OVERSEAS RESIDENT LANDLORDS

LEAVING THE UK

  • Don’t forget to tell HMRC when you go.
  • You may continue to get personal allowances.
  • Special rules for Capital Gains Tax.
  • Timing is everything.

UK resident pays tax on all his/her worldwide income. In calculating the amount of income tax due the taxpayer may receive a certain amount tax free (this is the personal allowance – see Rates and Allowances), then a certain amount is taxed at the basic rate and the rest is taxed at the higher rate and additional rate. National Insurance contributions are not payable by non-residents unless they wish to preserve their rights by making voluntary payments.

Tax Refund on Leaving

If you have been an employee in the UK the taxation of your income was dealt with by your employer under the PAYE scheme. This scheme assumes that your allowances and entitlement to the basic rate of tax are spread evenly over the year. This means that if you leave half way through the year you have only had half your tax free allowance (“personal allowance”) and only half the amount at the basic rate to which you are entitled. The result is that for the tax year, if you have no other income arising in the UK once you have emigrated, you will have paid too much tax. If you have other income such as property income or deposit interest you may still have paid too much tax. You may claim a refund on leaving the UK on form P85 (use form P85S if you are a foreign national and were in the UK for employment only). The form will ask you about the income you expect to have arising in the UK after you have left (including property income) and this will be taken into account in calculating your refund. As with any calculation made before the end of the tax year, this will only be an approximate calculation, so do remember to submit your Tax Return following the end of the year in which you emigrated if you want a precise calculation.

Other Income

Other income arising in the UK is still taxable even though you may be non-resident. See Non-Resident Landlord.

Capital Gains

An individual is liable to Capital Gains Tax on the gain arising on on all disposals if he or she is resident in the UK. If he or she is domiciled in the UK then he or she is liable to CGT on gains wherever they arise. A person who is not domiciled in the UK but who is resident and who sells an overseas asset may be subject to Capital Gains Tax to the extent that the proceeds are remitted to the UK. The exception is that non-residents are liable to capital gains tax on the disposal (or removal from the UK, or cessation of business) of business assets where that business was carried from a permanent establishment in the UK.

Non-residents may be subject to Capital Gains Tax on the gains made on the disposal of UK assets including land and buildings. See Capital Gains Tax. Gains arising after 5th April 2015 on disposals of residential property made by non-residents after 5th April 2015 are subject to Capital Gains Tax but only on the gain accruing after 5th April 2015.

The “split year” treatment is a means of treating people as being non-resident for tax purposes from the time they leave the UK to the time they return to become resident –rather than using 6th April after the date of departure to 5th April before the date of return. If split year concession does NOT apply to you, and you dispose of an asset between the date of emigration and the following 5th April, then the whole of the gain made on that disposal remains liable to UK Capital Gains Tax subject to the normal reliefs and allowances. If you dispose of an asset after 5th April following emigration (and before 5th April 2015), and you remain non-resident for five full tax years (or more) then the gain accruing before 5th April 2015 and made on the disposal is outside the scope of UK taxation. The reverse applies on your return to the UK :- if you sell an asset after the 5th April preceding your return to the UK (and becoming resident once more) then the gain on the disposal is subject to Capital Gains Tax subject to the normal reliefs and allowances.

If split year concession does NOT apply to you, and you dispose of an asset between the date of emigration and the following 5th April, then the whole of the gain made on that disposal remains liable to UK Capital Gains Tax subject to the normal reliefs and allowances. If you dispose of an asset after 5th April following emigration (and before 5th April 2015), and you remain non-resident for five full tax years (or more) then the gain accruing before 5th April 2015 and made on the disposal is outside the scope of UK taxation. The reverse applies on your return to the UK : if you sell an asset after the 5th April preceding your return to the UK (and becoming resident once more) then the gain on the disposal is subject to Capital Gains Tax subject to the normal reliefs and allowances.

Inheritance Tax

The taxation of the estate of a deceased person differs from country to country. In some countries there are rules as to who inherits what. In November 2015 the EU passed legislation granting more flexibility as to who can inherit what. If you die abroad you may be subject to the inheritance tax (or its equivalent) in several different countries. It is vital that you take professional advice not only in the UK but also in the country in which you intend to become resident before going there. You will probably be advised to make a will in each jurisdiction.

© Landlords Tax Services Ltd 2016 All Rights Reserved - In an article such as the one on this page we can only give brief general guidance and cannot cover all situations. This guidance may not cover all your personal circumstances and so you should not rely on it. Before taking action or not, always do your own specific research and seek appropriate professional advice which takes into account your personal circumstances, with the full facts of the case and all documents to hand. Neither Maurice Patry F.C.A. nor Landlords Tax Services Ltd can be held responsible for the consequences of any action or the consequences of deciding not to act.