Roger Harding, our Tax Director, runs through some key tax issues to consider when coming to live in the UK, in order to effectively plan for becoming UK tax resident.
Hello, My name is Roger Harding. I'm the tax director at Ince.
Today, I'm going to briefly discuss a few tax points to consider when coming to the UK, either long-term or permanently.
The key touchpoint when intending to become resident in the UK.
Is it best to plan before arrival?
This is so you can put in place good investment strategy and structure your assets efficiently before becoming UK tax resident.
For example, if you're not UK domiciled, you should ensure non UK assets are protected from UK tax as far as possible. Perhaps by using an offshore family investment company, offshore trust and also try to ensure off your income is not remitted to the UK after you become resident.
If it is necessary to remit overseas funds, make sure you have nominated your clean capital and bring the funds in from that source in priority, as no tax is charged on such funds.
One of the major considerations you will have is obviously somewhere to live.
While the purchase of a UK residential property can be a good investment.
It also brings you within the UK inheritance tax and potentially capital gains tax regimes, depending on your circumstances.
There is a purchase tax applicable to UK London property called Stamp duty Land Tax, in England, land transaction tax in Wales, and the land building tax in Scotland.
In England rate started, nought percent rising to 12% for acquisitions of your main primary residence, Different rates and thresholds apply to the land transaction tax in Wales and the buildings tax in Scotland, but the principles of charge are the same.
The purchase of second property or 3% stamp duty land tax surcharge is also added to the normal rates, so if you have already own property anywhere else in the world, it will apply taking the top rate up to 15%.
Additionally, following new legislation taking effect on the first of April 2021, a further a further 2% SDLT surcharge applies for the purchase of residential property by those who are not UK resident.
Making the top charge as high as 17%.
There is a slightly different definition of non residents for this purpose compared to the statutory residents definition in the legislation.
Under the UK statutory residents test, you can be considered UK resident for tax purposes for the whole tax year the rival in the UK. regardless of when you actually arrived during the tax year.
This particular treatment is available in certain circumstances.
For example, when you intend to set up homes, stamp duty land tax to avoid a non resident 2% surcharge.
You have to be UK resident, IE, present, in the UK for 183 days in the period of 364 days prior to completion of your property purchase.
If the 183 day test is met in 364 days following the purchase, it is possible to obtain a refund of that 2%.
But, obviously, there is a cash flow impact.
So, perhaps consider renting a property until the hundred and 83 day test is met before completing purchase.
If that proves more cost effective.
As mentioned, owning UK property regardless of your UK residents or domicile, potentially incurs inheritance tax and capital gains tax.
Inheritance tax is a tax on your death estate at 40% above a nil rate band of £325k.
Capital gains tax is charged on disposal of property that isn't your main home at a maximum rate of 28%.
Your domicile, IE where you were born or where your parents were born, has a major influence on your UK tax status and once domiciled in the UK, you become liable to UK tax on Worldwide Income and Gains.
Current UK Tax legislation renders you deemed domicile after 15 years of UK residents but you can be considered domicile well before that.
Even from day one if it is your intention to remain indefinitely in the UK, it's therefore central to structure your off your assets carefully to keep them out of the UK charge if intending to come to the UK for a long term or permanently.
Non UK assets placed into an offshore trust before becoming UK tax resident are excluded from UK inheritance tax.
So to summarize, good detailed planning and structuring of assets should be put in place before coming to the UK. To ensure of your assets are kept out of charge and those taxes that are payable and manage those to mitigate the charges as far as possible.
Well, thanks for listening. And if you'd like to find out more, please contact me on my e-mail,[email protected]