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Moving Abroad? Here's What You Need to Know About Taxation

Contributed by
December 23, 2016

So you've decided to move broad – but now comes the delicate matter of taxation. It is famously said that there are only two things that are sure in life – death and taxes – so it is a wise thing to consider your tax affairs before you relocate. Even more importantly, is to put everything in place that you may need further down the line such as bank accounts, documentation, records and receipts.

Once the decision to move has been made, and that one-way ticket is booked, here are the most important aspects to consider regarding taxation.

Tax is paid only once

Each country sets its own taxes which means if you are likely to encounter a different set of legislation when you touch down at your chosen destination. It is important to register yourself as a 'resident' in whichever country you will be spending most time and earning most of your income, although even these decisions can often be influenced by a range of additional factors such as nationality, employment type, income level etc.

Which brings us onto point 2:

Obtain professional advice

Considering that the lay of the land in tax is everchanging and invariably different from place to place; it may be a good idea to locate a professional financial adviser (or tax adviser) before you travel and start filling out forms without thinking ahead. Professional advice may cost additional money, but this could be paid back several times over the long-term.

Expatriation taxes

Given the freedom with which people can now travel and work, some countries have introduced 'expatriation' taxes to help fill the coffers.

An expatriation tax or emigration tax is a tax on persons who cease to be tax resident in a country. This often takes the form of a capital gains tax against unrealised gain attributable to the period in which the taxpayer was a tax resident of the country in question.

Tax eligibility

A UK resident is potentially liable to pay UK Income Tax and Capital Gains Tax on worldwide income/gains. However, non-UK residents may also be liable, and special rules do apply. The basic tax rule is that non-residents are only chargeable to tax on income arising from a source in the UK. Having said that, it is imperative to check with a licensed professional, especially for complicated situations involving investments, incomes and property held across several jurisdictions.

If you have left or are about to leave the United Kingdom, use form P85 to claim tax relief or any tax refund you're owed and to inform HM Revenue and Customs of any UK income you continue to receive.

Working in countries with bilateral Social Security agreements

If you start working for an employer in a country with a Reciprocal Agreement or Double Contribution Convention (sometimes called 'bilateral Social Security agreements'), you'll usually pay social security contributions in that country instead of UK National Insurance.

These countries are:

Barbados, Bermuda, Bosnia-Herzegovina, Canada, Chile, Croatia, Guernsey, Israel, Jamaica, Japan, Jersey, the former Yugoslav republic of Macedonia, Mauritius, Montenegro, New Zealand, Philippines, Republic of Korea, Serbia, Turkey, USA.

If you are resident of one of the above nations, and have decided to relocate to another nation in the same list – there are likely going to be an extensive set of tax mitigative measures that essentially help to reduce the overall tax burden.

You may have to continue paying contributions to the UK instead of the country you're posted to if you're sent there temporarily by your UK employer. Your employer will tell you if you qualify and give you the forms you need.

The USA: Land of the free and home of the brave

USA is one of a few countries in the world that taxes its citizens on their worldwide income. That means that no matter whether you live in the UK, Europe or Syria, all US residents must file a US federal tax as long as they meet the minimum IRS filing requirements.

Given the extensive complexity of US tax law and the various possibilities that exist within the current tax structure, it is strongly advised that US residents obtain professional tax advice when moving abroad.

US residents have to file a federal return by April 15th each year. However, Americans living abroad get an automatic extension until June 15th.

US residents living abroad also have access to a set of 'provisions', able to reduce their tax burden significantly. Namely, these provisions come in the form of a 'foreign-income exclusion', a 'foreign housing exclusion' and a 'foreign tax credit'.

UK property

If you are a UK homeowner, you should decide what you intend to do with your property before going abroad.

Even if you could afford to, simply leaving the property empty could be in breach of your mortgage agreement and may also invalidate your household insurance.

If you decide to sell your property, you should allow plenty of time to do so.

If the sale has not been completed before you leave, you can give power of attorney to your solicitor or to a relative or friend. If you decide to rent the property out, you will normally still be liable for income tax to the extent that the rent (minus certain allowable deductions) exceeds your personal allowance (when combined with other UK source income). Your letting agent will normally be required to deduct basic rate tax at source and pay it to HMRC unless HMRC agrees otherwise.

If you were to use a commercial money transfer company (here is a list of popular services), you would be eligible for some guidance on this topic.

Banking, savings and investments

Even if you are moving abroad permanently, you should initially consider keeping a UK bank account open and retain at least one credit card.

In some countries, it can be difficult to borrow before you have established a reasonable credit history there. It is also worth thinking about opening a local currency bank account in your chosen destination. It may also be a good idea to open an offshore bank account in a well-regulated offshore centre which in itself can provide tax breaks by paying interest gross and it may offer 24-hour internet banking, multi-currency facilities and mortgages.

Moving deposit accounts offshore will mean that interest will be paid gross. This will also avoid wasting any of your personal allowances. You can retain any existing ISAs if you become non-resident, but you will not be able to make any further investment into them. It is also worth checking whether the income from ISAs might be taxable in the country that you move to, even though it is exempt in the UK.


If you have individual life assurance, critical illness cover or income protection insurance, it is essential that you establish whether it will remain valid while you are overseas.

Your insurer may decide to remove your cover or to increase your premium if it judges that your move raises the risk of you making a claim. Similarly, if you are intending to work overseas, you should check with your employer whether your life insurance will cover death in service and whether you have private medical insurance. If you are not covered for private medical insurance through your workplace, you may wish to consider taking out an individual international private medical insurance policy.

Taxiing onto the runaway abroad

In summation, becoming an expatriate needn't be taxing. But thinking about your tax burden early, and taking the necessary steps prior to departure will provide you with access to a range of tax-efficient financial planning opportunities such as offshore pensions and investment bonds. Obtain professional advice about these specialist areas that may involve financial products you are not fully aware of, or do not completely understand.


Tags: tax | insurance | Tax | offshore | investment | interest | currency | Insurance | agreements | pensions | offshore pensions | social security | Barbados | Bermuda | Canada | Chile | Croatia | Guernsey | Israel | Jamaica | Japan



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