Self Assessment Advice For Returning Expats
Considerations that expats should make when returning to the UK.
Mike Parkes, our Self-Assessment Expert (and Director at GoSimpleTax ) looks at considerations that expats should make when returning to the UK.
Whether COVID-19 has uprooted you or it’s just simply time to return to the UK, it’s important to put the relevant tax measures in place before booking your plane tickets. Almost every year, expats return to the UK only to find themselves at odds with HMRC.
In most cases, this is due to unfamiliarity with new tax laws or laws that wouldn’t have been applicable to you prior to your departure. However, that won’t be enough to avoid HMRC penalties.
Brush up on the changes
A quick note about stamp duty: a 2% surcharge on non-UK residents purchasing residential property in England and Northern Ireland comes into effect from 1 April 2021. The surcharge will be in addition to the existing 3% Stamp Duty surcharge on purchases of “additional” dwellings such as buy-to-lets and second homes, the flat 15% Stamp Duty rate on purchases of dwellings worth more than £500,000 by companies acting as “envelopes” and the existing stamp duty rates for UK home buyers.
It may not feel like there have been any key legislative changes that an expat will have missed over the last decade. However, when you consider the introduction of the following changes, you may wish to seek professional advice when returning to the UK:
- Statutory residence test (2013/14) – These are rules regarding your residency status. Each year is looked at in isolation. There are automatic tests related to your time in the UK, time overseas and what ties you have in the UK.
- Deemed domicile rules (2017/18)
- Non-resident Capital Gains Tax (2019/20)
Determine whether or not you are a UK resident
Residency depends on the results of the statutory residence test. Essentially, if at any point in the tax year an individual fails to meet the overseas test and meets either the sufficient ties test or automatic UK tests, they will be regarded as a resident in the UK.
The exact date someone becomes a resident can depend on whether they qualify for split year treatment.
HMRC want you to run the tests in a specific order:
- Automatic UK test
- Automatic overseas test
- Sufficient ties test
If you’re deemed to be a UK resident, then your worldwide income will become taxable in the UK – assuming you are also domiciled in the UK.
There have been changes to the deemed domicile rules too. So, if you left the UK and have been making tax plans around returning, you should first check that recent changes do not affect these. We would recommend speaking to a tax professional in this case.
Additionally, if you’re returning to the UK within five years of leaving, this may also have an impact on tax on certain income and gains. Again, always check with a professional advisor before returning to the UK to avoid any unwanted tax bills.
Registering for Self Assessment
It may be that, before you left the UK, you did not qualify for Self Assessment. However, if you now have foreign income, depending on the amount, you will likely be required to register. Unless you are self-employed, you’ll first need to apply for your 10-digit Unique Taxpayer Reference (UTR) number – which takes approximately 10 working days. Bear this delay in mind as it could push you past the 31st January tax return submission deadline.
Once you’ve received your UTR and registered for HMRC’s online services, you’ll be able to file your Self Assessment tax return. Use this to detail all the foreign income that qualifies for taxation. Of course, if your total income stands below your 2021/22 Personal Allowance of £12,570, you won’t be expected to file. Neither will you be expected to file if your foreign income falls within your £1,000 trading allowance.
With GoSimpleTax, expats can get a clear picture of their obligations. All your income can be logged in an easy-to-understand format, and their software will highlight areas where you can potentially reduce your tax liability through tax relief.
Register for their free trial today and stay abreast of all the latest tax changes. When you’re ready to file your Self Assessment tax return, upgrade to their full service and submit straight to HMRC.