Leaving the UK

The Impact of UK Tax Changes on Expatriation: What You Need to Know

In recent years, the UK has seen a notable increase in the number of high-net-worth individuals and professionals leaving the country for destinations with more favourable tax regimes. This trend has been driven by a combination of rising tax rates, reductions in allowances, and the abolition of non-domiciled tax status. Many are relocating to jurisdictions such as Dubai and Italy, which offer attractive tax incentives and residency programmes.

Why Are People Leaving the UK?

The UK’s tax burden has reached historic highs, leading many to seek financial relief elsewhere. The freeze on tax thresholds has resulted in fiscal drag, increasing the effective tax burden on earners. Those with incomes exceeding £125,140 face a 45% income tax rate, while the reduction of the dividend allowance and capital gains tax allowances has further squeezed investors and business owners. Additionally, Labour’s proposed tax reforms—including the end of the non-dom regime and increases in inheritance tax exposure—have contributed to a record outflow of wealthy individuals.

According to a report by Henley & Partners, 10,800 high-net-worth individuals left the UK in 2024. The exodus included 78 centi-millionaires and 12 billionaires. Applications for alternative citizenship and residency from UK nationals rose by 57% in 2024 compared to the previous year. moneyweek.com

Those leaving the UK tend to arrive at popular destinations such as:

Dubai (UAE): No income tax and a straightforward residency programme through investment.
Italy: A flat-tax regime for new residents, offering a favourable alternative for high-income individuals.
Switzerland, Monaco, Andorra, USA, Canada, Singapore, and Australia: Various investment and residency schemes catering to expatriates

Key Considerations When Leaving the UK

While moving abroad may offer tax benefits, individuals must ensure they meet their UK tax obligations. Simply leaving the country does not mean one is automatically exempt from UK tax.

Declaring Departure to HMRC

Individuals leaving the UK should notify HMRC by completing a P85 form, which determines their tax residency status. Those who continue to earn UK-sourced income—such as rental income from UK properties—must still file UK tax returns.

UK Tax Residency Rules

The Statutory Residence Test (SRT) determines whether an individual is still considered a UK tax resident. This test assesses factors such as the number of days spent in the UK and the presence of family, accommodation, and work ties.

If deemed a UK resident, global income may still be subject to UK taxation.
If non-resident, only UK-sourced income (e.g., rental income) remains taxable.

UK Tax on Overseas Income and Assets

Individuals with UK residential investment properties must continue to declare rental income and pay tax on it in the UK. Additionally, UK inheritance tax (IHT) implications apply to UK-situated assets, including UK Land and Property. This remains the case regardless of whether an individual has since left the UK and taken up residence elsewhere.

The Importance of Tax Planning Before Moving

Many individuals unfortunately make uninformed financial decisions when relocating, leading to unnecessary tax liabilities. For example, failing to structure income and assets appropriately before arriving into the UK can result in unexpected tax charges when transferring assets into the UK post residency. Issues can also occur when an individual realises certain income and gains during a period of temporary non-residency. This can result in unexpected tax burdens when an individual returns back to the UK within a short period of time.

To avoid similar pitfalls such as these when arriving into your new country of residence, it is essential to seek professional tax advice before relocating. Understanding both the exit tax implications in the UK and the tax rules in the new country of residence can help individuals structure their affairs efficiently.

How We Can Help

At Lawrence Grant LLP, we specialise in international tax planning and have professional connections in multiple jurisdictions. Whether you are considering leaving the UK or are already living abroad, our team can assist with tax-efficient structuring, residency planning, and compliance matters.

For expert advice tailored to your situation, get in touch with us today.

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