Relocating your business or personal life to the UK can be exciting and rewarding, but the British tax system can be a minefield.
As international tax advisers, we understand the challenges and opportunities you may face when considering such a move.
That’s why we wanted to outline the three key taxes: Capital Gains Tax, Inheritance Tax, and Income Tax, so you can create an efficient tax plan and make the most of your move to the UK.
Capital Gains Tax
Capital Gains Tax (CGT) applies when you sell an asset that has increased in value.
It’s the gain you make that’s taxed, not the amount you receive.
So, for example, if you bought an asset for £100 and sold it for £150, you’d be taxed on the £50.
For non-residents, CGT is usually relevant for UK property or land sales.
The rates vary depending on your overall income level and the asset type, with the current rates for individuals being 10 per cent (for basic rate taxpayers) and 20 per cent for higher rate taxpayers.
However, for residential property, the rates increase to 18 per cent and 28 per cent, respectively.
(How much you pay depends on your Income Tax threshold which is explained below).
There is a threshold for this tax which is currently £12,300 but it will be reduced to £6,000 in April 2024. It will be reduced to £3,000 the year after.
Inheritance Tax
Inheritance Tax (IHT) is a tax on the estate (the property, money, and possessions) of someone who’s passed away.
It is relevant for those inheriting assets in the UK, as well as for UK residents who have worldwide assets.
The standard Inheritance Tax rate is 40 per cent, charged on the part of the estate that’s above the £325,000 threshold.
However, there are ways to reduce the IHT liability, such as gifting assets or setting up trusts.
The threshold also increases where property is considered the primary residence of the deceased or where their spouse has inherited the estate.
To get a more comprehensive understanding of how much IHT you may have to pay, it is always advisable to speak to a tax adviser.
Income Tax
Income Tax is charged on your income, including wages from employment, profits from business activities, certain benefits, rental income, and savings interest.
If you’re resident in the UK, you’re usually taxed on your worldwide income.
However, non-residents are taxed only on their UK income.
The rate you pay depends on your income level,
- The basic rate is 20 per cent for those earning £12,571 to £50,270.
- The higher rate is 40 per cent for those earning £50,271 to £125,140.
- The additional rate is 45 per cent for those earning over £125,140.
Your residency status could be the key to reducing your Income Tax rate so please discuss this with an international tax adviser before you make the move to the UK.
When should you speak to a tax adviser?
Navigating the UK tax system can be complex, especially with the additional considerations that come with being an international entrepreneur.
Professional advice is always invaluable in understanding your specific situation and ensuring you’re making the most of the tax reliefs and allowances available to you.
A tax adviser can provide tailored guidance on how to structure your affairs in a tax-efficient manner, ensuring compliance while optimising your tax position.
If you’re considering moving to the UK or have already made the move, speaking to a tax adviser should be a key part of your planning process.