If you move to the UK during the tax year, you do not always become fully taxable in the UK from 6 April. Depending on your circumstances, you may qualify for Split Year Treatment, allowing part of the tax year to be treated as non-UK 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 one of the statutory split year cases applies, the tax year can be divided into:
- an overseas (non-UK resident) period; and
- a UK resident period.
This can reduce the amount of overseas income and gains that are subject to UK tax.
When Can Split Year Treatment Apply?
For individuals arriving in the UK, there are five statutory split year cases.
Case 4 – Your Only Home Becomes the UK
This applies where your only home becomes located in the UK during the tax year. If the statutory conditions are met, the UK part of the tax year generally begins when the UK becomes your only home.
Case 5 – Starting Full-Time Work in the UK
If you move to the UK and begin full-time employment, split year treatment may apply from the date your UK employment starts, provided you satisfy the residence conditions.
Case 6 – Ceasing Full-Time Work Overseas
If you stop working full-time overseas and return to the UK, split year treatment may apply from the day after your overseas employment ends, provided you satisfy the overseas working conditions and become UK tax resident.
Case 7 – Returning to the UK with a Partner
This applies where you move to the UK to live with a spouse, civil partner or long-term partner who qualifies under Case 6.
Case 8 – Starting to Have a UK Home
This applies where you acquire a UK home during the tax year and continue to have that home into the following tax year. Unlike Case 4, you may still retain a home overseas.
Which Case Applies?
Sometimes more than one arrival case may apply. In these situations, HMRC applies the case that results in the shortest overseas part of the tax year.
Example – Returning to the UK After Working Overseas
James has been working full-time in Australia for several years. His last overseas workday is 25 August, and he returns to the UK shortly afterwards.
To qualify for Split Year Treatment under Case 6, he must satisfy the overseas working conditions up to the date his overseas employment ends.
Normally, these conditions include spending no more than:
- 90 days in the UK, and
- 30 UK workdays,
during the overseas working period.
Because James stops working overseas part way through the tax year, these limits are reduced (apportioned).
There are seven complete calendar months remaining in the tax year after his overseas work ends (26 August to 5 April), so the permitted limits become:
- UK days: 90 − (90 × 7/12) = 37 days
- UK workdays: 30 − (30 × 7/12) = 12 workdays
Provided James remains within these reduced limits and satisfies the other statutory conditions, the tax year can be split, meaning he is treated as:
- Non-UK resident from 6 April to 25 August, and
- UK resident from 26 August onwards.
Why Split Year Treatment Matters
Split year treatment can have a significant impact on:
- UK Income Tax;
- Capital Gains Tax;
- overseas employment income;
- foreign investment income;
- reporting overseas income to HMRC; and
- your overall UK tax residency position.
The rules are complex and depend on your UK residence status, working pattern, days spent in the UK, homes, and future residence status.
If you are planning to relocate to the UK after living or working overseas, obtaining professional advice before your move can help ensure the correct UK tax treatment applies 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.
