Are you thinking about living abroad for 6 months a year, while staying at home for the rest of the year? Living abroad as a part-time expat has become an increasingly popular lifestyle choice for UK residents over recent years. We’ve shared an expat guide to help you understand the tax implications and how to finance a part-time, overseas lifestyle.
The benefits of living abroad
Living abroad for half of the year can help you combine the best of both worlds. You can maintain your connections with family and friends while experiencing all the benefits of international living. With the right planning, it can be financially smart, personally enriching, and emotionally rewarding. Depending on your plans and career, you might decide to work remotely or semi-retire, so it’s important to balance your lifestyle plans with your finances.
Whether it’s warmer weather, beautiful landscapes or cultural preferences, there are clear advantages for living outside of the UK. However, you’ll need to consider your residency status, tax obligations and financial planning strategy.
How long can a UK citizen live abroad?
The length of time a UK citizen can live abroad will depend on the rules of that particular country or region and your employment status. So, check the immigration rules for your chosen country and make sure you’re clear on how long you can stay.
As an example, since Brexit, you’re only allowed to stay in an EU country in the Schengen Area for 90 days without a visa. If you’re employed by or own a company in a foreign country, you might be able to apply for a work permit. If you want to live in the EU permanently, then you’ll need to obtain a permanent residency status.
How many days can you live abroad without tax implications?
Whether you plan to earn an income or retire when living abroad, you’ll need to understand the UK tax residency rules. Known as the 183-day rule, this period of time in the UK automatically makes you a UK tax resident. So, if you plan to live abroad for exactly six months, then you need to track your UK presence and not exceed 182 days carefully.
As a UK tax resident, you’re liable for tax on worldwide income and capital gains, while non-residents typically only pay tax on their UK income. Your status will impact your overall tax liability and financial planning strategy.
There are a series of tests that can help you work out your residential status for a tax year, such as the Statutory Residence Test (SRT). This will look at the amount of time you spend and work in the UK, along with your UK connections. The SRT includes automatic overseas tests, UK tests, and sufficient tie tests, as well as other factors.
Spending 183 days or more abroad instead of in the UK will also have an impact on the country you choose to reside in. You’ll need to understand the country’s immigration rules and visa requirements, so you don’t stay longer than your allowed duration.
Pensions, Savings and ISAs when living abroad
As a UK expat, you can still access your pension benefits while abroad in relation to current UK rules. However, when it comes to pension contributions, you’ll need to check your residency status and pension scheme to ensure you stay compliant with UK rules.
There are double taxation agreements with many countries that can enable UK pensions, income and investment returns to be paid without UK tax being deducted. However, this will depend on your chosen country of residence.
Being absent from the UK temporarily might affect your long-term savings strategy. As an example, you can keep Individual Savings Accounts (ISAs) open and tax-free in the UK. If you’re no longer classed as a UK resident, you won’t be able to add any new contributions, but you might be able to arrange ISA transfers between providers. You must notify your ISA provider if your residency status changes.
Property Decisions: Renting out your UK home while away
Many people consider renting out their homes while they are living abroad. In many cases, this can provide a useful, additional income. You’re classified as a non-resident landlord if you live outside the UK for more than six months per year. There are specific tax obligations under the Non-Resident Landlord Scheme (NRLS) regardless of your tax residency status.
You can be a UK tax resident but still subject to the special NRLS rules. This includes a 20% tax being deducted from your rental income before you receive it. You’ll be expected to make quarterly payments to HMRC and annual self-assessment returns for income tax.
If you are renting out your home and have a mortgage, then you will need to let your lender know. You’ll also need to update or change your insurance cover and consider taking out Landlord Insurance to protect against tenant-related damage.
Wealth Management in Nottingham and Lincoln
If you’re considering living abroad for half of the year, then you’ll need a sensible financial plan to help you manage your income. It’s also important to get a Lifetime Wealth Forecast by carrying out cash-flow modelling so you have a clearer picture of your financial situation.
At Balance: Wealth Planning, our financial planners will help you plan your money so you can live in different countries without worrying about tax implications. Whether you’re working part-time or semi-retiring, we’ll help you manage your wealth in a tax-efficient way.
For guidance on pensions and healthcare when living abroad, see our blog Living abroad as a part-time expat.
If you’re planning to live abroad for 6 months of the year, then you’ll need a sensible financial plan to achieve your aims. Get in touch to speak to our team.
Sources:
https://www.gov.uk/tax-foreign-income/residence
https://www.gov.uk/tax-uk-income-live-abroad/uk-resident
https://titanwealthinternational.com/learn/uk-pension-for-expats/
https://www.gov.uk/renting-out-a-property/paying-tax
https://www.fineliving.life/blog/non-resident-landlord-scheme-nrls/
