The GSB Guide to repatriating to the UK
25/08/2022 Written by GSB Capital
If you have time on your side, then start looking at your financial affairs 12 to 18 months before your actual repatriation. If you have assets to sell and profit to release, it makes sense (from a capital gains tax perspective) to do this before returning home. Moving home on or after April 6th is a great way to simplify your tax situation. However, even the best-laid plans seldom come to fruition. Having the luxury of choosing your exact date of return is unlikely. Suppose you have assets such as property, and you can’t or don’t want to sell before you move. In that case, additional planning opportunities are available to mitigate potential tax on asset income.
Everyone’s circumstances are different. Repatriating may not be as complex for you as long as you take sage financial and tax advice from a professional.
If you transfer your funds or take benefits from your QROPS, the scheme has to report payments to HMRC, regardless of how long you were a non-UK resident previously.
If you’ve started drawing an income from a pension scheme while abroad, you will be liable to tax in the UK on your income once you return to Britain. (Regardless of whether yours is a UK registered pension scheme such as a SIPP or whether it’s a QROPS).
It is very important to seek advice at this stage to ensure that the level of income drawn from your pension, along with other assets, is done as tax efficiently as possible.
For example, you may be able to offset tax liability by drawing down a portion from the pension commencement lump sum, using tax-deferred 5% withdrawals from an offshore bond, using the CGT annual exempt amount, and transferring assets between spouses if one is a higher or additional rate taxpayer, etc. You have choices and options – but you must seek advice before your return to Britain. Otherwise, you limit all your choices and options. There’s also the issue of a no-deal Brexit which may affect your UK pension.
You will need to have a bank account in the UK if you want to receive funds from abroad. Simply supply the bank you’re transferring from with the following details about the account you’re transferring to:
- Your personal details
- Your bank’s SWIFT code
- IBAN (international bank account number) number
- BIC (business identifier code) when requested.
Liability for tax in the UK is determined by residence and domicile status. If you’re a tax resident in the UK you’re liable to UK tax on your worldwide income.
As a non-resident expat you’re subject to tax on UK-source income only, such as rental income from UK properties, UK pension income etc. Where you are subject to UK income tax, the amount you pay will depend on your income level, which falls into each tax band.
Everyone has a personal allowance of £12,500, which you do not have to pay tax on. In terms of registering your arrival back in the UK with the taxman. “You may need to register for Self Assessment, e.g. if you start working for yourself or have other income or gains from the UK or abroad. You don’t need to register if you’re an employee and don’t have other untaxed income to report.”
Everyone has a personal allowance of £12,500, which you do not have to pay tax on. In terms of registering your arrival back in the UK with the taxman, HMRC says:
“You may need to register for Self Assessment, e.g. if you start working for yourself or have other income or gains from the UK or abroad. You don’t need to register if you’re an employee and don’t have other untaxed income to report.”
You can find out more about self-assessment and who needs to send a tax return on HMRC’s website.
If you’re returning to the UK and taking up a job offer, you will likely need to fill in a Starter Checklist form from HMRC. This is for employees without a P45 (the form you’re given at the end of a period of employment in the UK, which provides details of your tax code, gross pay, and the tax paid for that year).
This Starter Checklist replaced the old P46 and gets you back on the taxman’s radar. Until your tax situation is clarified, you may also have to have an emergency tax code. Apply for both via HMRC’s website. For income tax, you are generally treated as a resident for the whole tax year. Therefore all income received in the tax year you become a UK resident will be subject to UK income tax.
There is, however, an extra-statutory concession for income tax which allows a ‘split-year treatment to be applied. That means income arising in the tax year of return (but before the actual return date) will not be subject to UK income tax. The rules for this are quite different to those applying capital gains treatment. And, income tax split year treatment is only available when an individual leaves or returns to the UK for work.
Capital gains is a tax payable on any gain made on the disposals of most assets, whether the disposal occurs due to a sale of the asset or gifting. It is assessed in the tax year the gain is made, and the rate it is paid relates to your total income.
When added to income for the tax year, any part of the taxable gain which falls into the higher or additional rate band is subject to CGT at 20% (28% for property), with any part below the basic rate band subject to tax at a lower rate of 10% (18% for property).
You have an annual exemption per tax year below, which gains realised will not be subject to CGT (currently, this exemption is £12,000). Depending on your current residency status, you may not be liable to UK CGT on investment assets purchased while you were non-resident and disposed of while non-resident. However, once you repatriate, your entire gain from such disposal could be liable to CGT. It may be wise to realise any gains on investment assets before repatriation.
HMRC has a useful section on its website with help sheets to determine whether you have anything to pay. Also worth keeping in mind is that there is no relief or reduction in liability available to take into account gains accrued while abroad. For this reason, returning to the UK with unrealised gains on assets is not a good idea. Where gains are realised during a tax year in which you are a non-UK resident, it is important to be aware that you may still be subject to UK CGT.
