Returning to the UK After Living Abroad: What You Need to Know

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Returning to the UK After Living Abroad: What You Need to Know

Are you a UK expat thinking of moving back home? You’re not alone – in fact, you’re in good company, as it’s been reported that almost 9 in 10 expats can feel isolated while living abroad (AXA Global Healthcare). Returning home can prove challenging and confusing; this article will guide you through what to do financially if you intend to come back to the UK permanently.

TAX ISSUES

Income Tax and National Insurance Contributions (NICs)

When you return to the UK, you will regain your UK resident status. This means that you should  be subject to the same rules as everyone else in the country. So, you would pay tax on your income and any other gains. You may also need to register for a Self Assessment tax return – make sure you check the GOV.UK website’s guidance.

If you’re returning to the UK within five years of living abroad, income from wages abroad will not be taxed, but income from investments and other assets can be taxed.  Please take advice on this. You should plan to file a tax return if your foreign income is over £300, or if you have any other income to report.

The UK tax year runs from 6th April to 5th April the following year. For example, the 2023-2024 tax year runs from 6th April 2023 to 5th April 2024. The 2024-2025 tax year runs from 6th April 2024 to 5th April 2025.

If you were living abroad for less than a full tax year, you may well pay UK tax on foreign income for the duration in which you were away.

Once you return, you will be subject to UK tax on your income. The UK’s tax rates vary based on income brackets, as the below table from GOV.UK explains:

BandTaxable incomeTax rate
Personal AllowanceUp to £12,5700%
Basic rate£12,571 to £50,27020%
Higher rate£50,271 to £125,14040%
Additional rateover £125,14045%

National Insurance contributions are normally not payable while you live overseas, although you can make voluntary contributions, depending on whether you plan on returning to the UK. National Insurance entitles you to a state pension. The amount you will receive depends on your earnings and status; to receive the maximum state pension amount, you will need to have paid National Insurance for 35 years. You must pay National Insurance on your earnings once you return to the UK, and, if you wish to, can catch up on the contributions you missed while living abroad. 

High-Income Child Benefit Charge (HICBC)

If you have children and are a high earner, you should familiarise yourself with the changes to the High-Income Child Benefit Charge (HICBC). This charge is now made on a household basis rather than individually, which may alter your tax liabilities depending on your household’s combined income. The highest earner of the household must have an income over £60,000 a year. From the 2024-2025 tax year, Child Benefit will be fully withdrawn if the highest earner has an income over £80,000 a year.

The UK government plans to implement this change by April 2026. No further details have been announced, so make sure to keep informed about any updates by checking with us and/or GOV.UK.

MONEY ISSUES

Cost of Living

As you will be aware, the cost of living in the UK has risen astronomically in recent years. House prices are said to be out of control, as wage growth is not keeping up with property and rental costs. So, if you’re moving back to the UK, make sure you budget carefully and consider any potential financial implications – especially if you are returning from a country with a lower cost of living.

Council Tax and Business Rates

As a Brit, you will be aware that council tax is levied on residential properties to fund local services (such as street maintenance), and the amount you pay is based on the value of your property. Bear in mind that discounts and exemptions may be available to you for reasons such as being a single occupant or having a disability. 

If you plan to start or run an existing business in the UK, familiarise yourself with business rates. Tax reliefs are available for small businesses and those in sectors like retail or hospitality.

Savings and Investments

The UK offers tax-efficient savings accounts. You may have heard of Individual Savings Accounts (ISAs), which allow you to earn interest and other perks. Also, the UK pensions system allows for tax relief on contributions; this can come in handy if you are saving for retirement.

Healthcare and Insurance

Once you’ve returned to the UK, you will be entitled to the same NHS services as if you never left. You might also want to consider private health insurance. 

Conclusion

Moving back to the UK after living abroad can be complicated, but understanding the above information is a key step to ensure a smooth transition. Hopefully this article has cleared up some of the confusion! Remember to consult with a professional tax adviser ( like us!) for further guidance. 

Megan Tarr has been engaged to blog on expatriate tax for our company from time to time. We are extremely pleased and lucky to have her informed input

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