Moving to the UK from overseas: your financial guide
Moving home is always an upheaval, but relocating to another country is far more complex. While the decision to move may be an emotional affair, it is practical issues that soon come to the fore. With packing, shipping and so many other things to organise, it’s easy to overlook the importance of sound financial planning. However, taking time to plan ahead could make a huge difference to your situation once settled in the UK.
Though based in Hampshire, AJB Wealth has a long history of clients in both the UK and overseas and often helps its clients navigate a cross-border move. This article is aimed at expats planning to return to the UK. It is also relevant to overseas residents considering relocation to the UK.
Here, we address the financial planning side of an international move: from savings and investments to tax planning and your entitlement to healthcare and education in the UK.
‘We have clients who have lived abroad all their lives but have connections to the UK. Others are expats who may decide to return home after many years,’ explains Managing Director Paul Willans. ‘We also have local clients who relocate abroad for work or other reasons. This gives us an international outlook which we feel differentiates us from other independent wealth managers.’
Plan ahead for your move to the UK
Experts agree that efficient management of your tax position and assets could have the biggest impact on your finances. To take get maximum benefit, it’s advisable to start detailed planning at least one full tax year in advance. What’s more, tax advisers recommend that you move at the start of the UK tax year (6 April) to keep things straightforward. At this early stage, you should review all your financial interests, including savings, investments, pensions and property.
Work out a realistic budget
When planning your new life in the UK, it’s important to calculate both likely moving expenses and living costs once you’re settled. Compare the cost of living between the two countries, including housing, transport and regular bills such as council tax and utilities. Consider how exchange rates and inflation may affect your income.
Reduce your tax bill
Though there are rules to ensure that you will not be taxed in more than one country, careful planning could reduce your overall tax bill. This is particularly true when there’s a significant difference between the tax rates in each country. For example, it could make sense to sell your foreign property and realise any gains before becoming resident in the UK.
It’s important to establish your potential tax liabilities in the country where you currently live, and in the UK. Income tax, inheritance tax, capital gains tax and national insurance may all be relevant.
You become liable for UK tax on becoming resident here. For this reason, you should be aware of any financial implications before scheduling your move. Also, remember that it’s possible to become a UK tax resident before the date you move. This might be triggered, for example, by having accommodation in the UK, or no longer having accommodation available overseas. The rules around residency are complex, with your UK residence status determined by the Statutory Residence Test (SRT).
In addition, expats may be subject to different tax rules depending on how long they have lived abroad. For example, if you sell an overseas property within five years of leaving the UK, you will be liable for capital gains tax in the UK.
In the past, it was advantageous for some wealthier non-UK citizens to move here as ‘non-doms’ – meaning they would be resident in the UK but have permanent homes abroad and need not pay tax on overseas earnings. However, in March it was announced that the non-domicile (‘non-dom’) regime will be phased out. (More on this below.)
Specialist tax and wealth management advice is important, but the UK Government website is a useful starting point: gov.uk/tax-return-uk.
Review your savings and investments
Consider taking professional wealth management advice in both countries as you work out how to manage your affairs going forward. Since you’re restructuring your life and assets, this is an obvious time to reconsider your long-term goals and objectives. A wealth manager can work with you to form a robust financial plan for your future.
Action to take before relocating to the UK
As you explore options, you will need to find out about any restrictions on transferring income and assets to the UK. As discussed above, it’s vital to consider the tax implications from every angle.
If you plan to sell property or other overseas investments, then early-exit penalties are another factor. Exchange rates and transfer fees might also have a considerable impact on the value of savings. A strategic approach may be needed to reduce the risk. A currency exchange specialist or wealth manager will be able to help you navigate this tricky area.
Non-UK residents often face difficulties in opening a UK bank account, although some banks offer still offer ‘international’ or ‘expat’ accounts, for wealthier clients.
Savings and investments once resident in the UK
An FCA-regulated wealth manager can help you optimise your portfolio for your new residency status, and take advantage of tax efficient investment vehicles available here. These may include:
1. ISAs (Individual Savings Accounts)
These tax efficient accounts can be used to save cash or to invest in stocks and shares. In the current 2024-25 tax year, you can invest up to £20,000 in either a cash or a stocks and shares ISA, or a combination of the two. You pay no income tax on the interest and reduced tax on dividends, and any profits from investments are free from capital gains tax.
2. Lifetime ISAs
Open to UK residents aged 18 to 39, these were created to help people either buy their first home or save for retirement. You can save up to £4,000 per year into a lifetime ISA, and holders receive a 25% bonus from the government, worth up to £1,000 per year. Like other ISAs, they are free from income tax and capital gains tax.
3. Pension savings
The government offers tax relief on pension contributions, even if you do have any income. See below for more on pensions. For those wanting a tax– efficient way of transferring assets to children or grandchildren, it is also possible to contribute to Children’s Pensions and Junior ISAs.