This can occur if you are a non-UK resident for fewer than five complete tax years before realising the gain. It is also worth noting that, while capital gains are assessed in the tax year, an extra-statutory concession applies where you have not been resident in the UK at any time during the previous five tax years.
Disposals made after the date that you become a UK resident are assessable for CGT. If, for example, you become a UK resident halfway through a tax year, you will not be subject to UK CGT on disposals made in the first half of the tax year. However, if you’ve lived abroad for fewer than five years and made a taxable gain, you may be subject to UK CGT.
PETs are gifts that potentially qualify for an exemption and are made, in general, to either an individual or an absolute trust. A potentially exempt transfer will only become chargeable to IHT if the donor fails to survive for seven years from the gift date. In this instance, it is regarded as a failed PET.
On death within seven years of the gift, the value of the failed PET is added to the donor’s estate, along with any other gifts made by the donor in the seven years before death. Only where the value of the failed PET, when added to any earlier gifts within seven years, exceeds the prevailing NRB (£325,000 in the current tax year) will IHT become payable on the failed PET.
If there is an IHT liability on the PET, then this may be reduced by taper relief, where the donor has survived at least three years from the date of the gift. The relief is calculated as a percentage reduction of up to the full IHT rate depending on the time between the gift and the date of death.
- 0-3 years from gift - 40% Taper Relief
- 3-4 years from gift - 32% Taper Relief
- 4-5 years from gift - 24% Taper Relief
- 5-6 years from gift - 16% Taper Relief
- 6 -7 years from gift - 8% Taper Relief
- 7+ years from gift - 0% Taper Relief.
If you’ve been away from the UK for a long time, things may have changed significantly concerning getting a rental contract or a mortgage. Most letting agents require references from previous landlords and will run a credit check on you before allowing you to rent a property.
As a returning expat, you can fall at each of these hurdles. You may not have up-to-date references, and your credit history may not reflect your current or recent earnings. If you’re returning to a job, this can help. You will be able to show proof of earnings (albeit anticipated earnings), a contract and a reference from your employer. However, if you’re returning for retirement, self-employed or currently unemployed, this can make things more challenging.
Many letting agents will consider your application favourably if you can pay a lump sum for rent in advance. Most private rented tenancies are let on an assured short-hold basis (AST). This means your landlord has the right to bring your tenancy to an end after its fixed term. If the tenancy does not have a fixed term, they can bring it to an end after six months. You will be required to pay a deposit upfront (usually 1 or 2 months’ rent), and it would be sensible to have contents insurance in place. And if you are returning with pets, your options are likely to be more limited, so start searching early if this is the case. (You may also need to pay a pet deposit).
When buying property, a very important part of the conveyancing process is understanding the source of the purchaser’s funds. As an expat or recent repatriate, you may be asked for additional proof if you bring money in from overseas (and/or your funds were earned or accrued overseas).
Solicitors handling the conveyancing process are guided by Money Laundering Regulations 2017, which mention the source of funds in two places:
- Regulation 28 (S11(a)) - Scrutinise transactions undertaken throughout the course of the relationship (including, where necessary, the source of funds) to ensure the transactions are consistent with the relevant person’s knowledge of the customer, his business and risk profile.
- Regulation 35 (S5(b)) - Take adequate measures to establish the source of wealth and source of funds which are involved in the proposed business relationship or transactions with that person.
Furthermore, the Law Society states;
“In many ways, client identification and verification is secondary in anti-money laundering compliance to understanding the source of funds.”
Cash is not an acceptable option. The onus is on you to prove your funds are not from the proceeds of crime, and if your solicitor has doubts, they are obliged by law to report you for suspicion of money laundering. For this reason, have as many wage slips, bank statements, contracts, etc.
However, be aware that the receiving bank in the UK may also require proof of the source of funds before clearing them This again takes time. Be prepared to answer questions about particular transactions on your bank statements, too, especially if they are frequent payments or large transactions. A delay in the process could cost you the property of your dreams.
Most big-name lenders in the UK make getting a mortgage for a repatriating Briton difficult.
The first hurdle? Not having a UK address in the last three years. Mainstream lenders carry out a credit score. You probably won’t have enough points without a recent UK address, and will be declined.
Fortunately, there are other lenders who credit check instead of credit scores and assess cases individually. Underwriters for these firms will look at your credit record to ensure that there is nothing untoward in your financial background.
And they won’t care so much about the fact you’ve been living abroad. Assuming all is well with your credit check, you have a deposit and can prove you can meet repayments, you should be able to find a willing lender. If you’re currently abroad and you’re planning to return and buy a property within the first year or so, these steps might help you plan:
1. Keep a correspondence address in the UK
Depending on where you’ve been living and how many possessions you’ve acquired, you may be able to return with just a suitcase. Chances are. However, you will require a container.
