Tax residency in the UK: pros and cons of becoming a non-resident

Being tax resident in the country means paying the taxes for all your income and deals there. Sometimes, when you go to live abroad for a long time and want some tax to relieve, it will make sense to change your tax residency or cancel it to avoid double taxation. However, it does not necessarily mean you can avoid paying the taxes at all. Here are some more insights into this tricky question.
If in the next financial year you plan to become a tax non-resident in the UK, it’s better to get ready for this before the end of this financial year.

Non-residents usually do not pay taxes on their income gained outside of the United Kingdom, as well as are free from the capital gains tax for the majority of sold assets. However, to confirm the tax resident status in the UK, you need to meet a few criteria. Moreover, there is a probability that after leaving the UK, you’ll have to stay a non-resident for another five years.

The specific criteria of the statutory residence test depend on many factors: for instance, it’s relatively easy to become a taxation non-resident if you are going to work abroad for the period over a year.
If you’d like to sell some of your assets and avoid the capital gain taxes, you should conduct the sale already after your departure from the UK. If in the next five years after the sale you’ll return your tax residency, you will have to pay all taxes on the capital gain from this deal as soon as you come back to the country.

Since April 2015 investors, who are not tax residents in the UK, have to pay capital gain tax for all income received from their residential properties in the UK, even though they are not tax residents in the United Kingdom. Also, you should keep in mind that some types of your income, received at the territory of the UK while you are living abroad – for instance, the income from renting the British property away still will be taxed by the UK. From April 6, 2019, investors who are not tax residents in the UK, have to pay capital gain tax for all income, received from sales of direct or indirect equity participation in any British real estate (both residential and commercial).

Consider all these issues if you plan to get a tax resident or non-resident status in the UK. If you have any further question or would like taxation advice, do not hesitate to contact our specialists at Immigration Tax Partners. They will be happy to recommend the best options for your particular situation.



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