Tax implications of leaving the UK

A huge number of people are forecast to leave the UK over the next 5 years, and therefore this is an important subject for a lot of people. Many of these points are covered in more detail in other articles but it's useful to 'bring them together'. Let's start at the beginning. You'll only need to consider your tax status if you become non UK resident. So if you leave the UK to go on a short holiday there won't be any tax implications. Similarly if you leave the UK and plan never to return you'll usually be classed as non UK resident from the date you leave the UK. Lots of people may be somewhere in between these two extremes. Some Implications of non residency Once you lose your UK residence status, this is when you'll see the tax implications. Note that unlike in many other countries (eg Australia) there is no 'exit' charge when you leave the UK. This means that if you hold assets that have increased in value substantially since your first bought them, when you move abroad the gain won't automatically be charged. Here's some of the key tax implications of moving overseas:

• You can sell UK assets free of CGT, provided you are overseas for a period of at least five complete tax years. So as there's no exit charge when you leave the UK, emigrating is in many ways the simplest form of tax avoidance. You can have assets that have substantial gains (eg property) and simply move overseas, establish non UK residence and sell them free of UK tax (subject to various conditions).
• You won't be able to make ISA contributions (although your existing ISA will retain the beneficial tax treatment).
• You need to carefully consider your position if you've made any EIS investments or have received assets subject to a gift relief claim. The EIS scheme allows individuals to defer paying CGT on the disposal of any asset when they reinvest some of the proceeds into shares qualifying under the EIS scheme. Great -- but the downside is that if you then become non UK resident within (usually) three years the deferred gain is charged to CGT again. Similarly gift relief can be used to transfer business assets between individuals free of CGT. The gain is then deferred until the asset is eventually sold. However if you have received an asset from someone and you've both claimed gift relief, the gain can also be charged if you become non UK resident within a period of six years. So you need to be careful if you've got deferred gains under either the EIS scheme or gift relief.
• Any assets that are used for the purposes of a trade are likely to still be within the UK tax charge. The CGT exemption for non UK residents doesn't apply if the assets are used for the purposes of a UK branch or agency trade. So you couldn't for example continue to run a sole trader business from abroad and then hope to sell up free of CGT. However, this doesn't apply if you're using a company and are planning to sell the shares. In this case the shares are effectively an investment asset and you can sell them as a non resident free of CGT. If the company was a UK company and was itself looking at disposing of the trade or assets the fact that the shareholders were non UK resident would not prevent the company from being charged to corporation tax on the gain realised. As such if you own a business and are looking at selling it as a non resident you may want to consider transferring it to a company first (known as 'incorporation') to obtain the CGT exemption on disposal.
• If you own an offshore company you need to be careful. We stated above that the exit charge does not apply when an individual ceases to be UK resident. However, this does not apply to companies. The only way that a company could cease to be UK resident would be if: It was a foreign registered company that was controlled from the UK (ie UK resident), and then subsequently transferred its control overseas. In this case the company would be deemed to have disposed of and immediately reacquired the assets that it held - crystallising the gains and subjecting them to corporation tax. So if you do own a foreign registered company that you control from the UK transferring its control overseas should be carefully considered.
• If you are subject to CGT you can still claim the annual CGT exemption.
• If you're selling a former home and aren't exempt from CGT (eg if you remain non UK resident for less than five years) you can still claim PPR relief in full or part to reduce the gain
• When you move overseas you will be exempt from UK income tax on your overseas income.
• You'll get the full personal allowances etc in the tax year that you leave therefore you may be entitled to a tax repayment if excess tax has been deducted under PAYE
• If you leave the UK permanently or have gone to work overseas you should be able to establish non residence on the split year basis. This means that you'll only be UK resident for the period of the tax year prior to your departure -- after this you'll be non resident. As this is only a Revenue concession it's probably not wise to rely on this too heavily though (eg I'd wait until the tax year after you left before extracting a substantial dividend from a company- if possible).
• If you're working overseas full time you should be able to get an 'NT' (No tax) code.
• Once you're non resident you can claim income from various UK sources free of income tax (eg bank interest can be received gross if you're non UK ordinarily resident).
• If you're renting out property you will be subject to the non residents landlord scheme
• If you have UK royalties, you may be subject to a UK withholding tax
• You can then look at any relevant double tax treaties if you're a non UK resident and are clearly a resident of the overseas country (and can back this up with a certificate of tax residence). For example you could consider using a double tax treaty to reduce the rate of UK tax withheld on any UK royalties. So there you have it -- some of the tax implications you should bear in mind when you leave the UK.