We don’t think it’s a coincidence that during times of increased uncertainty, we’re chatting to more and more clients about whether they should move abroad to become more tax efficient.
This week we’re looking at the key things you should consider if you’re thinking of a new life in the sun…
Will you be truly making life count?
We work with all our clients to ensure they make life count in whatever way works for them. So, it’s certainly something to consider if you’re leaning towards packing your bags.
Will you be comfortable with the emotional implications?
You’ve got to enjoy life AND where you live it. Will you be further away from family and friends? Might you find yourself travelling back and forth to the UK for work commitments? These are possibilities which you might be comfortable with. But before you start perfecting a new language make sure you’ve considered the bigger picture.
Choose your new home wisely
Unless you’re going to live in a recognised tax haven (which usually have rules of entry) you will be subject to your chosen country’s tax regime.
This will result in you paying tax there, perhaps at the same or an even higher rate than the UK. Careful consideration should be given to the local tax regime and whether you will be better or worse off.
Will you truly be non-UK resident?
If you retain assets in the UK, most notably a property, or you spend time abroad but also still come back to the UK frequently, you might not break the UK tax residency rules.
These rules changed in 2013 when a new statutory residence test was introduced. This test doesn’t solely rely on the number of days you may be out of the country – it also assesses the number of ties (or connecting factors) you retain in the UK.
The more ties you have, the harder it is for you to claim non-UK tax residency.
If you find yourself in this situation, you may not be able to have the lifestyle you want and could instead find yourself living life around the tax man’s rules.
Inheritance tax and non-UK residency
If you do become tax resident overseas, it’s likely you will retain your liability to UK inheritance tax on your worldwide estate. This is because inheritance tax is based on the separate concept of domicile – the country that a person treats as their permanent home, lives in or has substantial connection with – and not your tax residency.
Whilst it’s possible to change your domicile, this usually requires you to sever all of your connections with the UK.
You may also find you’re liable for inheritance tax in the country you’re a tax resident, at least on property assets sited there.
Having well-structured Wills in place, both for the UK covering your worldwide estate, and for the overseas country to cover property and other assets sited there, will be essential.
Investments and cash
As well as tax, you’ll need to seek advice on whether to restructure your investment portfolio and cash accounts.
Tax efficient investments in the UK such as ISAs might not be so tax efficient for your new country of residency. Equally, there may be other options to restructure your portfolio for tax efficiency.
You will need to consider the exchange rate and make sure your portfolio is structured appropriately to reflect a change of emphasis from say, sterling-based investment funds to the euro.
Make an informed decision
Thoughts of moving abroad might start from a tax motive but there are many factors to consider and these need to be carefully assessed.
At Cooper Parry Wealth, we have an extensive integrated tax team and the ability to reach out to overseas tax experts within our international network. This makes us perfectly placed to help and advise you.
So, if you’re dreaming of sun, sangria and tapas this weekend, get in touch with a member of our team.
This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice as at 17 May 2019. You are recommended to seek competent professional advice before taking any action. The value of investments and the income from them can go down as well as up, and you may get back less than you originally invested. Past performance is not a guide to the future. The investments described are not suitable for everyone. This content is not personalised investment advice, and Cooper Parry Wealth can take no responsibility for investment decisions you may make as a result of this information.
This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice as at 14 August 19. You are recommended to seek competent professional advice before taking any action. The value of investments and the income from them can go down as well as up, and you may get back less than you originally invested. Past performance is not a guide to the future. The investments described are not suitable for everyone. This content is not personalised investment advice, and Cooper Parry Wealth can take no responsibility for investment decisions you may make as a result of this information. Tax and estate planning advice are not regulated by the FCA.
