Moving to the UK: Tax and Estate matters to consider

Please be advised that the information in this article regarding QNUPS and IHT is no longer accurate due to the recent changes announced in the UK Budget. Starting in April 2025, the regulations will have significant implications that may affect your understanding of these topics. We encourage you to stay informed and consult with a Soteria Trusts expert to navigate these changes effectively.

This article will explore and inform about how the UK tax system works for non-nationals looking to move to the UK to live and work or are eying to invest there. In particular, we will look into tax and estate planning for those considering emigrating to the United Kingdom and becoming UK residents, and any such move should be planned carefully. The UK has a complex tax system, so knowledge and planning can help limit your exposure to UK tax and protect your wealth. Tax when moving to the UK

Moving to the UK – Taxation, Assets and Inheritance Matters 

Below is a short list of taxation considerations a family or an individual should consider before moving to the UK so that they can shelter their wealth from unexpected taxes—either in the UK or their home country. 

Taxation: 

• When is the optimal time to lose your current tax residence to minimise exit charges?
• What structure should you put in place to shelter assets from taxes before and after moving to the UK? Ignoring this until after arrival can result in unexpected and large tax bills that could have easily been avoided.
• If you intend to invest in UK property, should this be done before or after you move and become a tax resident in the United Kingdom?
• Should you establish new banking arrangements to segregate income and gains, which can help reduce my taxes?
• If you want to transfer any physical wealth, such as family heirlooms, works of art, cars and yachts, can they be transferred or imported without duties?

Succession and inheritance:

• Make sure that you understand which succession laws might affect your situation and whether you can choose different jurisdiction laws.
• Review all your estate planning documents (LPAs, guardianships, succession plans, prenuptial agreements, etc.) to determine if your wills are appropriate for different jurisdictions.
• Consider using trusts for estate planning, keeping in mind that timing the settlement of trusts can have certain tax consequences.
• Confirm whether gifts or donations should be made before acquiring a new residency.
• Educate yourself about the UK Inheritance Tax and ways to mitigate it. 

When will you become a UK tax resident, and what does that mean?

The UK tax authorities are very strict about how you qualify for resident and non-resident status. You should keep records of how long you spend in the UK and overseas to help with any tax planning. Usually, you will become a UK tax resident under the automatic UK test if you pass the following criteria:

– you spend 183 or more days in the UK in a tax year; and

– your only home was in the UK, and it was available to use for at least 91 days in total; and

– you spent time there for at least 30 days in the tax year;

– you worked full-time in the UK for any period of 365 days, and at least one of these days fell into the specific tax year;

– you pass a set of additional tie tests, which may include family or work. 

Moreover, when you become a UK tax resident, your income and capital gains taxes will be charged on your UK and foreign income. That’s why it’s crucial to plan your move and see whether you should consider sheltering your overseas assets before they come into view and reach HMRC. 

Related: What is a Trust? 

What if I am a tax resident in more than one country? 

It’s possible to be a UK tax resident and a tax resident in another country under local laws. A double tax treaty between the UK and this other country that contains ‘tie-breaker rules’ will determine your tax residence status.

You might be exempt from paying UK tax on income and gains earned overseas if you tie break to the overseas country rather than the UK. However, this is a very complex area of taxation. Detailed analyses of your residence status and applicable tax treaties are always necessary.

Related: Domicile vs Residency 

If your move to the UK is permanent and you want to transfer all your assets 

If you want to transfer any money from overseas to the UK and this money is part of your existing assets, then there could be tax implications for doing so. However, you can transfer funds and report transactions under the ‘remittance basis’ rules. 

Using the remittance basis of taxation, you pay UK tax on UK income and gains for the tax year in which they arise, but you only pay UK tax on foreign income and foreign gains if and when they are brought (or ‘remitted’) to the UK. In practice, the remittance basis can help to prevent double taxation. However, whilst having the remittance basis is helpful to those with overseas income or proceeds from sold assets, there is one drawback. That is, if they elect to use it, they lose all of their personal allowances for the tax year in which the election was made. 

The other option is to pay on an ‘arising basis’, which means tax is paid on all of the income as it is received, and you retain all personal allowances. If you are regarded as a UK resident and the money being transferred is your overseas income, then you will likely have to pay tax. 

You should check if any duties will be necessary for transferring physical assets as there may be import taxes you should consider. 

Moving to the UK: Tax and Estate Planning 

Individuals or families are often advised to set up a Trust, which can be managed and controlled in Hong Kong (or another finance centre with a DTA with the UK). Based on the Hong Kong Double Taxation Agreement, if a trust is managed and controlled in Hong Kong, the trustee would be treated as a resident in the place of effective management, and the trust would, therefore, be subject to Hong Kong tax only when it does not have any UK assets. UK tax would then only be relevant on any income and distributions at a rate of up to 45% for UK resident beneficiaries. 

The recently published Economic Crime (Transparency & Enforcement) Bill saw the introduction of the beneficial ownership register for all overseas entities holding UK property. The bill is unique in a number of ways, one being its start date, which was backdated to January 1999. Every overseas entity which has acquired UK property since that date will need to disclose the ultimate beneficiaries of the property or face a restriction placed on the title, leaving them unable to sell it until the owner/s are identified. This is another playing field leveller for overseas owners who now have the same level of disclosure as UK entities used for holding property.

For a more robust solution, you can consider a QNUPS, an HMRC-approved pension scheme that can hold UK assets (especially property). When established correctly, the QNUP ensures the member will have no CGT on gains made nor any IHT on death. A QNUPS might be a preferable option as it not only allows you to shelter your existing assets but also any future ones; any assets placed inside the pension will be Inheritance Tax-Free immediately post-transfer, and neither is there Capital Gains Tax to pay on disposal of the asset. 

For more information, feel free to contact one of our specialist advisers at Soteria Trusts to discuss your UK tax planning and estate planning matters.