Posted by Nick Day on 24 Jun 2013
Top 10 Tax Tips for Expats Moving to the UK
The UK tax rules for expats moving to the UK can be extremely daunting but there are many tax and social security (National Insurance) planning opportunities if the right approach is taken and the correct professional advice is followed.
Here we lay out our top 10 tips for reducing your UK tax bill should you move to the UK. The top rate of tax and National Insurance is 47% when combined, so well worth reducing if possible!
Relief for Non-UK Business Travel (“Overseas Work Days relief”)
If you are non-domiciled and move to the UK after 5 April 2013, you should be taxed on employment earnings relating to non-UK business travel only if you remit these earnings to the UK. This applies for the tax year of your arrival and the following two tax years. You will need to open a “compliant” offshore bank account to receive your earnings. So for example, if you travel on overseas business for 40% of the time, you potentially are taxable on just 60% of your earnings. For those that arrived before 6 April 2013 the position is more complicated but it is still possible to claim relief.
Remitting Pre-UK “Capital” on a Tax-Free Basis
If you are a non-domiciled and planning to file UK tax returns on the remittance basis to avoid paying tax on non-UK income and gains while resident here, it should be possible to “ring-fence” earnings/income/gains from prior to becoming UK tax resident, enabling you to bring this “pre-UK” money to the UK on a tax-free basis. The UK has some quite complex “mixed fund” rules for offshore sources but these should not present a problem if professional planning advice is undertaken.
Temporary Work Place Relief
If you are assigned to the UK by your overseas employer for a temporary period of up to two years, your UK housing and subsistence costs should be a tax deductible expense, whether or not these are paid by your employer or by you personally. With the high cost of UK accommodation and the top rate of UK tax at 45%, this can be a hugely valuable tax relief, but does need to be structured/documented in the right way from the outset.
International Travel Costs on Coming to the UK
Expats moving to the UK should be possible to claim international travel costs as tax-free, which should be well worth it as flight costs can of course be very expensive.
Relocation Costs on Moving to the UK
The UK allows up to £8,000 of certain employer reimbursed costs to be paid tax-free, in addition to the initial travel costs mentioned directly above.
Home Leave Travel Costs
If you are non-domiciled and on assignment to the UK for the first time, the reimbursement by your employer of travel costs to visit your home country will be tax-free for the first five years. There is no limit on the number of trips home you can make although your family only get the tax-free treatment for up to two trips a year.
International Tax Treaty Relief
The UK has double taxation treaties with most countries, which can provide you with exemptions or relief for foreign taxes paid. For example, if you work in the UK for less then six months, you may well avoid UK tax altogether depending on your circumstances. And if you suffer foreign taxes on income which is also taxable in the UK, you should be able to claim a credit for at least some of the foreign taxes paid.
Tax Relief for Pension Contributions
Whether you pay in to a registered UK pension plan or a recognised overseas pension plan wile working in he UK, it should be possible to obtain UK tax relief for your contributions and avoid tax on your employer’s contributions if the correct approach is taken.
Tax Relief for Foreign Pension Income Received
For expats moving to the UK who received a foreign pension while a UK tax resident. You can file your tax returns on the “arising basis”, meaning only 90% of your foreign pension will be liable to UK tax.
The UK has a network of regulations/agreements with other countries that can keep you in your home country social security system if you are assigned to work in the UK. This can be highly beneficial should your home social security contribution rates be lower than the UK National Insurance rates for employees and employers.
The UK tax and social security rules are complex and this article is for broad guidance purpose only, and is no substitute for a proper review by a qualified professional based on your individual circumstances.
Further Information for Expats Moving to the UK
Click here for further details of the services we offer to “Expats.”
Click here for a detailed summary of the changes to the UK tax residence rules.
Click here to read related posts for Expatriate Tax.
Contact Tax Innovations
If you would like any advice regarding expatriate advice for moving to the UK or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or firstname.lastname@example.org.
- Overseas Pension Changes 6 April 2017
- Property Partnership Incorporation and SDLT
- Top 10 tax tips for expats moving to the UK
- Overseas Workday Relief (OWR) – Relief for non-UK business travel
- Main Residence Exemption – Update on Recent Court Cases