Here’s some important tax tips for Australians moving to the UK
Beginning a new career overseas, or setting down roots in a different country is an exciting prospect for many. And with so many similarities to Australia, yet much more diverse (and cooler) weather, the UK tends to be high on the list for many Australian expats. Cities like London provide plenty of opportunity in the creative or financial industries, and with much smaller distances between their major cities, the UK is a great place to explore and discover new ways of life.
As exciting as a big move may be, the more mundane elements that are completely necessary can be often overlooked or overwhelming. To make your life easier, we take a look at five essential tax tips that will make your move to the UK much easier.
1. How will my residence status affect UK tax purposes?
If you’re a UK resident, you’re potentially liable to UK Income Tax and Capital Gains Tax on any worldwide income or gains. However, this doesn’t apply to non-UK residents and when it comes to non-resident taxation, a different set of rules apply.
For non-UK residents, the basic rule is that they will only pay tax on any income that has come from a source in the UK. So, if you’re working for a company that is registered or situated in the UK, or if you’re trading (either professionally or as a hobby), you will need to pay tax contributions from your salary or profits. This also means that if you are getting any UK partnership or UK pension income, you will need to pay taxes.
It is also important that you consider that any dividend income, interest or any other income that you may make from savings is taxable in the UK. So, if you sold a house or gained inheritance in Australia, and move this money into savings when in the UK, you will be taxed on the interest that it generates.
Unless there are specific relieving provisions, this income is chargeable in the UK at both a basic and higher rate tax.
Something known as a tax-free personal allowance is also available to all non-resident British citizens, although its availability to non-residents is currently under review. In the UK, the this article. And to find out everything you need to know about the Statutory Residence Test, read here.
3. What are the tax allowances available to expats?
This ties nicely into the above information about a non-UK resident needs to become a UK resident. If you are classed as a tax resident in the UK or if you receive an income in the UK by other means (for example through property), you will usually receive a tax allowance on your UK income of £11,500.
This means that the majority of expats will start paying income tax once they are earning more than £11,500 a year. If you are lucky enough to earn over £100,000, your personal allowance will be altered to £1 for every £2 earned over £100,000. Essentially, this means that if you earn over £122,000 in a tax year, you will not receive a personal allowance. To see the tax rates and bands after tax allowances, read this document.
4. What if you have recently arrived in the UK and want to transfer your Australian superannuation fund to a UK pension fund? What are the tax implications of this?
According to current Australian tax rules, you are not allowed to transfer your Australian superannuation to a UK bank fund. To be able to access your superannuation at all, you must be of preservation age (57-67 years old) and satisfy a condition of release (retired). The only exception to this is if you were to arrive back to Australia on a certain temporary work visa. In this case, you would be able to receive a Departing Australia Superannuation Payment (DASP). The DASP would enable you to be given an amount that is equivalent to your superannuation balance, minus the typical tax of 35% (If you have a working holiday maker visa, it would be 65%) once you have left Australia.
The UK is actually one country where you can actually transfer your pension funds to your Australian superannuation fund. But only if you meet a set of specific requirements. At the moment, there are only two main requirements – the receiving fund qualifies as a Registered Overseas Pension Scheme (QROPS) and in the second instance, you are aged over 55 years old.
5. What taxes will I need to pay if I want to buy a house?
If you’ve settled enough in the UK to want to buy a house, it’s a brilliant opportunity to secure your residency and create a new home! However, it’s important to know what taxes you will need to pay when purchasing your home. The Stamp Duty Land Tax (SDLT) must be paid by anyone buying a house in the UK, even if they are a non-UK resident. This is a relatively recent change to the UK policies, and in April 2016, when Stamp Duty rates increased for people buying a UK property who already own property in the UK or elsewhere.
For more information about paying stamp duty land tax for a non-UK resident, read this guide.
If you’re considering making the leap and moving to the UK, find out more expat tax information, tips and advice, on our blog or speak to one of our friendly team members.
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Comments 7
HI Terryn
Thanks for the reply. My wife and I will be in Australia when we sell the PPR house and after the sale will both move to the UK and transfer the funds to a UK bank. We have still to seek a spouse visa for my wife but would not see an issue. I have not lived in the UK for 22 years and will move once i sell the house (so I hoping this will not have any tax issues) what are your thoughts?
