It could be the Covid-19 factor, Brexit or a combination of both, but we’re finding that conversations with our clients about the tax implications of moving abroad are increasing.

There are a lot of common misconceptions about becoming tax resident abroad and it is a surprisingly complex area, surprising sometimes because for some years now we’ve had a Statutory Residency Test that establishes how many UK ties an individual has. The number of ties then dictates how many days a person needs to be out of the UK to become non-UK tax resident. Sounds simple doesn’t it, but…

Scenarios we often come across include:

  • Remote working business owners who wish to retain their UK business and home but spend a large part of the year abroad,
  • People who are fed up with the British weather (who isn’t?!) and want to spend a lot of their time away, perhaps travelling between different countries regularly so they don’t actually become resident anywhere else, and
  • Increasingly, people who are looking to move to somewhere with a more favourable tax regime, perhaps as part of their wider retirement planning, looking at selling out whilst abroad or taking a large amount of income via dividends maybe.

“Where should I move to?”

This is usually a tax-motivated question and there isn’t a quick or simple answer. One of the points we make whenever we’re having any of these discussions is that you have to bear in mind, particularly if you are planning around tax, that things change. You may have the best intentions to stay abroad for five plus years (which is what you usually need to do if you don’t want to pay lots of UK tax on return) but family circumstances may force you to return sooner than you planned; it could be something lovely like the arrival of a new grandchild, but often it’s an elderly parent becoming ill or even simple homesickness.

If you are not choosing your intended future home for its climate or local culture, but primarily based on tax, then the nearer ones that are popular include The Isle of Man, the Channel Islands, and increasingly Portugal. With its lovely climate and beautiful coastline, Portugal makes for a pretty attractive destination and there is a surprisingly beneficial tax regime for UK expats moving there, including an exemption from income tax. Obviously, there are plenty of other places around the world with favourable tax regimes including the Cayman Islands, New Zealand also has a favourable capital taxes regime although it’s not so easy to gain entry at present.

You should also bear in mind that if your move abroad is primarily tax-motivated, not only can the UK rules change but also those in your country of destination too. It’s quite a big planning exercise to consider moving abroad for tax reasons and you should of course always ensure that you take detailed professional advice before you make your move. I would recommend that you seek to understand how the rules would apply if your plans fail and you remain or revert to being UK resident – particularly if you are realising a gain or income whilst abroad.

One step closer to departure

We are happy to talk through your situation and give you the bespoke advice that a move abroad requires. And, with our international connections, we can also make sure you get the right advice in the country you are moving to whether it is Portugal, the Channel Islands or further afield on one of the Caribbean Islands. Start a conversation today by sending an email to Kate Naylor.

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Kate Naylor
Kate Naylor

Business Tax Partner

Kate spends a lot of time working with businesses and their owners on tax strategies and mitigation, which includes looking at the business and its structure, through to the owners personal tax situation and their longer term goals and plans.

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