Repatriating to the UK – how to restructure your finances?

This article was updated on March 28, 2021

After living overseas for 9 years, I have seen a good many expats return to the UK, only to be faced with unexpected tax and other problems.

This article will discuss some of the issues you might face, especially financially, if you are a British expat wishing to repatriate to the UK.

It will especially look at the procedures you might need to take, alongside some general guidance and frequently asked questions (FAQs).

Due to the ongoing crisis related to the virus, this article will address some questions related to that issue – could it effect your return to the UK?

If you wish to contact me about these financial matters associated with returning to the UK, you can reach me at advice@adamfayed.com or the chat function below.

For those that prefer video content, the content below summaries this article:

Firstly, who especially needs to undertake research and take advice?

Every should plan to a certain extent, but some people should plan more than others.

In general, the longer you have been outside the UK, the more money you have and the more complicated your financial situation, increases the importance of sound financial planning prior to your return to the UK.

If you have only been outside the UK for 6 months, and are coming back without any money, your situation is much less complicated than for somebody who has over 1 million GBP in various investment accounts, and with companies in two countries.

Especially for people who are dealing with multiple jurisdictions, the situation becomes even more complex.

For example if you are living in Singapore (one jurisdiction), have investments in the Isle of Man or Puerto Rico (another jurisdiction) and a business in Luxembourg (a third jurisdiction), and are coming back to the UK, your situation will be more complicated that if all your money is in Singapore or the UK.

So the more assets you have, in more jurisdictions, the more important it is to take advice.

It usually makes sense to plan your repatriation 6-12 months in advance, if that is possible.

How can you simplify your tax situation?

If you can move home on around April 6, you will simplify your tax situation.

This will mean that all your income made during the tax year, will be subject to UK income tax.

In comparison, if you arrive in July or December, you might have to go for a split tax year, which is more complicated.

This is because the tax authorities have to annualise your income and calculate UK taxes according.

Coming home in April isn’t right for everybody though. As you start using your 12,000GBP per year allowance the moment you arrive in the UK, you can use up less of your allowance if you arrive during the middle of the tax year.

That is one reason why a “one sized fits all” approach isn’t always wise.

How about selling assets before coming back to the UK?

In general, it makes sense from a capital gains perspective to sell your assets before returning home.

However you need to consider the following issues:

  1. What is the capital gains tax rate where you live now? If it is 0%, and your investment platform is based in a 0% capital gains environment, that is a strong reason to sell before returning to the UK
  2. If, on the other hand, you don’t plan to liquidate your investments for decades, and are living in an even higher tax place than the UK right now, it doesn’t make sense to always sell. For example, in Canada, capital gains can even be taxed at 50%!
  3. How long you plan to stay in the UK for. If you are 32, and plan to stay in the UK for three years, before moving abroad again, your situation is very different to somebody that wants to permanently settle back into UK life. This is because capital gains, by definition, occurs when you liquidate an investment and realise a gain. Therefore, having money in overseas accounts, and making a capital gain, aren’t the same thing in some cases.
  4. Which assets they are specifically. I will speak about that more below.

So 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.

Another consideration is foreign exchange fees. If you hold USD or Euro asset or cash in bank accounts, you could face a significant charge for liquidating positions.

How about QROPS?

If you have a QROPS pension, you will need to inform your provider you are moving back to the UK.

You will be liable to pay income tax on any drawdown of the pension.

Are offshore bonds similar to the QROPS situation?

No exactly as the regulation is different. Nevertheless, it is best to notify your providers, and give them your updated proof of address and tax numbers, whenever you move.

This applies to moving to a third country as well, and not just returning to the UK.

In general, portfolio bonds, many of which are linked to QROPS, can be tax efficient if you drawdown up to 5% per year.

You can also sometimes transfer allowance between you and your husband, wife or partner as well.

How about a no deal Brexit?

We can’t know what the next year will bring. Brexit is no different. In general, a no-deal Brexit could affect some of these things, but is looking unlikely.

How about taxes on investment funds in the UK?

This is complicated and depends on whether you are an ordinary resident or non-ordinary one, and where your domicile is.

In general, if you have been an expat for more than 5 years, it is easier to bring money into the UK in a tax efficient manner and pay 0 on these.

