When Richard assessed his choice to return to the UK after 20 years of working in Asia, he was bowled over by the “astronomical” prices of shifting again.
The transfer price him £3,400 for a partner visa, £10,600 on one-way flights for himself, his spouse and two kids and £17,600 for a 20ft delivery container with related packing and unpacking.
“The top of stress, although, was shifting our pet chicken,” says Richard, whose identify has been modified at his request.
He explains that the paperwork for transferring Teri, the household’s parakeet, took 5 months. It will definitely price him £9,400 to convey the pet back — almost as a lot because the transport invoice for the remainder of the household mixed.
British expats have been leaving Asia — significantly Hong Kong — in growing numbers within the face of draconian Covid-19 containment insurance policies.
A web 170,000 Hong Kong residents have left the previous British territory to this point this yr, in keeping with evaluation of Hong Kong immigration statistics by database Webb-site Who’s Who. In Singapore, which has additionally had strict lockdown insurance policies, the variety of folks employed fell by nearly 150,000 within the 12 months to June 2021.
Escalating costs of every kind imply greater payments for these returning to Britain. Common airfares for world outbound journey from Hong Kong are up by 95 per cent within the first half of 2022, in contrast with 2019, in keeping with journey information firm ForwardKeys.
Inflation is a big drawback, however these returning to the UK after a protracted stint overseas can face greater challenges when shifting and settling again in. Tax guidelines and residency guidelines are notoriously complicated, pensions typically tough to switch, and managing the timing of your transfer and the sale of any property could make a giant distinction to your tax invoice.
Consultants say the environment friendly association of your tax place and property may have the largest influence in your funds, so it will possibly pay to begin planning properly upfront of a transfer. FT Cash affords six key points for returning British expats to think about.
1. Is the timing proper?
If you’re contemplating a transfer house, preparation is essential — and one of many prime priorities is tax. When Simon Cahill, a chartered monetary planner at Octopus Wealth, moved again to the UK in 2020 having spent 4 years in Dubai and a yr travelling, colleagues and buddies pestered him for recommendation concerning the course of. He determined to put in writing a information on the way to overcome the principle hurdles, interviewing 30 former British expats who had lived within the UAE.
“The most typical mistake folks made was not planning sufficient upfront,” he says, explaining that one individual was hit with a £32,000 tax invoice that he may have prevented with a deferral of his return.
First, you must work out how a lot tax you must pay in your return to the UK. This will rely on how a lot time you’ve gotten spent residing abroad. As quickly as you’ve gotten turn into a non-resident of the UK for tax functions, you’ll not must pay dividend tax or capital positive aspects tax on any of your UK property.
Nevertheless, below the so-called “short-term residence guidelines”, in case you have lived overseas for lower than 5 years, any tax financial savings you’ve gotten made on UK dividends or capital positive aspects because you left must be paid to the exchequer in your return.
“The short-term residence guidelines are designed to cease folks from going away for a brief time frame to incur tax-free capital positive aspects,” says Tim Stovold, accomplice at accountancy agency Moore Kingston Smith.
“If, say, I had purchased a ton of bitcoin years in the past and determined to go and reside in a low tax jurisdiction for a yr, offered the lot, made £1mn in revenue, and are available again a yr later, I haven’t saved any tax in any respect as a result of it is as if the capital positive aspects arrive at Heathrow with me and it’s taxable there,” he explains.
The opposite timing consideration is the second within the tax yr at which you select to maneuver again. In the event you can time the transfer so that you arrive on or shortly after April 6, the start of the UK tax yr, that may prevent the potential for having to finish a “break up yr” tax return, the foundations of that are “actually fiddly and horrible”, Stovold says.
The break up yr guidelines permit you to have solely UK tax liabilities from the date you progress again, reasonably than from the entire tax yr of your return. However they may solely apply if sure situations are met, regarding working days, property possession and a accomplice’s working patterns.
2. Type out any property
You probably have any property to promote, together with shares and property, it often pays to plan this fastidiously earlier than leaving.
Chris left the UK for Hong Kong in 2012, the place he arrange a enterprise journey company however returned in Might this yr, pissed off by the impact of town’s onerous Covid restrictions on his five-year-old daughter’s schooling. “Everyone seems to be sick of it,” stated Chris, who requested for his full identify not for use.
Earlier than leaving Britain for Asia, he rented out his flat close to Manchester and offered it for £215,000 shortly earlier than coming house.
Having purchased it in 2010 for £150,000, he solely needed to pay capital positive aspects tax on positive aspects constructed from April 2015, when the then chancellor George Osborne launched capital positive aspects tax (CGT) on residential property for non-UK residents.
CGT within the UK is charged at 10 per cent for fundamental charge taxpayers and 20 per cent for increased and extra charge taxpayers, rising to 18 per cent and 28 per cent respectively for residential property. In the event you plan to maneuver again to the UK following a chronic stint elsewhere, seeing a tax adviser lengthy earlier than you progress again may prevent cash.
Cahill means that in case you have any shares listed in a low tax jurisdiction, you may need to think about promoting them and coming again to the UK with money, to stop you having to pay UK taxes on income accrued overseas.
“From the purpose you might be resident within the UK, all of your worldwide earnings is taxable at UK charges,” explains Mike Hodges, tax accomplice at accounting agency Saffery Champness. “If you’re coming again it’s usually not going to be the case that you’ll profit from buildings, reminiscent of an offshore belief, you’ve arrange whilst you have been offshore.”
Totally different guidelines apply to the “non-dom” standing, which allows folks domiciled out of the country to reside full time within the UK for as much as 15 years with out paying any tax on their international earnings, offered they preserve it abroad.
