Skip to main content

Cut Tax Ties Properly When You Retire Abroad

There’s more than one difference between expatriating to live and work abroad and moving overseas to retire.  Clearly the first alternative requires you to work each day whilst the second will allow you to enjoy a more relaxed life of luxury!  But beyond these obvious differences there are some very important ones relating to your taxation treatment in the UK.

If you move abroad to work it is far simpler to prove residence in another nation almost straight away to the Great British taxman, however, you have to ensure you cut tax ties properly when you retire abroad otherwise you could end up in all sorts of trouble!

As an overseas retiree it is up to you to actively demonstrate to the UK tax authorities that you have moved abroad permanently and that you have no intention of returning to mainland UK – at least for the foreseeable future anyway.  To prove to the taxman that you are no longer UK resident and therefore no longer liable to pay UK taxation on any pension related income for example, you need to actively demonstrate your overseas residence.

You can do so if you have bought a property abroad or even if you have entered into a long-term rental agreement overseas.  Other aspects of your retirement abroad that might convince the taxman that you have expatriated include having a residency visa in place perhaps or having a bank account and utility bills in your name addressed to your overseas home.

If you can actively demonstrate that you have committed to living abroad and you have convinced the taxman accordingly, as long as your absence has then covered a complete tax year and you live abroad for three or more years you will be treated as non-resident and not ordinary resident in the UK for tax purposes.

If you do return to the UK for visits, you should make sure you are not overstaying your allowable number of days.  You can visit for no more than 183 days in one tax year…although in actual fact, this limit really only relates to one year as if you consistently were in the UK for 183 days each tax year, the taxman would think you’d moved back!  So, tax professionals usually advise that you keep your average yearly visits below 90 days.

There is one final way in which you have to cut your tax ties properly when you retire abroad as well – you AND your spouse have to demonstrate to the taxman that you have both retired abroad and are living overseas permanently.  Unlike an expat who moves with his family to work overseas whose spouse can ‘adopt’ his non-resident status, your spouse will have to prove she is also non-resident.  To do this any property purchase or rental contract could simply be in joint full names for example.

If you are concerned about any of these issues, you are advised to take personal and professional advice.