Most who depart the UK to live and work overseas will have been paying tax under PAYE and will not previously have needed to be involved with the Self Assessment system.
If you are such a person you should complete HM Revenue’s form P85 when you leave the UK.
The submission of this form, together with the form P45 from your last UK employment will – probably – give rise to a tax refund. This is because the UK PAYE system makes available the UK personal allowance and the various tax rates on the assumption of continued employment throughout the tax year.
Thus, if the last date of pay is on (say) 31st October only 7 months of the UK tax year have elapsed. A departing UK resident is entitled to the UK personal allowance for the whole tax year, which means a balance of 5/12 of the annual personal allowance has not been made available at the time of the final UK salary payment.
Also, if a salary has borne income tax under PAYE at tax rates other than the basic rate in the period leading up to the cessation of the UK employment prior to departure there may be an element of that pay that should bear tax on a lower tax rate when the income tax rate bands for the whole 12 months are considered.
Those claiming a tax refund via form P85 but who are letting a UK property when moving overseas should bear in mind that any rental surplus will then generate a tax liability to HMRC, as all of the available personal allowance for the year will have been utilised in giving rise to the P85-generated tax repayment.
Non Resident Landlord Scheme
If you are moving overseas and will be letting a property in the UK you should enrol in the Non Resident Landlord (“NRL”) Scheme, whether you appoint a managing agent to look after your UK property or have trusted friends or family paying rent to you directly.
Form NRL1 should be submitted to HM Revenue, following which approval should be given by HM Revenue for rental income to be paid to you on a gross basis – ie without the need for basic rate tax to be deducted.
The consequence of lodging form NRL1 is that you will probably also be entered into the UK Self Assessment system.
UK Self Assessment (“SA”) Tax Returns
Once you are in the UK SA system you must lodge a tax return each year – HM Revenue will send a Notice to Lodge a Tax Return to you.
UK Tax Returns must be lodged:
- By 31st October following the end of the UK tax year if you will be submitting your tax return on paper, or
- By 31st January following the end of the UK tax year if you will be submitting your tax return electronically.
The late lodgment of a UK tax return will give rise to automatic late filing penalties.
A practical issue to bear in mind here is that once you have departed the UK you should include the Residence supplement with the UK tax return – particularly if you have an ongoing entitlement to UK personal allowances.
Unfortunately the Residence supplement cannot be lodged electronically via the HM Revenue website meaning that non-UK resident individuals must:
- Lodge a paper tax return, or
- Buy commercially available tax software that allows the supplement to be lodged electronically, or
- Engage a firm such as GM Expat Tax to prepare and e-lodge the tax return
Income That Remains Assessable in the UK as a Non Resident Individual
The following sources of income will remain taxable in the UK, even once you have ceased to be a resident there:
- Income from UK property
- UK interest and dividend income – although tax is normally withheld from these sources and no additional liability to UK tax will arise
- UK source pension income – unless exempted from UK tax by virtue of a tax treaty with a jurisdiction in which you are now a resident
Capital gains on the disposal of a UK investment are usually not subject to UK capital gains tax so long as the disposal takes place after you have departed and have ceased to be tax resident in the UK.
Note: This is subject to a tax anti-avoidance provision. We recommend taking further advice if you are planning to dispose of an investment generating a capital gain to ensure there are no other tax planning issues to be considered.