Pre-Arrival UK Tax Planning: 12 essential points
Proper pre-UK arrival tax planning is essential to ensure you are UK tax efficient.
Before diving into tax considerations, you must address your immigration status. Depending on your nationality, the purpose of your move, and the duration of your stay, you may need to secure the appropriate visa or residence permit. The UK has various visa categories, including work visas, student visas, family visas, and more.
1. Get advice before you come
The earlier, the better! Once you become UK tax resident, many tax planning opportunities are lost, and you may end up paying more UK tax then you would otherwise have done. Time is required to take tax advice and put any planning into place.
2. UK tax resident: from when?
The Statutory Residence Test (SRT) determines whether you are UK tax resident. The UK tax year runs from 6 April to the following 5 April. The default rule is that, even if you arrive in the UK part way through a tax year, you will become resident from 6 April before your arrival. However, if you are able to ‘split’ the year, then you will be resident from part way through the tax year.
Domicile is a vital concept in UK tax law that influences your tax liability, particularly on foreign income and capital gains and for Inheritance Tax purposes. Your domicile is typically where you view as home, and it can be different from where you are tax resident.
4. Double Taxation Agreements
If you become dual tax resident in your home country and the UK, and / or have income and capital gains from, or structures you can benefit from in non-UK countries then you need advice on the Double Taxation Agreement (DTA) between the UK and your home country. DTAs can prevent double taxation and provide relief for foreign tax paid.
5. Remittance Basis
Individuals who are UK tax resident and not domiciled (or deemed domiciled) in the UK can access the remittance basis of taxation. This is typically more attractive than the default basis of taxation called the ‘arising basis’. There are certain steps which should be taken by individuals who qualify for the remittance basis before coming to the UK in order to make full use of the reliefs available.
6. Review investments
Any gains realised before you become UK tax resident should not (making various assumptions) be chargeable to UK tax, even if you later remit the proceeds to the UK. There is no ‘rebasing’ of assets to the value when you come to the UK, so on disposing of assets once UK tax resident, you will be taxed on the whole gain since acquisition.
7. Review structures
You should review the structures you control and / or can benefit from, such as companies and trusts. Often, it can be advantageous to restructure these entities or alter how they fund you before you become UK tax resident to avoid adverse UK tax consequences.
UK taxation for employment income differs from investment income. It is sensible to review where you will be working, how you will be employed, and how your remuneration will be structured. Bonuses and / or incentive arrangements should also be considered.
9. UK property
How should you own UK property? Is it tax-efficient to hold it directly, through a company, through a trust / company structure or through another vehicle? This will depend on whether the property is residential or commercial, and, for the former, whether it will be lived in or rented out. Assets situated in the UK will potentially be subject to UK Inheritance Tax on your death, which is taxed at 40%, subject to various exemptions and reliefs.
Pensions should be reviewed. Complex rules apply.
11. Register for a National Insurance Number
A National Insurance Number (NIN) is necessary for ensuring you are correctly identified for tax and social security purposes in the UK. Make sure to apply for one as soon as you arrive.
12. Open a UK Bank Account
Having a UK bank account makes it easier to manage your finances here. Care should be taken how it is funded, particularly if advantage is being taken of the remittance basis of taxation.