Expat Returning to UK – Your essential guide

Are you a UK expat thinking of returning home? If so, there’s a lot to think about. In fact, you’d be forgiven for not knowing where to begin. There’s so much to consider.

Finances, taxes, education, mortgages and healthcare to name but a few. In this essential guide we highlight the main points you need to think about.

The topics covered in this article provide a good outline of what lies ahead. Most importantly, it will give you a heads up, and a good idea where your attention needs to focus first.

For most, the key to saving costs and a successful move is going to be forward planning.

What are the tax implications when you return to the UK from abroad?

Tdax is something you might want to start thinking about earlier rather than later.

That’s because there are rules for expats returning to the UK that nobody seems to know about.

It’s no surprise because they are related to tax and that ain’t a popular topic for anybody.

In short, there are tax rules are there to stop people living overseas temporarily to avoid taxes. I know. It’s hard to believe there are people out there that really do that.

The good news is, if you play by the rules it is possible to save money (a lot in some cases) by doing some tax related tasks before you return. But at the same time, it can also be to your advantage to put other things off until after you are back.

When all said and done, it usually comes down to just how much of a non resident you are. You see, it all depends on the number of years you’ve lived abroad and as it turns out, five is the magic number!

If you return within five years you may find yourself lumbered with a large tax bill if you aren’t careful. Let me explain.

The tax five year rule

The minute you become a non resident you no longer have to pay capital gains or dividend tax on your UK assets (ignoring property).

But this is provisional on you not returning to the UK to live within five years. If you move back permanently within those five years things change. Essentially, you are probably going to be liable to pay tax as if you’d been resident in the UK.

Now if you’ve been living overseas for one year or ten, you probably aren’t going to let this situation impact your decision to move back, but the closer you get to that five year limit the more of an issue it becomes for those with UK assets or who had UK assets they recently parted with.

Let’s say you’ve been living overseas for four years, and you’d just sold a some UK shares and realised some substantial capital gains. It might make sense to hang around for a year if you can. Doing so means you should avoid having to pay a large tax bill on those gains.

And by the way, it’s important to realise this applies to all UK assets except property. If you realise capital gains on a house sale you’ll be liable for tax anyway.

Yes, you can sell your home without realising capital gains, but it may be hard to argue that’s your home when you haven’t been living there! Second properties, buy to lets and investment properties are all liable for capital gains tax.

Which brings us nicely onto the next point. If you are thinking about selling your home at a similar time to going back to the UK it may make sense to hold fire for a while.

In doing so, you may be able to reduce your tax liability by living in the house for a while before you sell it.

Stamp duty

Similarly, expats returning home might want to hold off buying that new property. There were some updates to UK stamp duty legislation recently so we’ve written a whole article on this topic which you can find here if you are interested.

But in summary the headline being expat stamp duty usually comes with a 5% surcharge over standard rates. Ouch!

On a £300K property that would equate to about £20K you’d pay, rather than the standard £4,750. In other, words you pay four times as much. Double ouch!

In other words, it maybe in your best interests to put any property purchase on hold until you get back home.

Split year tax return

Tax years run from April to April so it’s logical to try and time your move as close to April 6 as you can so that you can avoid completing a ‘split year’ tax return.

As anybody whose had the pleasure of dealing with one of these will testify, they are a bit of a nightmare. Especially, if you do it yourself but not much better professionals so they can’t help but charge you more than they otherwise would.

You can read more about these here over at HMRC.

Where can I get some tax advice?

The only good thing (in my opinion) about tax is the fact there’s lots of help available. A lot of it free.

HMRC themselves should be able to answer any questions you have. (You can find their contact details here. )

Alternatively if you need help with property taxes in particular we have found UK Landlord Tax to be very knowledgeable and open to our questions, so would recommend them as your first contact. You can contact them directly with any questions you may have from here. We’ve also gone into detail about how to find your own online tax accountant here.

For anything else we’d recommend beginning your search with Unbiased. They offer a free professional advisor match-making service. In other words, they can pair you with professional advisors for free.

Essentially, Unbiased match you to advisors who are independent, regulated and qualified. And yes even though they are a UK site serving UK residents, they also offer dedicated expat advice. And the service couldn’t be easier to use. You key in some basic information (the 2nd question being are you a UK resident) and then they’ll get to work finding you a professional that should fulfil your requirements.

Mortgages

As well as saving on stamp duty, another reason for you to hold off a potential property purchase until you arrive is mortgages.

All things being equal UK residents usually get better deals.

However, it doesn’t always make sense to wait until you get to the UK, particularly if you already have a property in mind. Just make sure you find a specialist mortgage broker experienced with people in your situation. If you haven’t yet found one, we’ve taken a look at three of the best for expats and non residents here.

Kids returning to UK schools

In many cases education is the sole reason for a move back home.

We often talk about doing your own due diligence at British Expat Money, but I think, when it comes to your child’s education we really mean it this time.

This topic deserves an article of its own which is in the pipeline. However, here are a few things to think about in the meantime.

Culture shock – Swapping, marble floors, the tropics and foreign languages for accents, carpets and reality TV might not be easy for some.
Watershed years – Unless your children are really good at fitting in, it can be very difficult to break into established friendships. As a result, where possible kids of expats returning to the UK will usually find it easier if you time the move to coincide with a watershed year. 11 for high school or 16 for six form, being two of the big ones.
Early applications – Some schools begin the admissions process three years in advance. If you want your child to go to such a school you are going to need to be prepared.

