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.
In short Shane's a tax and software techno-geek, who recognised that Australian expats were unable to obtain the specialist advice and quality service, that they needed from their accountants. Accordingly, Shane founded Expat Tax Services to provide Australian expats with access to specialist, quality advice at fair and reasonable prices (no hourly rates, fees quoted upfront with unlimited support included) . . . receive the support and advice you need without having to take second-mortgage to pay your accountant's bill! Speak to Shane & the team today.