Navigating UK expat tax rules can be complex, especially for those living abroad. This UK expat tax guide outlines crucial information on tax obligations for UK tax non-residents, including income tax, capital gains tax, inheritance tax, and property taxes. Understanding these rules is essential for expats to manage their tax affairs and avoid unexpected liabilities.
If you’re a British expat, understanding UK tax rules can be confusing.
While you may have left the UK, you could still have tax obligations depending on your residency status, income sources, and assets.
1. UK Income Tax for Expats
Do Expats Pay UK Income Tax?
Your UK tax liability depends on your residency status.
The UK uses the Statutory Residence Test (SRT) to determine whether you are a UK resident for tax purposes.
- If you are non-resident, you only pay UK tax on income sourced from the UK (e.g., rental income, UK-based employment, or UK pensions).
- If you are UK resident, you pay UK tax on your worldwide income.
The UK uses the Statutory Residence Test (SRT) to determine whether you are a UK resident for tax purposes. Check your status now . . .
How Much Tax Do You Pay?
For the 2025/26 tax year, UK income tax rates are:
- Personal Allowance: £12,570 (Reduced by £1 for every £2 earned between £100,000 and £125,140).
- Basic Rate (20%): £12,571 – £50,270
- Higher Rate (40%): £50,271 – £125,140
- Additional Rate (45%): £125,141 and above
As an expat, you may still qualify for the UK Personal Allowance, depending on your residency status and nationality.
UK Tax on Pensions for Expats
💡 UK pensions are usually taxed at source, meaning UK tax is deducted before you receive payments.
💡 If you live in a country with a Double Taxation Agreement (DTA) with the UK, you might be able to claim tax relief and pay tax in your country of residence instead.
💡 You may be able to apply for a no-tax (NT) code, which allows you to receive UK pension payments without UK tax deductions. This can be beneficial if you are liable to pay tax only in your country of residence.
2. Capital Gains Tax (CGT) for UK Expats
What is Capital Gains Tax?
Capital Gains Tax (CGT) applies when you sell or dispose of assets like property, shares, or investments and make a profit.
Do Expats Pay Capital Gains Tax?
- If you are non-resident, you don’t pay CGT on most UK assets, except for UK property.
- If you are UK resident, you are liable for CGT on worldwide gains.
CGT on UK Property for Expats
- Since 6th April 2015, non-residents have been required to pay CGT on gains from UK residential property (the good news is that you can rebase the purchase price of your property to this date).
- Since April 2019, this rule has been extended to include UK commercial property and some indirect property interests (e.g., shares in property-holding companies).
- Expats must report and pay CGT on UK property sales within 60 days of completion.
Guide to CGT rules for UK expat property owners
CGT Rates for 2025/26
- Basic Rate Taxpayers: 18%
- Higher Rate Taxpayers: 24%
- CGT Allowance: £3,000
What are the UK Temporary Non-Residence Rules?
The temporary non-residence rules exist to prevent you from avoiding tax liabilities by becoming non-resident for a short period of time.
Effectively, you will need to be a non-resident for more than five years to escape UK CGT on assets owned at the time of departure and which you dispose of after leaving the UK.
If you become resident again in the UK during this five-year period, any assets sold will be taxed in the UK in the tax year you return.
Navigating the UK Temporary Non-Residence Rules: A Guide for Expats
3. Inheritance Tax (IHT) for Expats
How Does UK Inheritance Tax Work Currently?
UK Inheritance Tax (IHT) is charged at 40% on estates worth over £325,000 (Nil-Rate Band).
An additional £175,000 allowance applies if a home is passed to direct descendants.
Do Expats Pay UK IHT?
- If you are UK domiciled, your worldwide estate is subject to IHT.
- If you are non-UK domiciled, only your UK assets are liable for IHT.
I’m resident overseas, but where am I domiciled?
New IHT Rules in 2025
From 6th April 2025, UK IHT will depend on residency rather than domicile status.
If you have been outside the UK for at least 10 years, your estate will no longer be subject to UK IHT, meaning only UK-based assets will be taxable.
This marks a significant, and welcome, change, as previously, UK-domiciled individuals remained subject to IHT indefinitely unless they took formal steps to change their domicile.
Gone for a Burton! What Expats Can Learn About Estate Planning from an Acting Legend
Tips for Reducing IHT for Expats
💡 Gifting Assets: Gifts made more than seven years before death are usually exempt from IHT.