I will contact the team to discuss further
Thanks
John
Hi Terryn
Similar to the email on 28/07/22 you received. I too, am looking to retire to UK from Australia (been here for 24 years) with my Australian wife via family visa (I am a dual citizen and will receive a full UK pension – my wife should get 2/3 UK pension as we purchased years of National Insurance via class 2 contributions) looking to move there within next couple years (I am 60 now).
You mentioned that if funds were drawn from the Australian superannuation to an Australian bank account and then transferred to the UK bank account it would be deemed as an income and taxed as such. If the funds transferred were less than 12,000GBP all together each year (which is the tax threshold in UK) would there be an automatic tax or if within the threshold, then not taxed. Secondly I will be selling my house here in Australia (PPR) and transferring the funds to a UK bank account (approx $900,000) – Will I be taxed on these funds either in Australia or UK (as it was my own PPR and will be buying a PPR in UK) or will I only be taxed on the interest income that the funds earn from the bank account their deposited?
Hi John,
Thanks for your question.
In regards to you receiving payments from your Australian superannuation those would be included in your UK tax return and be taxed in the UK, regardless of whether you transfer the money to the UK.
If your overall income is below the UK tax free threshold then you would have no tax to pay in the UK.
With the sale of your main residence, you will need to undertake careful planning. Firstly because the Australian main residence exemption does not apply if at the time of the sale you are a non-resident for Australian tax purposes. Here is a link to one of our blogs on the main residence exemption. The other important thing in regards to the sale will be to ensure it is not taxed in the UK, so the sale would need to be before you become a UK tax resident unless the UK will allow a main residence exemption for your Australian property.
It is important to plan your move to the UK to ensure you get a good tax outcome and understand your future taxes and obligations, I would suggest you contact our team to discuss further.
Thanks
Terryn
Linda Hughes I am a dual citizen in England and Australia, After many years i am returning to the Uk to live. I have super fund here in Australia and as i am 68 years old this is tax free to me. Can i leave my fund here and draw off it when i require money as i want to keep my bank account also here. Is this allowed . This is the only money that i will have to live on. I am very confused as i have spoken to several financial people and they say i have withdrawn it all and open up an investment in the uk which will be taxable. Could you give me some idea what to do for the best
thankyou Linda Hughes
Hi Linda,
Thanks for your question. It would be important for you to find out your UK tax if you are receiving a pension from your superannuation account, it’s most likely the UK will consider this to be a foreign pension scheme and tax the pension income you receive.
You can retain a bank account in Australia while you are living in the UK.
If you have any further questions do not hesitate to contact us.
Thanks
Terryn
Hi
I am currently looking for and likely to get work in the UK. I have dual nationality, British and Australian. I am currently in Australia, about half way through the financial year and have been paying Australian tax (I am currently an Australian resident for tax purposes).
If I move to the UK and become a UK resident for tax purposes, how is my tax bill split between Australia and the UK and how is my tax free threshold determined?
Kind Regards
Stephen Lee
Author
Hi Stephen,
Thanks for your questions. Ultimately if you become a non-resident for Australian taxation purposes, you’ll be entitled to a tax-free threshold right up to the month that you become a non-resident. For example, if you become a non-resident in January 2019, you’ll be entitled to 7/12ths of the $18,200 tax-free threshold available to Australian tax residents.
Regarding how your income will be split between the two jurisdictions, once you become a non-resident, from that date, only your Australian source income (interest, dividends, rent, royalties and other Australian source income) and gains from the sale of Taxable Australian Real Property, need be included in your Australian taxation return. In other words, from the date that you become a non-resident for Australian taxation purposes, your UK sourced income will not need to be included in your Australian return.
As the UK has a worldwide basis of taxation, once you are a resident of the UK for UK tax purposes, you’ll generally be required to include your Australian income (from the date that you became a UK tax resident) in your UK return. To avoid double-taxation, the UK will generally allow you a foreign tax credit equal to the lesser of the Australian tax paid or the average rate of UK tax on that Australian income.
Stephen . . . I hope that helps? If you have more questions or need further assistance I strongly urge you to book an ‘Outbound Expat’ tax consultation with us via our ‘Book an appointment’ page.
Thanks again for your message.
Cheers
Shane