structures

If you are a director of a non-UK company, trustee of a trust, or sit on the board of a foundation, you should carefully review your position to ensure that you do not accidently trigger an exit tax if your departure from the UK means that the company, trust or foundation is no longer UK resident (or no longer managed and controlled from the UK).

In addition, if you are the settlor or beneficiary of a trust, a shareholder in a private company, or the founder of a foundation, you should seek advice in the jurisdiction to which you’re moving to check whether your move there will trigger any tax liabilities in that jurisdiction.

9. Wills and succession planning

England & Wales has a system of “testamentary freedom”. With a few limited constraints, this allows individuals to leave their assets to whoever they wish in their Will. Many other jurisdictions do not have this system, with some countries (e.g. France, Italy, Spain) having forced heirship rules which require an individual to leave a certain portion of their assets to specific individuals (e.g. spouse and children). Other jurisdictions implement forced heirship through applying religious rules (for example, Sharia law in many countries in the Middle East).

In some cases, it may be possible to opt out of forced heirship rules, but advice should be taken to ensure that, so far as possible, your assets are inherited in line with your wishes.

If you have retained assets in the UK, particularly real estate, it may be advisable to retain a UK Will to govern succession to those assets.

10. Pre- and post- nuptial agreements

Many countries have matrimonial property regimes, which set out how assets should be divided in the event of divorce. In contrast, the UK does not have marital property regimes.

Whilst nuptial agreements are not legally binding in the UK, provided certain safeguards are met, they are likely to be upheld. In other jurisdictions, nuptial agreements can be legally binding.

If you are married or in a civil partnership, you should consider whether the country you are moving to has specific matrimonial regimes and/or whether it recognises pre- and post-nuptial agreements. Any existing nuptial agreements should be reviewed and if necessary, new agreements put in place.

There are undoubtedly other matters to consider in addition to the legal and tax considerations outlined above, including banking arrangements, school selection for those moving with school-age children, arrangements for transportation of pets, access to healthcare, insurance, mobile phone contracts, checking if your driving licence is valid in the country to which you are moving and last, but not least, the practicalities of moving!

As you plan your departure from the UK, taking early, informed advice can make the process smoother and help you avoid unexpected challenges. At Burges Salmon, our expert team provides clear, tailored guidance across all the legal and tax issues that can arise when relocating.

If you would like to discuss your circumstances or need support navigating any aspect of the move, please get in touch with our team – we’re here to help.