4. Venture capital schemes
Suitable for more sophisticated, typically high-net worth, investors, these schemes are designed to support early-stage businesses and innovative start-ups. They seek to incentivise investment in these riskier areas by providing generous tax advantages. The Enterprise Investment Scheme, Seed Enterprise Investment Scheme and Venture Capital Trusts all come under this category. However, they are higher-risk, and may not be suitable for investors who cannot afford to risk, or tie-up, their capital.
5. Offshore assets and holding structures
If you or your spouse are not UK nationals, then it may be appropriate to use offshore assets and holding structures to reduce tax. It should be noted that there is nothing illegal about holding offshore investments, provided that all taxable income and gains are declared on your UK tax return.
However, the rules around overseas earnings are due to change on 6 April 2025. This follows the UK Government’s announcement in March this year that ‘non-dom’ tax status is to be phased out.
As things stand, UK residents with permanent homes abroad for tax purposes can apply for non-dom status. This means they only pay tax on earnings in the UK. Under the new rules in 2025, people who move to the UK will not have to pay tax on money they earn overseas for the first four years. After that period, they will pay the same tax as everyone else. Those who opt into this system though, will lose their annual tax-free personal allowance (currently £12,570) and their annual capital gains tax exemption (£3,000).
Maximise your pensions
Check your entitlement to pensions in both countries. British expats returning to the UK should take stock of pension funds accumulated overseas and explore the options available for consolidation or transfer into a Self-Invested Personal Pension (SIPP). A wealth manager or financial planner can help with this.
In many cases, Britons will have a foreign pension in a Qualifying Recognised Overseas Pension Scheme (QROPS). This means you can transfer to a UK pension pot without paying taxes or penalties. Alternatively, you can leave it where it is, and withdraw benefits when the time comes.
For other overseas residents moving to Britain, the ease of transferring pension pots will depend on individual circumstances and where your overseas pension is located. For example, it is only possible to withdrawn funds from a South African retirement annuity in limited circumstances before the age of 55. To move funds abroad from South Africa, the holder generally has to have been tax resident in another country for at least three years.
Depending on your circumstances, you may be eligible for the State Pension or workplace pensions in the UK.
This is a complex area. Good initial sources of advice include HMRC and the International Pension Centre.
Are you entitled to free healthcare?
Anyone who is ‘ordinarily resident’ in the UK is entitled to healthcare services through the National Health Service (NHS). When you relocate to the UK, it’s important to register with a local GP. You may also want to explore private health insurance to supplement what’s available on the NHS.
Review insurance policies
It is possible that all your insurance policies will need to be replaced. Ensure that you review all aspects, including private medical insurance, life insurance and travel insurance.
State and private education
For anyone settling in the UK with children, school admission will be a top priority. Admission to state schools is often based on proximity to the school in question, with popular ones often at full capacity. Rules vary from one regional authority to the other, but schools are not obliged to process applications until the child is resident in the UK. Private (fee-paying) schools operate independently and will be able to guarantee places in advance subject to their normal admissions procedures.
For anyone hoping to attend university in the UK, it would be beneficial to be classed as a home student, as international students pay far higher fees and would not be eligible for other financial aid such as student loans. Generally speaking, to qualify as a home student, this means being ordinarily resident in the UK for at least three years. The UK Council for International Student Affairs publishes useful guidance on this complex area.
Property considerations
As you may be selling property or other assets where you currently reside, you may well be deciding whether to buy a property in the UK. It’s important to remember that setting up a home in the UK is a deciding factor of UK residency. If you’re selling property or other assets in tandem with your move, consider the capital gains tax implications in both countries. It may make sense to realise gains before taking up residency in the UK.
Good housekeeping
It’s important to establish a credit rating as soon as possible if you have not retained a UK bank account, credit cards or a mortgage. You will also need to register with HMRC and enrol for self-assessment. Expats moving back to the UK should check whether they need to make up any missing years of National Insurance Contributions.
In conclusion
Relocating to the UK requires careful financial planning and foresight. As the law around pensions, tax and investments in this area is extremely complex, and prone to change, it’s important to take professional advice to ensure the best outcomes. Taking a strategic approach will smooth the transition and lay a solid foundation for life in the UK.
The experienced and highly qualified team at AJB Wealth is well placed to help you achieve financial efficiency and security. To discuss your situation, please book an obligation-free consultation, or call us on 01483 774 070.
Important: The content of this bulletin is for general consideration only and does not constitute advice. No action must be taken, or refrained from being taken, without advice and this company accepts no responsibility for any loss occasioned as a result of any such action, or inaction. You are also reminded that investments can fall, as well as rise, and, in the event of early encashment, you may receive less back than your original investment. Pension and tax rules can change and any benefits will depend on your personal circumstances and your eligibility for state benefits. While some Venture Capital Trusts (VCTs) may be viewed as less risky than others, investors should remember that VCTs as a whole are higher-risk investments and may not be suitable for them.
