Although surveys have repeatedly shown that something like half of Britons, or more, are hoping to retire outside of the UK one day, financial advisers with expatriate clients know only too well how often such stories end in tears – or at least, in moving lorries trundling purposefully back into Kent from the Channel Tunnel.
Such returns require as careful planning as the original outward journey did – both from a personal and financial point of view.
At Fry Group, we’ve been helping expatriate Britons re-settle in the UK for more than a century, and this experience has enabled us to cope with the greater numbers that we are seeing come back currently.
Whether a client is moving back for a temporary period or for good, there are significant tax and wealth consequences to becoming a UK resident again that must be planned for well in advance of the returnee’s actual re-entry.
Getting back into the UK tax system
If an individual is returning to the UK permanently, the date he first sets foot again on British soil is when the taxman assumes he is back for tax purposes. That said, it is often possible to secure a favourable position in the year of return.
On the individual’s return, he must re-establish contact with HMRC to advise them of his new UK-resident status.
Deciding what to do with a pension
If a client’s pension fund is based outside the UK, then from the date of his return, 90% of it will be chargeable to UK tax (whether it is remitted or not). If the pension arises from a UK-based pension fund, tax will be charged on the whole amount.
If a client holds bank deposits in the UK, he would gain a significant tax advantage in moving these offshore before he returns to Britain.
For any cash he holds in overseas accounts, meanwhile, careful planning will be needed to ensure that any interest paid after he returns to the UK – but which was accrued while he was living abroad – is not liable to UK tax.
The return of a client to the UK normally provides an adviser with an excellent opportunity to take control of his investment portfolio.