Relocating to the UK: What are the Key Considerations?

There are many reasons why someone might relocate to the UK. Perhaps a new employment or business opportunity, the end of employment in Singapore, retirement or just to be near family. Equally, maybe you just want to split your time between Singapore and the UK.

These alternatives have one thing in common – they will make you resident in the UK for tax purposes. And that is where the ‘rub’ really is from a financial perspective. The UKs highest rate of Income Tax is double that of Singapore, it has a full suite of taxes for investment income and gains, an evolved system of Social Security contributions and, of course, the dreaded Inheritance Tax.

Whilst relocation certainly needs to be planned for financially, there is a lot to organise in the run up to the move (as well as after). Culture shock is an often-overlooked issue. If you are a British national returning home, you may be coming back to a country which is very different to the one you left, and your life experiences will tend to be very different to those around you. Singapore is a very joined-up country, and it is easy to get things done here. That isn’t quite the case for the UK, so planning carefully in many areas will help to make the transition easier.

As far as tax planning is concerned, I would make several observations.

1. Do not underestimate how much you can control. Some have the luxury of time to plan, and others don’t. However, you can often decide when to trigger UK tax residence. You can decide who owns what assets, how they are structured, when to relocate and what types of income and investment returns can be produced. These choices can drive meaningful tax savings. Did you know that a couple can enjoy incomes and gains of up to GBP 55,740 before paying tax? That is achievable with some straightforward and simple planning – involving real choices that you can make.

2. The UK can be surprisingly tax-efficient even when tax is due. Tax-free incomes can be derived from Individual Savings Accounts (ISAs), dividends from shares and funds are taxed at a basic rate of just 7.5% and certain International Investment Accounts can prevent excess incomes from being taxed annually. In a presentation I regularly give, I walk through a case study of a British couple relocating to the UK with GBP 2.5m to invest and a target after-tax income of GBP 100,000. I show how they can generate gross incomes of GBP 150,000, invest GBP 40,000 per year of that income into ISAs (tax-free income and gains), generate tax-free Capital Gains of GBP 20,000 and pay an effective rate of Income Tax of just 2.7%. All using straightforward and tried-and-tested planning options.

3. Whilst relocation is an inflection point for retirement planning, it is also a great opportunity to do Inheritance Tax planning. There are tried-and-tests routes to tax efficiency which allow you to enjoy very low rates of Income Tax from sources which also provide tremendous Inheritance Tax savings – allowing you to meet income objectives whilst also taking a sensible approach to succession planning.

4. If you or your spouse are ‘non-domiciled’ whilst resident in the UK, additional long-established tax planning opportunities exist for assets situated outside of the UK which can provide a permanent shelter for non-UK income and gains arising from non-UK assets in the first 15 tax years of UK resident status as well as a permanent shelter of such assets from Inheritance Tax. These opportunities simply don’t exist for the vast majority of Britons returning home and they make the UK an even more attractive fiscal destination.

5. Inevitably there are things to do before becoming resident. Understanding the UK tax treatment of existing assets is key, as is avoiding assets which are taxed punitively. We typically recommend that latent gains from different asset classes are realised before you become resident in the UK. Indeed, some of the tax-efficient structuring we would recommend should be put in place whilst you are still in Singapore.

6. It is important to manage your relationship with HM Revenue & Customs. Make sure that all outstanding tax returns have been filed and tax liabilities paid before relocating. Try to come into the UK with a ‘clean slate’ as far as your UK tax affairs are concerned. You may not have to file a Tax Return after becoming resident but at the very least you should inform HM Revenue & Customs that you have arrived. Unlike in Singapore where everything is joined-up, HM Revenue & Customs won’t know that you have relocated unless you tell them.

7. There is a particular planning opportunity for Singaporeans who have no intention of becoming resident in the UK but who have children and/or grandchildren who live in the UK and are likely to remain there. You can structure your finances in Singapore in a manner which protects wealth, income and gains from UK taxation when those assets vest to your next of kin upon your death. Without planning, those Singapore assets will generate income and gains which are subject to UK tax and form part of the estates of your UK domiciled beneficiaries for Inheritance Tax purposes. This can be avoided with a little restructuring.
 

What Should You Do Now?

The obvious call to action is to take advice from skilled and experienced professionals who bring tax planning and wealth planning together in meaningful ways. After all, as far as the UK is concerned, wealth planning can’t really be done without tax planning and tax planning will enhance the returns on your investments. The team at Select Investors has tremendous experience in helping clients who move to the UK. You might be relocating for the first time but rest assured that we have done it thousands of times and can put all of that collective experience to work to your benefit.

If you would like to learn more on this topic, Martin and the Select Investors team regularly present educational webinars to further outline the best ways to plan for the move to the UK. The most recent BritCham presentation on this topic can be found here and click here to reach out directly via email select.investors@sjpp.asia.

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. Select Investors is a Partner Practice of St. James’s Place (Singapore) Private Limited.
 

About Select Investors

Select Investors is a Partner Practice of St. James’s Place (Singapore) Private Limited. Members of the St. James’s Place Partnership in Singapore represent St. James’s Place (Singapore) Private Limited, which is part of the St. James’s Place Wealth Management Group, and it is regulated by the Monetary Authority of Singapore and is a member of the Investment Management Association of Singapore and Association of Financial Advisers (Singapore). Company Registration No. 200406398R. Capital Markets Services Licence No. CMS100851. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.