COMING TO the UK – Our top 8 key tax & social security considerations

1. Plan & Prepare

If you are planning to come to the UK then we cannot stress enough the importance of ensuring you obtain the necessary tax / social security advice at least 3 months before you arrive.  This will help to ensure your advisor is best placed to support you with structuring your move and completing any pre-move actions which are required e.g. restructuring your overseas bank accounts.

2. Tax Residence Assessment

Where will I be tax resident?

A common question we receive is on tax residence.  This is a key consideration when you are moving to the UK and broadly,

• If you are moving overseas for 6 months or less then you will remain overseas tax resident.
• If you are moving to the UK for at least 6 months and plan to spend at least 183 days in the UK in each tax year then you will likely become UK tax resident.

Why Does my Tax Residence matter?

Your tax residence status is the key factor in determining whether you will be required to start paying UK tax.  If you remain non-UK tax resident, then you will not be taxable in the UK except on income that’s sourced/earned in the UK (see point 3 below).  If however, you become UK tax resident, then you will be taxable in the UK on your UK income as well as your worldwide income (see point X below) but with the potential added complexity of having to pay taxes both in the UK and overseas.  In this case a review of the relevant double tax treaty (if in force) will need to be undertaken to determine filing/reporting obligations in order to ensure you are not subject to double taxation (see point 4 below).

3. UK Sourced Income

The most common type of UK sourced income is employment income. If you are working in the UK and are employed in the UK, then regardless of the time you are spending in the UK or your tax residence status, your UK earnings will be taxable in the UK.  The relevant double tax treaty in place between the UK and the overseas country would need to be reviewed to determine if you would be entitled to a credit in your overseas country for any UK taxes.

4. Foreign Income

Another common question we receive is whether you are required to declare your foreign income in the UK.  The simple answer is “Yes” if you are UK tax resident and “No” if you are non-UK tax resident. 

The more complicated answer is “it depends” on a number of factors.  However, assuming you are UK tax resident, then you would be taxable on your worldwide income unless you are considered non-UK domiciled.  Your domicile is not defined in tax legislation but is generally considered to be the country of your birth or the country of your father’s birth. 

If you are non-UK domiciled then you can elect to be taxed on a remittance basis i.e. you would only have to declare and pay UK taxes on your foreign income if you bring this income into the UK.  However, depending on your circumstances, there are some potential downsides to making this election such as losing your entitlement to a tax free UK personal allowance (£12,570).  In addition, it is important to structure your overseas bank accounts prior to moving to the UK (see point 5 below).

5. Overseas Bank Accounts (if you are non-UK domiciled)

If you are non-UK domiciled and are planning to make the election, then we would recommend setting up multiple bank accounts for different sources of income primarily to split income received prior to your move to the UK and income received after moving to the UK.  This will help to minimise the tax impact if at any point in the future you decide to bring some of your overseas income to the UK.

6. Overseas Workday Relief (if you are non-UK domiciled)

One of the additional benefits of being non-UK domiciled is that you can exclude any income earned for time spent working overseas e.g. if our UK employment requires you to travel on business trips overseas.  This can be a significant benefit in reducing your overall tax bill and it will be important to ensure you set this up correctly and have agreement of your UK employer as any income relating to your overseas workdays would need to be paid overseas.  In addition, it may be possible to claim this relief directly in the payroll if your employer makes a s690 application to HMRC.

7. Social Security

If you are moving permanently to the UK on a local UK employment contract, then you will start to pay UK national insurance and start to obtain qualifying years for state pension purposes.  You will however stop to contribute into the social security system and therefore you should review the impact this will have on your overseas state pension.  Similar to the UK, the overseas social security authority may offer the option of making voluntary social security contributions and this should be considered if relevant and beneficial to your circumstances.

8. Trailing Income

What is trailing income?  Trailing income is income you receive over a longer duration of time such as bonuses, share options etc.  If you are an employee overseas moving to the UK on assignment / secondment, then you may receive trailing income. A proportion of such income may remain taxable in the overseas country and your employer will / should process part of the awards via the overseas payroll.  Therefore, we would recommend filing a tax return for the year in which you receive your awards as you may be due a tax refund overseas.

Next Steps

If you are moving to the UK and would like tax and/or social security advice which is tailored to your circumstances, then please get in touch with us at contactus@e-taxconsulting.com or via the contact us form on the website.  Also check out our “Leaving the UK” article if at any point you do decide to leave the UK in the future.