Currencies are particularly volatile at the moment, so it’s important for expats living here to find the best way to transfer funds to and from their home country if, for example, they need to pay a tax bill.
Double tax treaty
While it’s impossible to say what the long-term tax implications of Brexit will be for those planning to settle here, under current rules, if you are moving to the UK from another European country, protection from paying tax twice comes from double tax treaties agreed between the EU countries and the UK.
Double taxation agreement
These are expected to remain after Brexit as they are not dependent on membership of the EU. Many other countries, including Canada, China, India, the US and Japan, also have tax treaties with the UK to minimise the chance of double taxation.
Tax rules for non-UK residents
Here, we explain some of the basics about taxes in the UK. Tax rules can be extremely complicated so it’s vital to seek expert advice if you’re not sure which taxes you’re liable for, or how much you’ll have to pay.
What is a UK resident?
You’re considered a UK resident for tax purposes if you spend at least 183 days in the UK each tax year, or if your only home is in the UK. You must have owned, rented or lived in it for a minimum of 91 days and spent at least 30 days there in the tax year.
If you’re deemed to be a UK resident once you move to the UK, you’ll pay UK tax on your income, whether you receive it in the UK or abroad.
UK personal allowance
If you are a UK resident, you’ll be entitled to a personal allowance, which is the amount you can earn each tax year without paying income tax. In the 2019/20 tax year, the personal allowance is £12,500. Earnings above this amount (up to £50,000) are taxed at the basic rate of UK income tax: 20%. Income between £50,001 and £150,000 is taxed at 40%, while income above £150,000 is taxed at 45%.
You may end up being taxed twice on the same income or gains unless your country has a double-taxation agreement with the UK.
Tax rules for non-residents
If you’re a non-resident, you’ll pay tax on your UK income but not on any foreign income.
You’re considered a non-resident if you spent less than 16 days in the UK in the tax year, or fewer than 46 days if you haven’t been classed as a UK resident for the previous three tax years. You’ll also be considered non-resident if you work abroad full-time and spent fewer than 91 days in the UK. Of these 91 days, no more than 30 can be spent working.
There are special rules for UK residents whose permanent home, or domicile, is abroad. For tax purposes, for example, domicile determines a person’s liability to inheritance tax, which is charged at 40% on the value of your estate over the current £325,000 IHT threshold.
Domiciled in the UK
If you are domiciled in the UK, you may be liable to UK inheritance tax (IHT) on your worldwide assets. However, if you’re not domiciled in the UK, you’ll only be liable for IHT on any UK assets.
Understanding whether you are domiciled or resident in the UK is not always straightforward, so you should ask for advice from a qualified tax adviser if you’re not sure.
Sending money overseas
If you need to pay a tax bill in the UK and will be transferring funds from overseas to do so, or you need to pay a tax bill in a different country, make sure you don’t pay over the odds to move your money internationally.
Exchange rates offered by foreign-currency specialists working in partnership with The Telegraph are usually much better than the rates provided by high-street banks. The Telegraph also offers a transfer fee-free international service.
Specialists can even give guidance on the best times to make transfers, so you benefit from favourable exchange rates. For example, you may be able to use a forward contract to lock in the best rate up to two years in advance, which will usually require a deposit.
Keep currency-transfer costs to a minimum with transfer fee-free international money transfers from The Telegraph.
The above article was created for Telegraph Financial Solutions, a member of Telegraph Media Group Limited. For more information on Telegraph Financial Solutions, click here.
Information correct at date of publication.