However, temporary non-resident rules means that gains can be taxed.

Do I need to open up a bank account remotely before coming to the UK?

Not always because it is legal to live on overseas income in the UK of course.

I know many online business owners that simple keep using their same USD overseas bank account, and self-assess every April.

However, you might want to start using a UK bank account again. If you already have a bank account in the UK, you don’t need to make new provisions.

Some online banks such as Revolut are the easiest to deal with in terms of account openings, before returning to the UK.

Online banks tend to be easier when it comes to remote account openings

How about registering for tax?

If you have a job, you will automatically be enrolled on pay as you earn (PAYE), and might need to fill out a starter checklist form from the UK tax authorities HMRC. This is available on their website.

If you start working for yourself, you will need to register for self-assessment.

This is regardless of whether you have an existing business you can run from home, or you are starting a new business.

Should I fill in any national insurance gaps before returning?

National insurance pays for the old age pension and some other benefits.

You can voluntarily pay national insurance whilst you are abroad. This can make sense for those that are overseas for a short period of time.

In general, you should be careful with filling in big gaps for a simple reason; the UK has an ageing population and the state can’t be trusted not to go back on previous promises.

This became an issue in the 2019 general election, after the retirement age was increased for women.

Whatever your feelings on the issue, it seems certain that the UK retirement age will move to 70 and beyond.

How about UK property?

The UK has increasingly became more regulated when it comes to renting and buying property and this might be a kind of “reverse culture shock” for returning expats.

Many landlords are now requiring tenants to get references in the UK from previous British landlords. This can be hard for UK expat returnees for obvious reasons.

In addition to that, credit checks are also sought by various lenders in the UK.

So what are the most effective ways to overcome these issues? In general it makes sense to:

  1. Get references from landlords abroad
  2. Focus on private agreements for private renting if possible. I have spoken to 1-2 friends that have returned from abroad in the last year, and they have negotiated private agreements with AirBnb landlords. In other words, renting from them for a few days, and then signing a contract outside the platform. They have found these landlords to be more flexible than the average.

If you want to buy a UK property after living abroad, you will need to prove where the funds are coming from, of course.

You might be asked as a recent expat for more detailed proof of where the money has came from.

So information like wage slips, contracts, proof of sale documents for assets and other things can be very useful when speaking to a lawyer.

Assuming you need a mortgage, it gets even harder, as most lenders do a credit check.

Assuming you haven’t had an address in the UK for years, you are more likely to be rejected.

You can combat this issue by focusing on smaller lenders that are more flexible than mainstream ones, and maintaining correspondent addresses in the UK can be useful.

In other words, if you kept a UK address open for getting letters and electronic correspondents, which went to your parents or sisters home, this makes things a lot easier.

How about short-term trusts for property?

Even though rules around trust are always changing, it is still possible to create short-term trusts before returning home to the UK.

Again though, as this situation is always changing, getting up-to-date tax advice makes sense.

What are the biggest financial mistakes that returns make?

The biggest mistakes I have seen are:

  1. Leaving the process too late and panicking. This can result in big tax bills or headaches.
  2. Not taking proper legal and/or tax and financial planning advice. This is especially an issue with people with very complicated situations
  3. Assuming your companies HR will sort everything out. It is beneficial to have a good HR department that sorts out most of the requirements. This is more likely to be a benefit for income tax and other work-related issues. It is less likely to be beneficial for your personal wealth situation.
  4. Not considering more complex situations. If you are moving money from Myanmar/Burma or a country which is under US sanctions like Iran, your case is much more complex than most expats.
  5. If you wish to stay with your existing investment platform, not asking them about rule changes. For example, it is no longer legal for EU residents to buy some kinds of US domiciled ETFs, including the S&P500 funds, but you don’t have to actually sell such positions if you return to an EU country. You merely can’t add to the positions.
  6. Not fully considering the move. I have met countless expats that go overseas again within a few months of landing, due to failing to adapt to life back in the UK.
  7. Not considering a third country. I have met countless people that are only returning to the UK due to losing a job, or they are finding it more difficult to extend a visa if they are self-employed. They often assume that the UK is the easy option. However, it is increasingly normal for people to be able to work from home. Most countries offer residency visas by investment, and not all are super expensive. Therefore, coming home to the UK isn’t always the cheapest option, or most convenient idea, as this article has made clear. Considering buying a property or putting money in the bank, in return for residency in a third country, could be a viable option for many people.
  8. Panic selling assets when stock markets are down. It is easy to look at stock markets in 2020, and conclude that your life would be simpler just selling and taking a loss. In reality, that seldom makes sense to crystallise a loss when markets have declined so much, and will rebound.