💡 Trusts and Exempt Transfers: Using trusts or gifting within IHT allowances can help reduce your estate’s taxable value.
💡 Life Insurance: Taking out a policy in trust can help cover potential IHT bills.
4. UK Property Taxes for Expats
Stamp Duty Land Tax (SDLT) for Expats
When purchasing property in England and Northern Ireland, buyers must pay Stamp Duty Land Tax (SDLT).
Different rates apply in Scotland (LBTT) and Wales (LTT).
SDLT Surcharge for Non-Residents
From April 2021, expats must pay an extra 2% SDLT surcharge when purchasing residential property in England and Northern Ireland.
Stamp Duty on Second Properties
If you already own a property and buy an additional one (such as a second home or buy-to-let investment), you will need to pay an additional 3% surcharge on top of the standard SDLT rates.
This applies even if you are non-resident.
Expat SDLT Rates for Second Properties (2024/25)
| Property Price | SDLT (With 2% Expat Surcharge) | Second Property (Additional 3%) |
|---|---|---|
| Up to £250,000 | 2% | 5% |
| £250,001 – £925,000 | 7% | 10% |
| £925,001 – £1.5m | 12% | 15% |
| £1.5m+ | 14% | 17% |
Council Tax for Expats
Expats who own property in the UK must still pay council tax.
Discounts may apply for empty or second homes.
UK Rental Income Tax for Expats
- Rental income from UK property is always taxable in the UK, even if you are non-resident.
- Non-residents can register for the Non-Resident Landlord Scheme (NRLS) to receive rental income without tax deducted at source.
- Standard income tax rates apply after allowable expenses are deducted.
Final Thoughts: UK Tax Planning for Expats
UK tax rules for expats can be complex, and failing to plan properly can result in unexpected tax bills.
If you are living abroad but still have UK income, assets, or family, it’s important to:
✅ Understand your residency and domicile status
✅ Check tax treaties between the UK and your country of residence
✅ Use tax allowances and exemptions to reduce your liability
✅ Consider professional tax and financial planning
Staying compliant while minimising your UK tax bill requires careful planning.
If you need help structuring your finances as an expat, speak to a specialist UK expat financial adviser to ensure you make the most of your wealth while staying tax-efficient.
UK Expat Tax Rules
FAQs
It depends on your residency status and the type of income you receive.
Some UK income, such as rental income, will still be taxable even if you live overseas.
The Statutory Residence Test helps determine whether you’re considered a UK resident for tax purposes.
It’s crucial because your residency status affects what UK tax you’ll need to pay.
Not always, but you might need to file one if you have UK rental income.
You can still claim your UK State Pension while living overseas, but whether it increases each year depends on the country you live in.
It is likely that your pension provider will deduct UK tax at source from any pension payments, often using an Month 1 emergency tax code.
You can reclaim the tax from HMRC, but they will obviously take their own sweet time in processing your refund.
Alternatively, you can apply for a No Tax tax code and then, your pension provider will make your payments without deducting tax.
DTAs are agreements between countries that prevent you from being taxed twice on the same income.
The UK has these agreements with many countries.
You can keep your existing ISA, but you won’t be able to add new money to it once you’re non-UK resident.
Expat ISA Rules: What can be done with an ISA when living overseas?
Yes, you should complete a form called the P85 when you leave the UK to ensure you’re taxed correctly going forward.
Tax planning is key.
This might include making use of double tax treaties, structuring your income efficiently, and working with an adviser who understands cross-border tax rules.
When you take your Pension Commencement Lump Sum (PCLS) at retirement, it is tax free in the UK.
This is why it is often referred to as Tax Free Cash.
However, if you take it while you are resident outside the UK, it is may be taxed locally.
Some examples of countries where this applies are:
🇨🇦 Canada
🇫🇷 France
🇬🇷 Greece
🇪🇸 Spain
Therefore, if you are planning to retire in one of these countries and want to draw your Pension Commencement Lump Sum, you should probably do so before moving.
Yes, you can live abroad and save into a UK pension scheme.
However, there are limits to the tax relief you can claim on your contributions.
If you move overseas, for the next 5 tax years you can still make pension contributions of up to £3,600 a year and get tax relief.
This assumes you have no earnings taxed in the UK. If you continue to have earnings taxed in the UK, tax relievable contributions can be based on these earnings, or £3,600 a year if greater.
The contributions must be made to a pension scheme you were a member of before you left the UK.
