There’s been growing interest among some in leaving the UK in recent months, particularly among higher earners and internationally mobile individuals. Following the removal of the long-standing “non-domicile” tax rules in the Budget last Autumn, headlines have speculated that many are packing their bags, whether for tax reasons or not. If you are thinking of leaving the UK, here’s what you need to know about the tax implications.
While the UK does not impose a formal “exit tax” like the United States, departing its shores still has tax implications. Changing your status to a non-UK tax resident can lead to various consequences. Some you might anticipate, and others that may be surprising.
Even if your motivations for moving are lifestyle-driven, such as seeking better weather, new opportunities, family reasons, or simply a change of pace, it’s essential to understand what leaving means from a tax perspective. A failure to plan properly could end up costing you more in the long run. As such, we strongly recommend taking professional tax advice before making any final decisions.
In this blog, we explore several key areas of UK taxation that may be affected when you leave, but this is not an exhaustive list, as everyone’s circumstances are different. Here’s the top 5 things you need to know if you are thinking of leaving the UK and the tax implications:
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You May Lose Your UK Personal Tax Allowance
The UK’s personal allowance, which is currently £12,570, allows UK tax residents to earn income tax-free up to that threshold. But once you leave the UK and become non-resident, you may no longer be entitled to this allowance.
There are limited exceptions: for instance:
- If you’re a citizen of a country that has a double tax treaty with the UK
- You’re a citizen of a European Economic Area (EEA)
- if you receive certain types of UK pension income.
If you qualify, you can claim the allowance either via your self-assessment or Form R43.
This can particularly affect rental income, interest, or dividends derived from UK sources, which remain subject to UK tax but without the shelter of the personal allowance.
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Capital Gains Tax Relief on Your Home May Be Restricted
For many people, their home is their most valuable asset. When you’re a UK resident, gains on the sale of your primary residence are typically exempt from Capital Gains Tax (CGT) under Principal Private Residence (PPR) relief.
However, when you become a non-resident, that relief becomes more restricted. You’ll need to satisfy the “90-day rule”, physically occupying the property for at least 90 midnights in the tax year, then you may lose the relief entirely for that year.
This can be problematic if you keep your home after moving abroad and plan to sell later. If you’re not meeting the 90-day requirement in the relevant year, part (or all) of the gain could be taxable even if it was once your main residence.
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EIS Relief May Be Clawed Back
Enterprise Investment Schemes (EIS) offer significant tax advantages for those investing in qualifying UK startups, including 30% income tax relief and capital gains deferral. But these benefits are tightly linked to your UK tax residency.
If you leave the UK within three years of making an EIS investment, you risk losing the income tax relief, which HMRC could claw back.
Additionally, if you have previously deferred a capital gain through an EIS investment, becoming non-resident could trigger a chargeable event. In other words, the gain you thought was deferred may suddenly become taxable depending on timing and your residency status when the deferred asset is disposed of or becomes chargeable.
It’s essential to seek advice to understand whether EIS reliefs will remain valid post-departure or whether there are strategic ways to lock in the benefits before you move.
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Pension Contributions Lose Tax Relief After Departure
UK pensions are another area where residency makes a big difference. While UK tax relief on pension contributions is generous, typically providing 20% basic rate relief at source and higher or additional relief via tax returns, this relief is generally only available to UK residents.
There is one exception: after you leave, you can still receive relief on £3,600 gross per year (i.e. £2,880 net) for up to five tax years, even as a non-resident. This small allowance is often overlooked but can still be valuable.
Beyond that, you can still contribute to your pension scheme, but you will do so without tax relief.
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Watch Out for the “Temporary Non-Residence” Trap
Many individuals leave the UK for a few years, thinking they’ve entirely severed their tax ties, only to be caught out by the “temporary non-residence” rules when they return.
In essence, if you return to the UK within five years of leaving (having been UK-resident for at least four of the seven previous years), you may be treated as temporarily non-resident.
In that case, capital gains while you were abroad, particularly those involving UK businesses, partnerships, or assets that were held before departure, can become chargeable to UK tax in the year of your return. So watch your dates if you decide to come back in the future.
Final Thoughts
There’s no official “exit tax” in the UK, but don’t let that fool you into thinking a departure is free from tax consequences. From personal allowances and CGT to pensions and EIS investments, the UK tax system has hidden tripwires for those going abroad without proper advice.
So, whether you’re moving for the sun, opportunity, or a fresh start, don’t ignore the tax side of the equation. Speak to a qualified adviser who understands both UK and international tax issues before finalising your plans. A little foresight now can prevent significant tax headaches down the road.
If you have any questions, please email us at enquiries@myersclark.co.uk or have a look at how we can make you feel calm and confident about your taxes.