What are some of the non-financial issues you might face coming back to the UK?

It isn’t the main propose of this article to speak about non-financial issues, but some of the other issues people face are:

  • Importing pets, cars and vehicles into the UK
  • Getting on the NHS list or having new private medical insurance
  • Being put on the election register to vote again
  • Sometimes getting a non British wife or husband into the UK.

Will the ongoing health pandemic impact your return to the UK?

Needless to say, the ongoing global pandemic is causing travel issues, with many airlines cancelling flights.

We are in the early days when it comes to this crisis but what we can expect is:

  1. Delays in paperwork. If you need to complete paperwork, including for your investment accounts or taxes, there could be delays due to governments being overrun. This will especially be the case if you need to send out physical paperwork.
  2. If you have a non-British partner, wife or husband, there might be some restrictions such as quarantines if they arrive back in the UK.
  3. You need to plan on an ongoing basis. In other words, check the updated travel advice related to flights and quarantines, on the morning of your flights.
  4. Policies might also change. This could affect both returning UK expats, and those UK expats that are unexpected stranded in Britain due to the virus. There is already speculation that the UK government will put in special measures to help people who would usually be taxed. For example, those people, like UK expats, that are stranded in the country, and can’t leave for 60-100 days, would usually have to consider tax implications of an extended UK stay. The government has also announced delays in self-employed people needing to pay certain types of taxes, until next year. So returning British expats might get some tax breaks, and help with their incomes due to the economic crisis. This situation is ongoing though and government policy is regularly changing.
  5. The key point is that government policy is changing on all manner of issues (travel, taxes and other areas) at a much quicker rate than usual.

The situation involving the global pandemic makes planning even more important, even though we can never plan for quick changes in government policy.

There is help from the UK government, including a hotline, which will allow you to speak to somebody regarding your flights, if you are stranded, and can’t return home as expected.

How about the requirements from the other side – the country where you currently live in?

Many people aren’t just worried about the UK tax authorities having requirements for returning expats. Countless people worry about their current country of residence.

It is beyond the scope of this article to discuss the requirements of each country where British people live as there are about 200 countries around the world.

In general, highly regulated places like the United States, Singapore and Hong Kong, will have more procedures to jump through, if you decide to return home, compared to some other places.

For example, British expats leaving the US should obtain a certificate of compliance to ensure they have met their tax obligations.

This is also known as the “Sailing Permit” or a “Departure Permit”.

It also makes sense to look at all your bank, investment accounts and taxes locally, before coming back to the UK.

This will ensure you are compliant on both sides – the returning country (the UK) and your current country of residence.

This also means that it makes sense to seek local advice, as well as UK-specific advice.

For example, whilst it is tax advantageous for many people to return to the UK at the start of the tax year in April, that might not be the case in your country of residence.

Conclusion

Tax and how your investment situation is considered is a complicated topic, if you are returning to the UK.

It is only likely to get more complicated in the future, with new regulations concerning tax and investments.

It is especially complicated if you have assets in multiple jurisdictions and have joint passports, or a spouse that is from another country.

It is best to receive independent tax and financial advice, before repatriating to the UK, if you have significant assets and/or a complicated situation.

This is especially the case as the situation is always changing, with new laws announced on a regular basis, due to the ongoing health and economic crisis of 2020.

With the current global pandemic, there are likely to be signifiant delays in implementing sound advice and could even delay your return to the UK.

In addition to that, currency markets and investment portfolios, are being affected on a daily basis, which makes making decisions on liquidations more difficult than during more normal times.

All of this makes prior planning even more important than it was before.

Further reading

The article below looks at some common expat investments sold overseas, and what you can do if you have one.

Many expats aren’t happy with these investments. So is it better to stick with these investments or seek an alternative?

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