Are you repatriating to the UK? In this article, Expat Focus partner and Founder of Global Expatriate Tax Services Limited, Oliver Heslop, looks at six financial issues British expats should consider when moving back home.
A good friend of mine moved to the Middle East about fifteen years ago, and this year he moved back permanently to the UK. I remember him saying last Christmas, he’d simply ship their beds and crockery to the UK, and it would all be plain sailing. I spoke to this same friend last month, and he was tearing his hair out. “All of the UK money issues are driving me crazy,” he complained.
So, let’s take a tour of the money and tax issues that can impact expats returning to the UK. I’ll also come up with some solutions!
Cost of shipping
This is not strictly a UK money issue, although it can hit the pockets of most expatriates returning to the UK. I have one recommendation only: please ensure and doublecheck that your possessions are fully insured.
One of the worst scenarios is for goods that are not fully insured (even though you paid high premiums) to be damaged enroute. A client of mine was recently caught out by this, through no fault of her own. The insurers are now only paying out a limited percentage of the value of the lost goods. It seems most unlucky and most unfair!
Banking
When you return to the UK, you may not have a UK credit history or a permanent address as recognised by the financial bodies, such as banks and lenders. This can make it very difficult to set up a new bank account if you don’t have one.
Here are some thoughts on proving you have returned to live permanently in the UK:
i) Register on the electoral roll as soon as you arrive
ii) Obtain a letter from a local solicitor to vouch for your new address
iii) Whilst still abroad, open an international bank account (for example, with Lloyds or HSBC), which can be converted into a UK based account
iv) Keep any documents issued to you at the airport by HM Customs, as these can serve as official UK Government documents and proof
Re-joining the UK tax system
Now, we might call this a bizarre one – attempting to do the right thing and hitting HMRC obstacles … The returning expat wants to bring all of their tax affairs up to date. They therefore need and expect HMRC to accept their tax return filings, and any other HMRC forms they file. That sounds sensible and easy? Far from it, at times, unfortunately! HMRC can be erratic.
When you file an HMRC form (e.g. an application to join self-assessment), HMRC will be very strict on the ID and address information, and they will reject plenty of paperwork. The forms filed must match the records held by HMRC, and this data can be ancient. This data “match” is vital. So, how can you overcome this problem?
i) Every expat should set up a personal tax account with HMRC (details below)
ii) This online HMRC account will allow you to check and update your personal details
You can set up your account on the UK Government website. This is well worth your time – it’s a real “stitch in time”.
UK tax returns
You may not have filed a UK tax return ever before, or perhaps not for some years. The quick overview is that the UK tax year ends on 5th April every year, and the personal tax return filing deadline is 10 months later, on 31st January the following year.
You may not wish to join the UK tax return system, but there are a multitude of reasons why you are required to (or you have been required to, and not known, when overseas). The typical examples are: receipt of rental income, at certain levels; the need to claim tax reliefs and rebates; and receipt of overseas investments. There are many more reasons, and I can advise you on whether you must file.
When it comes to UK tax returns, you are better off checking what your position is yourself, rather than receiving a surprise notice to file from HMRC.
Cost of living
This is an issue that is blindingly obvious to any UK resident – because it’s in the news in Britain every day. UK inflation has exceeded 10% for the first time in decades. If you are living abroad, you may not have been keeping so up to date with the latest news.
One of the biggest cost areas to consider is household food bills. These are increasing at rates of 10%-20% pa, and you should factor this into your budgeting. A second key area to remember is UK salary negotiations. If you are offered an interesting new role in the UK, bear in mind UK inflation when discussing that offer.
If you have lived overseas in warmer climates, with longer springs/summers, you will be returning to the UK with a definite winter of three to four months. Home fuel bills are of course rising in every country, but the UK climate can greatly increase your utility bills, compared to overseas.
National insurance contributions records
During your time abroad, you may have continued to pay UK national insurance contributions (NIC) or you may not have. Either way, the size of this UK “NIC pot” will normally determine your final UK state pension. This may be absolutely critical to future happiness (current full pension is ~£9,500).
The recommended action here is to speak to me or the HM Govt pensions team and request confirmation of your current UK state pension “pot”. I may be able to help you top up that pot!
Good news
Above I have highlighted some of the problematic financial issues and given my advice on how to tackle them. I’ll now offer a quick run-down of some of the positive tax implications associated with returning.
A returning expat can claim “split” year tax relief that can deliver a £500, or even £4,000, extra UK tax rebate. That same expat may be entitled to overseas workday relief, if non-domicile and other tests are met. A returning expat can in some cases repatriate funds/pensions without triggering UK tax. If you’d like to discuss any of these points further, you can get in touch via the Expat Focus website.
Global Expatriate Tax Services Ltd (GETS) are highly experienced UK tax specialists helping UK expats abroad AND foreign nationals living in the UK. Contact them today for confidential, no-obligation advice with your UK tax affairs.