How Returning Expats Should Manage Their Taxes
Returning to the United Kingdom after time abroad brings a series of tax considerations. Whether you will owe tax on foreign income, capital gains, or inheritance depends on two separate concepts: domicile and residency. Understanding both is vital to avoid surprises and plan efficiently. This article explains the distinction, the tests used by HMRC, and practical steps for a smooth transition.
Lead Solution Wealth Management can guide returning expats through residency and domicile rules to optimise their tax position and ensure a smooth transition.
Get expert guidance on UK residency and domicile rules—schedule a confidential consultation today to plan your taxes efficiently.
UK Residency
Residency for tax purposes is determined primarily through the Statutory Residence Test (SRT). It examines the number of days you spend in the UK, where your main home is located, and your personal and professional connections.
Automatic UK Tests
You are automatically considered a UK resident if any of the following apply:
- You spend 183 days or more in the UK in the tax year.
- Your only home is in the UK for 91 consecutive days or more, and you stay there for at least 30 days in the tax year.
- You work full-time in the UK for a continuous period of 365 days or more, with at least one day in the tax year being part of that period.
Sufficient Ties Test
If none of the automatic tests apply, your residency is determined by ties to the UK. The main connections are:
- Family tie – spouse, civil partner, or minor children living in the UK.
- Accommodation tie – a place to live in the UK for at least 91 consecutive days, with at least one overnight stay.
- Work tie – working more than 40 days in the UK per year.
- 90-day tie – having spent more than 90 days in the UK in either of the previous two tax years.
The number of ties you have affects how many days you can spend in the UK without becoming a resident: three ties mean residency after 91 days, four ties after 46 days.
Split-Year Treatment
Returning partway through a tax year may allow split-year treatment, splitting the year into a non-resident period and a resident period. This ensures that foreign income earned before returning is generally not taxed in the UK.
UK Domicile
Domicile differs from residency. It reflects where your permanent home is considered to be, rather than where you spend most of your time.
Types of Domicile
- Domicile of origin: normally the same as your father’s permanent home at your birth.
- Domicile of choice: can be acquired after age 16 by moving abroad with the intention of making a new country your permanent home.
Changing domicile is complex and requires clear evidence of permanent relocation and intention to live outside the UK indefinitely.
Deemed Domicile
Even if you are not technically domiciled in the UK, you may be treated as deemed domiciled for inheritance tax if:
- You were domiciled in the UK in the three years before a transfer, or
- You were a UK resident in at least 17 of the 20 preceding tax years.
Domicile is particularly relevant for Inheritance Tax, as UK-domiciled individuals are liable on worldwide assets.
Tax Implications
Both residency and domicile affect several areas of UK tax:
| Tax Type | UK Resident | UK Non-Resident | Domicile Considerations |
| Income Tax | Worldwide income taxed | Only UK-sourced income taxed | Non-doms may opt for remittance basis until April 2025 |
| Capital Gains Tax | Worldwide gains taxed | Usually only UK property or trade-related assets taxed | Non-doms may avoid CGT on foreign gains if not remitted |
| Inheritance Tax | UK-domiciled: worldwide assets | Non-doms: UK assets only | Domicile determines scope of IHT |
| Stamp Duty Land Tax | Standard rates on UK property | Standard + 2% surcharge for non-residents | Residency affects timing and liability |
UK residents are entitled to a personal allowance (£12,570 for 2024/25). Non-residents may only qualify if they are UK or EEA nationals, or under a Double Taxation Agreement.
Planning Your Return
Before returning, review:
- Foreign income: bringing overseas earnings to the UK may trigger tax. Consider timing and currency implications.
- Pensions: overseas pensions might be less tax-efficient. Check treaties and consider transferring to UK-regulated schemes.
- Investments: some offshore funds or bonds may have different tax treatment in the UK. Reviewing them before moving can prevent surprises.
It is also important to notify HMRC, register for Self-Assessment if needed, and check National Insurance contributions to secure UK State Pension entitlement.
Changes Effective from April 2025
Since April 2025, the UK has replaced the non-dom regime with a residency-based system:
- Long-term residents—those who have been UK tax residents for four or more of the previous ten years—are now liable for UK tax on their worldwide income and gains, regardless of whether these are remitted to the UK.
- Transitional reliefs were introduced to support existing non-doms, including Capital Gains Tax rebasing and temporary lower tax rates on foreign income brought into the UK.
Returning expatriates should plan ahead with a tax adviser to optimise their position under the new rules.
Secure Your Tax Position Before Returning to the UK
Residency determines your tax obligations each year, while domicile governs long-term liabilities, particularly inheritance and remittance planning. Understanding both is key for anyone moving back to the UK. Careful preparation, review of assets, and professional advice ensure a smoother and more tax-efficient transition.
Contact Lead Solution Wealth Management today to review your tax situation and plan your return to the UK efficiently.