If you’re likely to return before your belongings, pack carefully to ensure you have the essentials you need while the rest is in transit. Also, plan to live in the UK without all your things for some duration and get Customs clearance. You will need a valid visa and a declaration form to bring your personal effects into the UK. You will also be required to list all the items brought into the country.
You will have to estimate acquisition dates and current values, and any items that you bought between six to twelve months before moving back to the UK may be subject to VAT charges. Remember that no liquids or consumables can be brought back via shipping containers, including toiletries and even candles. Otherwise, your personal belongings should be considered duty-free.
Those with large or many possessions will find it much easier to employ an international removal company or a separate import agent service and removal company. The agent and the international removal company will have the expertise and experience required to help your importation smoothly.
Fees charged will vary and depend on the cubic volume of effects to be returned, the container size, the place of origin and the ultimate destination. It’s wise to get a few quotes and to plan well in advance because shipping times can be long.
Tip: You can get a good deal if you are willing to share a container with other movers. So ask your relocation company for details.
You will have to pay a fee for the customs clearing agent who looks at your shipping container. And include copies of your passport and visa for the customs agent too.
Any delays on arrival at UK customs could be chargeable to you for storage, and of course, your goods may be subject to random checks.
It is possible to import medication, although customs will require all medication to be in its original labelled container with English instructions. Some medicine, such as controlled drugs, will require a doctor’s letter and a personal licence, and the amount allowed in will be restricted.
You have 14 days to inform HMRC that your vehicle has arrived in the UK. Your vehicle also needs to meet UK driving and safety standards. A European Certificate of Conformity and a Mutual Recognition Certificate are required for vehicles imported from the EU. A new car will require additional VAT, duty, tax payments, and registration once it arrives. HMRC sets VAT, and the registration department will determine the vehicle tax to be paid. A NOVA form and DVLA registration will be required for vehicles imported from any country, not in the EU. VAT and vehicle tax must also be paid.
The rules around live animal importation are fairly easy to understand and navigate. It’s wise to seek the help of a specialist transportation company to ensure your pets are cared for in transit. They also ensure all required documentation is in place to avoid enforced quarantine on arrival.
In the case of dogs, cats, and even ferrets, this is what the government has to say:
You can enter or return to the UK with your pet if it:
- has been micro-chipped;
- has a pet passport or third-country official veterinary certificate; and
- has been vaccinated against rabies - it will also need a blood test if you’re travelling from an unlisted country.
Dogs must also have a tapeworm treatment. Your pet may be put into quarantine for up to 4 months if you don’t follow these rules – or refused entry if you travel by sea. You’re responsible for any fees or charges.
It’s also worth checking with different airlines to see how they treat animals in transit, as some have much more favourable reviews than others. Bear in mind you may need to fly your pets, or all of you if you want to travel together, into a different airport in the UK than you had planned, as not all airports accept animals and the costs can vary widely as not all airports accept animals and the costs can vary widely.
If you return to the UK and become unwell before registering for a GP surgery, you can, of course, dial 999 or visit an accident and emergency hospital department. Alternatively, 111 is the number for medical help and advice.
The NHS is a residence-based healthcare system. This means the free provision of NHS treatment is based on whether you’re ordinarily resident in the UK or not. It doesn’t depend on a person’s nationality, payment of UK taxes or national insurance contributions, owning a property in the UK, or even being registered with a GP or having an NHS number. Therefore, as a British citizen returning to live in the UK, you will be immediately entitled to free NHS care. Only if you reside exclusively and permanently overseas and are visiting the UK may you be charged for treatment.
Depending on how long you’ve been away from the UK, you may be unaware that seeing an NHS dentist can be extremely difficult.
Many UK residents now have private dental insurance. Using the NHS Choices website, you can search and see if there are any dentists near you offering NHS treatment. Those that do also often offer private practice as well. Make sure you clarify what you will be eligible for as an NHS patient before agreeing to any treatment. Your dentist should be able to outline what may be covered and what you may have to subsidise, as some procedures aren’t offered on the NHS anymore.
If you can, take any record of dental treatment carried out while living overseas home with you that will be a benefit to your new dentist in the UK. If you need to see a dentist urgently before you’ve registered with one, dial 111 for assistance. Many returning expats report feeling disconnected when they return ‘home’ to a country that no longer feels like home.
A lot may have changed in Britain since you left, and it’s not uncommon to find adjusting hard. If you anticipate and accept that you might experience a degree of reverse culture shock, it may help you adjust to your return more quickly. The good news is most government agencies, councils and service providers in the UK have embraced technology, and everything you’re likely to need is available online.
At GS, we explore all the different aspects of your goals, taking everything into account to create a financial plan that works for you throughout life’s events.
Contact GSB Capital today to discuss how we can help you.