University fees

International students pay double the amount UK students need to pay. In other words, it in this instance it pays to be classed as a UK student. You usually need to have been living in the UK for the past three years prior to commencement for that.

That said some people seem to get around these rules. It will depend on your actual situation and which university you apply to. Having strong connections to the UK, such as family and housing could help.

Contacting University admissions well in advance of course commencement to ensure you are applying to Universities that will accept you as a UK resident should serve you well.

But the fact remains, the safest route is going to be moving to the UK at least three years before the course starts.

Healthcare

The NHS for is something a lot of potential returners worry about, but in most cases it shouldn’t be.

As long as you can prove you have moved back permanently you shouldn’t have a problem.

In fact, for NHS services should be exactly the same as for long term residents.

Driving licence

EU and EEA driving licences should still be accepted in Britain after Brexit. On the other hand, non EU/EEA licences should be exchanged for a UK version.

In some rare cases you will need to apply for a new UK licence, and this can involve retaking your test.

You should be able to find out exactly what you need to do here.

Returning to UK with a foreign wife and or children

The spouse and children of British citizens can apply for partner and child visas. These are types of family visa. Though the application process should be relatively straight forward, there are a few points worth going over.

They cost more than £1,500 each. So as an example, visas for a wife and two children would cost over £4,500.
You would need to fulfil the sponsor requirements.
You need to demonstrate a level of income and or savings. Your income requirements are £18,600 for you and a partner. A further £3,800 for a child and then £2,400 for each subsequent child. Alternatively, you can also meet the requirements through savings. You need £16K and then £2.50 for every £1, your income is below the requirements. (but beware as these are supposed to be increasing).
Though, there aren’t any language requirements for kids, there are for partners. They’ll need to take a test unless they are coming from a country that speaks English as an official language, has a University degree that was taught or researched in English or they are either under 18 or over 65. You can read more about this here.

Bank accounts

Most expats don’t have a problem opening a bank account when they get back to the UK. Instead, it’s the type of bank account they open that may not offer the services they require, at least initially.

Credit cards and large overdrafts aren’t usually handed out to those who don’t have a credit history.

So though it’s not essential for an expat returning to the UK credit rating may just matter. That’s why it is best to keep some kind of financial footprint in the UK when you are living overseas.

Here are some things you can do to ensure you have a credit footprint.

Keep your UK bank account when you move overseas and use a UK correspondence address, such as that of a family member or trusted friend. If you can’t keep your UK bank account think about opening a dedicated expat account. We’ve gone into more detail about banks that maybe open to expats here.

Benefits & Welfare

In theory, when you return home you should be able to claim benefits.

In some cases it may not be quite as straight forward as it should be, however.

For example, an expat returning to the UK from abroad may find themselves subject to the Habitual Residence Test (HRT) before they can claim any benefits.

This is an article in itself. If you are interested, the Citzens Advice Bureau goes into more detail about it here.

But suffice to say, to qualify you must demonstrate:

A legal right to live in the UK and claim these benefits (called right to reside);
That your intension is to settle in the UK, Isle of Man, Channel Islands or Ireland (the ‘common travel area’) and make it your home (called habitual residence).

You can find information on specific benefits here.

Pensions

There are few things to think about with pensions. First and foremost do you have enough National Insurance contributions built up to claim the state pension?

If you haven’t you may want to top up your years. It’s probably going to be worth it for most people. ‘Which‘ have more details about how you can get this done if you are interested. You can find it here.

In addition if you have an overseas pension you may want to look into transferring back to the UK. This isn’t going to be something everybody should do or even can do.

For example, some pension funds simply won’t let you transfer back. Even if yours does, it’s not always the wisest move. For example, if you’ve been contributing to your overseas pension since before 2017 certain tax benefits may be available to you if you leave your pension overseas.

Your pension provider should be able to provide you more details about this. UK SIPP (Self Invested Personal Pension) providers can usually help with this too.

Where expats get help?

Citizens Advice Bureaux is always a good place to find free information related to the topics we’ve been talking about.

If you want general free advice related to your finances, we always recommend starting with the Money Advice Service. In fact, we often refer back to them on this site. In short, it’s a free UK government backed website full of information on everything finance related. The information isn’t specifically aimed at expatriates but there is a lot on there that is relevant.

And for tax advice don’t overlook HMRC, who will be able to answer most questions you have. You can find their contact details here.

If you need help with property taxes we have found UK Landlord Tax to be very knowledgeable and open to our questions, so would recommend them as your first contact. You can contact them directly with any questions you may have from here. We’ve also gone into detail about how to find your own online tax accountant here.

Or if it is just help with your self assessment it may make sense just to start using software that will guide you through the motions. We’ve compared some tax software packages here, but for tax returns specifically you might want to try GoSimpleTax. Right now you can try it for free here.

For anything else we’d recommend beginning your search with with Unbiased. They offer a free professional advisor match-making service. In other words, they can pair you with advisors for free. They have tax/accounting professionals and financial advisors.

What’s likely to be the biggest shock?

It may come as no surprise that the biggest shock when you get home is likely to be the cost of living. One of the biggest benefits of most popular expat destinations is the cost of living.

Of course, you may be coming from one of the few places that is even more expensive than Britain. But even then, the chances are you’ll struggle not to raise an eyebrow when confronted with your first energy bill. In case you haven’t heard, they’ve risen a lot in recent years.

Are you a UK expat thinking of returning home?

The key to a successful move is always going to be forward planning.

The sooner the better!