As the end of the tax year approaches, more individuals appear to be looking to leave the country at pace, so they are outside of the country before 6 April 2025. It is driven by a desire to secure non-UK tax residency status but there are potential pitfalls for those rushing through a move overseas, says RSM’s Chris Etherington.
It is not unusual to see a steady stream of individuals looking to emigrate from the UK each year, but such a move can often be the culmination of years of careful planning. As we approach 6 April 2025, there is a greater sense of urgency as some seek to rush through a departure from the UK, allowing them to potentially break their UK tax residency status in the tax year ahead.
Those looking to leave the UK at pace are not simply individuals who have historically benefitted from the non-dom tax rules. Indeed, many of those impacted by the forthcoming changes to the non-dom rules have already taken action.
Rather, we are seeing more UK domiciled individuals looking to pack their bags before the tax year ends. The motives are varied but if there is a common theme, the high UK tax burden and fears around further changes to capital taxes are certainly a factor. In contrast, Mediterranean countries, like Italy and Greece, are proving attractive destinations as they offer preferential tax regimes, similar to the non-dom rules that are shortly set to be abolished in the UK.
In some cases, individuals are leaving without necessarily having a finalised plan as to where they want to live permanently in the future. This is because it may be easier for someone to break their UK tax residency status in a tax year if they are already living overseas before 6 April, rather than if they try to leave mid-tax year.
In certain circumstances, someone leaving the UK mid-tax year can still be treated as a non-UK resident immediately from the day they leave, but this requires a number of narrow conditions to be met. For example, this may be the case where someone leaves the UK to work full-time overseas or begins to only have a home overseas.
For those who are already outside of the country when the new tax year begins, their non-UK residency status will usually be confirmed by limiting the number of days they are present in the UK. It is a common misconception that if someone simply spends fewer than 90 days in the UK, they will not be a UK tax resident. Indeed, depending on someone’s particular circumstances, they could be UK tax resident for a tax year if they spent just 16 days in the UK in that year.
How much time an individual can spend in the UK and remain a non-UK resident will usually be determined by working through the UK’s statutory residency test, which can be complicated to follow and satisfy. For example, one particular point that is often overlooked by those looking to break their UK tax residency status is an element of the statutory residency test relating to retaining a UK home.
If an individual has a UK home but has not yet established an overseas home, this can potentially result in them being automatically treated as a UK tax resident if they spend 30 days in the UK home during the tax year.
For some looking to leave the UK in the coming weeks without a fully formed plan, there may a bit of a Thelma & Louise philosophy: “what if we just kept driving?”. The key will be ensuring they do not drive off a cliff and land themselves in hot water with HMRC in due course.
