Expat Tax

Watch Out For Tax Changes

Expats who have had their 'non-resident tax status' confirmed by HMRC have no need to trouble themselves about disclosure matters, however constant rumblings to changes to the rules could threaten an expat's non-resident tax status.

As it currently stands savings can continue to accrue interest tax-free, quite legitimately, provided they keep within the residency rules laid down by the UK's tax authority. Broadly speaking, 'non-resident tax status' is determined by the length of time an expat spends outside the UK in any one or more tax year/s and confirmed by the number of days spent back in Blighty calculated over a one or three year period.

A ‘pumpkin' rule introduced in 2008 stipulates that the physical presence of an expat in the UK at midnight on any given day, now counts as one full day’s presence. This seemingly insignificant little rule change will notch up the number of days some expats spend back in the UK quite considerably. Cinderellas who habitually stretch their visit allowance to the wire had better watch out.

A move to US style residency rules?

What's more, current rumblings in the undergrowth suggest further changes are afoot. My guess is we'll see the UK rules on non-residency mirroring the US model. This would mean that any expat resident in the UK for 31 days or more within a single tax year, or 183 days or more during a three year period, will be deemed to be resident for (UK) income tax purposes. So, an expatriate with non-resident tax status would have to ensure that he/she spends on average less than 61 days back in the UK in any one year stretched over a three year period.

Such a move hasn't happened yet, but non-resident expats should keep watch for any further developments and diary their cross-border movements carefully. We'll keep you posted.