Tax Issues to be Aware of Before Moving to the United Kingdom

September, 2020

Author: Kevin Lei

The UK has a highly evolved system of taxation and planning helps to limit exposure and protect wealth. Two issues in particular should be considered before any move to the UK.

Clean Capital

Any income or gains which have arisen before becoming the UK resident is regarded as ‘Clean Capital’. These income and gains can be brought into the UK without triggering any UK tax issues. However, these funds must be kept separate from any foreign income or gains earned after becoming a UK resident otherwise risks questioning from HMRC regarding the source of the funds. A solution to this for example, would be to set up a separate bank account to maintain any pre-UK residency funds and to open another account to receive any income (interest, dividends and capital gains) from foreign investments.

Arising Basis vs Remittance Basis

The non-domiciled tax resident in the UK can choose to be taxed on an arising or remittance basis relating to any non-UK income or gains.

The arising basis means that taxpayers will be taxed in the UK on their worldwide income in the tax year which the income or gains arises regardless of whether the funds are brought to the UK.

The remittance basis means taxpayers do not need to pay UK tax on any non-UK sourced income as long as they are not remitted back to the UK. A consequence of claiming the exemption under remittance basis is that the individual will lose their entitlement to their personal allowance and capital gains annual exempt amount (£12,500 and £12,000 respectively for the years 2019-20) for the tax year in respect of which the remittance basis claim is made. A decision on whether to make a claim for the remittance basis can be made on a year-by-year basis. The claim is usually made via the individual’s self-assessment tax return

For more details on the above, please contact Kevin Lei at 852 5588 5035 at Zetland Tax Advisors.

Zetland Tax