If you are leaving the UK permanently or moving abroad for work, you may not have to wait until the next tax year to be treated as non-UK tax resident.
Under the UK’s Statutory Residence Test (SRT), an individual is normally either UK tax resident or non-UK resident for an entire tax year. However, where certain conditions are met, the Split Year Treatment rules can divide the tax year into:
- a UK resident period, and
- an overseas (non-UK resident) period.
This can significantly reduce the amount of overseas income and gains that are subject to UK tax.
When Can Split Year Treatment Apply?
For individuals leaving the UK, there are three statutory split year cases.
Case 1 – Starting Full-Time Work Overseas
This is the most common split year case and applies where you leave the UK to start full-time employment overseas.
Broadly, you must:
- have been UK tax resident;
- leave the UK to work full-time overseas;
- meet the overseas working conditions, including minimum working hours;
- limit the number of days and workdays spent back in the UK; and
- become non-UK resident in the following tax year.
If the conditions are met, the overseas part of the tax year normally begins on your first overseas workday.
Case 2 – Following a Partner Overseas
Split year treatment may also apply where you move overseas to join your spouse, civil partner or long-term partner who qualifies under Case 1.
You must move abroad so you can continue living together and satisfy the statutory residence conditions.
Case 3 – Ceasing to Have a Home in the UK
If you permanently leave the UK and cease to have a UK home, split year treatment may also be available.
Broadly, you must:
- stop having a UK home;
- establish sufficient connections with another country;
- become non-UK resident in the following tax year; and
- keep your return visits to the UK within the permitted limits.
In this case, the overseas part of the tax year generally starts from the date you cease to have a UK home.
Which Case Applies?
In some situations, more than one leaving case may apply. HMRC requires the cases to be considered in the following order:
- Starting full-time work overseas
- Following a partner overseas
- Ceasing to have a UK home
Example – Leaving the UK to Work Overseas
Emma leaves the UK on 1 November to start a full-time job in Singapore on 7 November.
Normally, the overseas work conditions require no more than:
- 90 days in the UK, and
- 30 UK workdays,
during the overseas working period.
However, because Emma only starts working overseas part way through the tax year, these limits are reduced (apportioned).
There are seven complete calendar months in the UK part of the tax year (6 April to 6 November), so her limits become:
- UK days: 90 − (90 × 7/12) = 37 days
- UK workdays: 30 − (30 × 7/12) = 12 workdays
Provided Emma remains within these reduced limits and satisfies the other conditions, she can qualify for Split Year Treatment, meaning she is treated as:
- UK resident from 6 April to 6 November, and
- Non-UK resident from 7 November onwards.
Why Split Year Treatment Matters
Split year treatment can have a significant impact on your UK tax position, including:
- UK Income Tax;
- Capital Gains Tax;
- taxation of overseas employment income;
- foreign investment income; and
- your overall UK tax residency status.
The rules are highly technical and depend on your UK residence status, days spent in the UK, working pattern, and living arrangements.
If you are planning to move abroad or start working overseas, obtaining professional advice before you leave can help ensure you qualify for the correct UK tax treatment and avoid unexpected UK tax liabilities. If you would like to discuss the above, please get in toucheither by email shimshon.goodman@fkgb.co.uk or book a zoom meeting on my calendar – https://calendly.com/shimshon-goodman-fkgb/30min.