Not like different international locations, the US tax system works on a citizenship foundation, so should you maintain US citizenship, you might be usually taxed in your worldwide earnings. The UK and the US have an settlement designed to stop double taxation, however Dhana Sabanathan, accomplice at legislation agency Winckworth Sherwood, suggests you may need to search recommendation if it seems to be like each international locations will search to tax you on the identical earnings or positive aspects.
When you’re within the UK, Cahill recommends you begin constructing or rebuilding property if attainable within the tax-efficient buildings out there. UK residents over the age of 18 can open a person financial savings account (Isa), which may develop freed from tax as much as a considerable £20,000 most within the present tax yr.
In the event you’re an worker, you must routinely be enrolled right into a office pension. You may also arrange a self-invested private pension, which provides you with earnings tax reduction on cash paid in at your marginal charge, and additionally, you will pay earnings tax on cash withdrawn whereas with the ability to entry 25 per cent tax free.
3. Transferring your pension
These shifting again to the UK to retire ought to examine their nationwide insurance coverage data to see how a lot of the state pension they are going to be eligible for, says Andrew Tully, technical director at Canada Life.
“Work out in case you have paid sufficient to get the total state pension and, if not, think about shopping for added years,” he suggests.
You probably have a pension pot abroad, you may additionally need to look into transferring it again to the UK, allowing for the potential influence of forex trade fluctuations.
“It might be higher to go away the funds within the abroad pension if it contains contributions previous to 2017 as there are particular tax breaks you could possibly benefit from,” says Rachel De Souza, non-public consumer accomplice at tax adviser RSM UK.
Some pension funds, reminiscent of Australia’s superannuation fund, will solely allow you to switch your pension in very particular circumstances earlier than you attain retirement age.
“We advocate expats ought to examine procedures and necessities of their native nation and apply to a Sipp supplier to just accept a switch,” De Souza provides.
In the event you’re fortunate sufficient to have a pension pot with a worth in extra of the lifetime allowance, at present £1,073,100, an extra cost is utilized once you begin to attract down in your pension — or once you attain the age of 75 — whichever is sooner.
“Expats ought to think about whether or not they should apply for a lifetime allowance enhancement issue, which supplies a rise to the lifetime allowance for intervals labored overseas,” De Souza suggests.
4. The relocation course of
Anybody fascinated about shifting again quickly with lots of belongings must navigate the worldwide delivery disaster which has “actually impacted world mobility,” says Jeremy Chandar, director at Bournes Relocation Options, which has helped round 500 households relocate to the UK over the previous yr.
Whereas house removals symbolize a fraction of maritime freight, Chandar says there’s nonetheless a post-pandemic “increase market” in UK relocations. Disruptions at ports are inflicting important delays and family items are afforded decrease precedence than delivery traces.
“The US ports specifically are closely congested, that means shipments are delayed till house turns into out there on a vessel and we’ve seen inbound delays of round 4 to 6 weeks,” Chandar stated.
Expats ought to brace themselves for top costs, particularly if shifting from Asia the place freight prices are among the many highest. Chandar says he had seen charge will increase of between 20 and 60 per cent worldwide, for quite a lot of causes — from freight, labour prices and gas and port surcharges — and capability constraints.
Discovering appropriate lodging within the UK can be an issue. On shifting again to the UK in Might, Chris and his spouse and two daughters stayed along with his dad and mom whereas they regarded for a spot to hire.
He described the UK property market as “loopy”, explaining that as quickly as he discovered a spot he appreciated, in Hale Barns, a village in Better Manchester, he needed to signal the rental settlement on the identical day.
Finishing the contract was a battle in itself. When he went by the method of proving his right to rent, the truth that his earnings was nonetheless paid from a Hong Kong firm brought about additional delays.
Chandar says the rental housing local weather has modified considerably in a comparatively brief house of time. “On common there are 30 to 40 per cent fewer properties out there than there have been in 2019, and everybody has put their costs up.”
5. Getting a visa
Anybody needing to use for a visa within the UK ought to brace themselves for a tortuous course of.
Owing to Ukraine’s humanitarian disaster, purposes for member of the family visas at present take 24 weeks to course of, twice so long as regular, in keeping with the UK government’s website.
Ben Pearcy, chief technique officer at meals and agriculture group Olam, based mostly in Singapore, plans to return house after three years working in Singapore, along with his partner of 23 years, a Brazilian citizen.
“We paid roughly £6,000 in charges to use in June — together with a lawyer because the types are so complicated that it’s wanted,” Pearcy says. “The system is designed to discourage.”
Having hoped to return again in August, they now have to attend till a partner visa choice is given — a course of for which he says a date is rarely offered — and can miss his daughter beginning college within the UK within the autumn.
Precedence and “super-priority” visa providers have been temporarily suspended for brand spanking new examine, work and household visa purposes, eradicating any choice to pay extra to hurry issues up.
6. The price of residing
Regardless of low taxes, having factored in Hong Kong’s sky-high rents and education prices, and the UK’s NHS, Chris thinks his life within the UK may match out cheaper.
Nevertheless, he was bowled over by the “loopy” price of power payments within the UK, which is because of worsen in October when the energy price cap rises.
The annual client value inflation within the UK is currently 9.4 per cent, in contrast with 1.9 per cent in Hong Kong, 2.5 per cent within the UAE, 6.7 per cent in Singapore, 9.1 per cent within the US and 10.8 per cent in Spain. Fluctuations in currencies may imply that the timing of your transfer may have a big influence in your wealth.
The lesson is that coming house might sound easy, however the course of could also be far more elaborate and costly than you count on.
One FT Cash reader, who returned to the UK in 2018 after 38 years abroad, supplied some reassuring recommendation: “Don’t wing it so far as HM Income & Customs is anxious. Take good recommendation, pay somewhat to verify it, and it needs to be comparatively stress free from a tax legal responsibility perspective.”
