Brits Abroad Beware: Don't Trigger a Tax Charge by Coming Home Too Soon
UK nationals who have lived abroad and return to the UK may face unexpected tax charges on income and gains received during their non-UK residence, if they are not careful about timing.
A person who has lived in the UK, become non-resident, and then returns can face UK tax on certain income and gains received whilst they were non-resident — if their period of non-residence is not more than five years. This is the "temporary non-residence" (TNR) trap.
The five-year rule
To avoid TNR, you must be non-resident for more than five complete tax years (6 April to 5 April). If you are non-resident for five years or fewer and then return, you may be taxable in the UK in the year of return on income and gains received during your absence — including pension withdrawals, dividends from UK family companies, capital gains, trust payments and insurance bond proceeds.
Split year treatment
If you qualify for split year treatment in the year you leave and/or return, part years of non-residence count towards your five-year total — which can make the difference between being caught by the TNR rules or not. The conditions for split year treatment are detailed and should be checked carefully.
The bottom line
If you have been living abroad and are considering returning to the UK, the timing of your return is critical. Taking advice before you come back — rather than after — can make a very significant difference. Please contact a member of the team.