Leaving the UK to retire abroad is a complex business; there are so many government bodies to tell and there is no central point you can inform and expect them to tell everyone who needs to know.
So in this section we include a list of places you might want to tell in the tax and benefits world and to find out the detail of actions you may need to take.
But perhaps more importantly you need to think about the effect of doing normal things which take place when you move location, like selling a house, but doing it in an international context.
The point here is that you cannot assume that the tax consequences of doing things in the UK apply in the country to which you are moving. Let’s take a simple example. If you move within the UK and sell your main residence and it has appreciated in value since you bought it, then our law says that the capital gain you have realised is exempt from tax. But if you move to Country X and the actual sale of your main residence in the UK takes place after you arrive there, they may charge you tax on the whole of the gain that arose whilst you were in the UK. Even paying off your mortgage can create a tax liability!
The lesson is that all significant actions taken around the time of a move abroad have to be taken in the light of the tax regimes of both countries and also the double taxation agreement that exists between the UK and the country you are moving to.
We list below a number of things you should think about; it is not a complete list as circumstances are so variable. If there are significant assets involved it is probably a good idea to take professional advice from a tax adviser familiar with international issues.
Places to tell
- Your tax office. If all your sources of income are taxed under the PAYE system then telling HMRC once should be sufficient in respect of all PAYE sources. Ask them specifically if you are likely to be due a tax repayment and to get on with making it. They will probably send you a form P85 to complete.
- If you file a self-assessment form tell the office to which you send your HMRC return.
- If you claim tax credits, tell the tax credit helpline on 0845 300 3900 (textphone 0845 300 3909).
- If you claim child benefit contact the Child benefit office on 0300 200 3103 (textphone 0300 200 3103).
- If you are entitled to the Winter Fuel Payment you may be entitled to continue to receive it, even if you have moved to a hot climate. Contact the helpline on 0845 915 1515(textphone 0845 601 5613).
- Your bank, if you are proposing to leave deposits in the UK. If you want to try and get them to pay you your deposit interest without UK tax deduction of 20% then ask them for a form R105. Not all banks offer this facility.
- The Pensions Service, who will decide whether you will be entitled to increases to your State pension whilst you are abroad, on 08456 060 265 (textphone 0800 731 7339).
- If you are receiving other benefits from the Department for Work and Pensions then you need to contact the particular office dealing with each of the benefits. Do not assume that one office will tell another one.
- Contact your local council about your liability to council tax (and housing benefit if you were in receipt of it).
Things to think about
- If a permanent move abroad involves you in selling or giving away something on which a capital gain might arise, then you need to understand the tax rules in the UK and the country to which you are moving in order to understand the tax impact of what you are doing in both countries. There may be something in the double taxation agreement between the UK and the country you are moving to which may be relevant. A listing of double taxation agreements is held on the HMRC website. Timing of a gift or sale could be very important.
- If you are going to retain a property in the UK then you will need to understand the rules in the UK for non-resident landlords. Don’t forget that the overseas country is likely to want you to pay tax there on your letting profit.
- If you are going to continue having UK income sources when you are abroad you need to understand how the overseas country is going to tax those sources and then how to approach HMRC Residency to ensure that you can have UK sources paid to you without deduction of UK tax at source, where possible.
- HMRC may want you to complete a self-assessment form if you have continuing sources of income in the UK.
- If you want to transfer property of any sort between spouses or civil partners remember that the UK has generous rules which often allow that to happen without tax consequences. The overseas territory may not be as generous, so timing of when you do it is important.
- If moving abroad coincides with cashing in pension funds or receiving a golden handshake this needs to be considered with both regimes in mind.
- If you have a pension from a government or local authority source, some countries will not tax these but they will continue to be taxed in the UK. You will need to check whether the UK has a double taxation agreement setting out the rules for who taxes such pensions.
- Some people moving abroad have an extended holiday between leaving the UK for good and arriving in their new home. Transactions which occur in this window may still be taxed in the UK even though you have left the UK permanently. The precise rules are complex and advice from a professional may be needed if you have significant assets.
- You might be able to continue to receive benefit or make a claim for benefit if you go to a European Economic Area country, or a country that has a social security agreement with the UK. It's important to check the social security agreement with the country you're moving to before you leave.
- Check with the authorities in the other country if you can claim their benefits.