Are you a returning formerly domiciled individual?
If you were born in the UK to UK parents who were also born in the UK then it is likely that your domicile of origin is the UK. By moving abroad and living and working in a foreign country you may have acquired a domicile of choice but if you move back to the UK your domicile of origin revives.
Were you abroad for less than 5 years?
If you return to the UK within 5 years and you were resident in the UK for at least 4 out of the 7 tax years before you moved abroad your absence will be considered temporary. This means that certain types of income and any gains realised on the disposal of assets you owned before you left the UK will be taxable in the year of your return. If you paid overseas tax on any gain you may be able to claim relief for it under a double taxation treaty. Gains on assets you both bought and sold whilst out of the UK will not be taxable in the UK on your return.
My spouse/civil partner/children are not UK citizens
If you got married whilst overseas and your spouse/civil partner is not domiciled in the UK then you should consider equalising your funds before returning to the UK as there is a lifetime limit (currently £325,000) for transfers to a non-domiciled spouse/civil partner.
Close family members with UK citizenship or settled status can return with you and live permanently in the UK. Close family members include spouses, partners, children, parents and grandparents. If they do not have UK citizenship or settled status there are different rules depending on where you are returning from. If your family is returning from the EU then no visa will be required until 29 March 2022. After that time, those family members without citizenship or settled status will need to apply for a visa. If you have any other dependent family members, or a future spouse/civil partner, who are not UK citizens and do not have settled status they can accompany you without the need for a visa up to the end of December 2020. If you return after 1 January 2021 they will need to apply for a visa. If any of your close family members hold EEA or Swiss citizenship, they can also accompany you without the need for a visa up to 31 December 2020. Family members moving from anywhere else in the world will need to apply for a visa prior to relocating to the UK.
What taxes will I pay?
Following the introduction of new rules in April 2017, as a formerly domiciled resident, you will be liable for income tax and capital gains tax on worldwide income and gains from the day you return to UK. You will have 1 year to put your affairs in order and then you will be liable to Inheritance tax on your worldwide assets. You should check the tax rules of the country you are leaving as you may have obligations under their tax regime for a certain period after leaving the country.
What actions should I take in respect of my tax position?
If you are going to become self- employed, let out property, or if you will continue to receive income from overseas you should register with HMRC and file annual Self Assessment tax returns declaring your income and gains. You will not be liable for inheritance tax (IHT) on your worldwide assets until you have been resident for one tax year. Use this time to review your situation and your intentions for the future. Consider who you would like to benefit from your wealth and whether you want them to benefit now or after your death. There are various ways to mitigate your IHT liability. You can make lifetime Trusts for the benefit of your children, grandchildren, other family members, or a charity if you prefer. By making a will you get to state who will administer your Estate, who should look after your children, and who should benefit from your Estate and to what extent. The Covid-19 pandemic has highlighted the fact that life is uncertain. Now is a good time to consider making Lasting Powers of Attorney, both financial and welfare, so that you get to choose the people you would like to be responsible for managing your affairs and making decisions on how you should be looked after should you no longer be able to manage your affairs for yourself.
For more information on this or any other matters relating to private wealth, please contact me on +44 (0)20 7201 3575