Permanent Departure Tax Strategies for High-Net-Worth Individuals Leaving the United Kingdom
The United Kingdom is undergoing significant changes in its tax system, particularly for residents and non-residents. Here's a breakdown of the key points to consider:
The UK's non-domicile tax regime, which exempts non-residents from paying capital gains tax on their foreign assets, is being abolished by the Labour government, effective from 6th April 2025. However, non-residents may still face capital gains tax on crypto trades if the gains are considered UK-sourced.
Gold, like other capital assets, is subject to capital gains tax upon sale. It's essential to plan ahead if you're considering using a second residence or citizenship as an escape route, as failing to do so could result in a significant tax bill.
For non-residents, selling a UK property may result in taxable income or gains in both the UK and the new country of residence. If you're a non-resident selling a UK property, you're liable for UK capital gains tax on any gains from that sale. However, your existing Individual Savings Accounts (ISAs) remain tax-free in the UK if you've not sold your investments and taken the money with you.
If you remain a UK tax resident for any part of the year, you will likely be taxed on your worldwide gains. On the other hand, as a non-resident, you're generally taxed only on UK-sourced income.
The Labour government is implementing various tax reforms, including changes to capital gains taxation, property levies, business regulations, and inheritance tax. Notably, from April 2025, firms' national insurance contributions will increase by 1.2 percentage points to 15%. Additionally, the threshold at which businesses start paying social contributions on each worker’s salary has been reduced from £9,100 per year to £5,000.
In a bid to address social inequalities, the Labour Party has targeted the wealthy in their tax policies, introducing measures such as an exit tax on those who leave the UK and VAT on private school fees. The exit tax, effective from April 2025, could expose long-term UK residents who cease to satisfy the residency tests to a tax of up to 6%, although only on funds in settled UK-based trusts.
Double taxation treaties between the UK and your destination can help prevent paying tax twice. It's also possible to receive a tax refund if you overpaid tax in the past.
In conclusion, with the UK undergoing significant changes to tax implications regarding residency status, it's crucial to consider exiting the UK tax system before changes take effect and that means becoming a tax resident somewhere else. The bottom line is that proper planning is essential to minimise potential tax consequences.
His Majesty's Revenue and Customs (HMRC) is the government department responsible for collecting taxes in the UK. When expatriates leave the UK to live abroad, they may still have to pay UK tax if they earn UK income. Rental income earned from a UK property will be subject to UK tax, with non-resident landlords having to comply with HMRC's non-resident landlord scheme.
Record numbers of high-net-worth individuals have already decided to leave the UK and 'go where they're treated best'. Popular destinations for British expats include Australia, Spain, France, Canada, New Zealand, and South Africa.
