For many of us, living in a foreign country, particularly somewhere warmer than the UK, is one of life’s ultimate dreams, but understanding moving abroad and tax is not easy.
If you are close to achieving this dream and making it a reality, it is likely that you have been good with your money and have grown your wealth. You probably realise that taxes have been your biggest expense and unfortunately this won’t stop once you move abroad.
The rules that apply to moving abroad and tax
When planning to move abroad you need to be clear whether you are planning to do this for just part of the year, temporarily and what country you are moving to as all have different impacts on how you pay your tax.
For the purpose of this article we are going to focus on those who wish to move abroad full time for a good few years at least. If you would like to know more about how you’re impacted if you only live abroad for part of the year then please contact us or chat to us live through Facebook Messenger.
If you move abroad permanently you will need to tell HM Revenue and Customs (HMRC) and they will class you as a non resident. If you are moving abroad and working abroad you will pay tax on your earnings in the country you are a resident in and not the UK. Any savings accounts, investments you make or investment property you purchase in the country you move to will all be taxed by that country rather than the UK.
If you are planning to work in an EU country then you will normally pay social security contributions (similar to UK National Insurance) in the EU country you reside in. This will give you entitlements to benefits in that country. The UK also has an agreement with EU countries that you will continue to receive free health care.
Where HMRC may still be in touch with you is if you continue to earn money from jobs, investments or property based in the UK. This is potentially still subject to UK tax and tax in the new country you now reside in! But don’t panic the UK has what are called ‘double taxation agreements’ with many countries which make sure you don’t pay tax twice. You can check the list of countries here.
5 key moving abroad and tax points to understand
- Be clear on what your future plans are. Is the move temporary or long term?
- Once you are clear on your plans tell HMRC. You can find the various forms to notify them here.
- Work out what income you are earning from investments and property that you plan to keep in the UK. This may still be liable to UK tax.
- Check whether the UK has a double taxation agreement with the country you are moving to. This will mean you don’t pay tax twice!
- Decide on whether to continue National Insurance Contributions to the UK. If you are planning to return to the UK this could be beneficially as it will protect your future State Pension.
The government website actually has lots of useful information on this subject so I would urge you to have a look: https://www.gov.uk/tax-right-retire-abroad-return-to-uk if you are about to start living the dream!
If you’re not yet ready to live the dream but want to understand what you need to do to get there in terms of setting up your finances then please contact us. We would be happy to make it a reality for you!