Investing as a British Expat

Introduction

Investing as a British expat often involves materially different tax considerations from investing as a UK resident.

Different rules.
Different risks.
Different structures.
Different tax consequences.
Different reporting requirements.
Different traps - especially if you might return to the UK.

But most expats don’t know this.
And these differences are not always fully explained or understood.

So expats end up:

• investing in UK-situs assets without realising the IHT consequences
• holding funds that can lead to less favourable UK tax treatment if they later return to the UK
• keeping money in mixed accounts that can create complex UK tax outcomes later, particularly where the remittance basis or remittance rules may apply
• buying ETFs that can produce less favourable UK tax outcomes (for example, depending on reporting fund status)
• investing through platforms that may not provide the records, statements or UK tax reporting information UK returners often need
• overlooking upcoming changes to UK tax rates and rules that can affect investment income (including dividend tax rate changes from 6 April 2026)
• overlooking the residence-based inheritance tax framework introduced from 6 April 2025, including long-term residence tests and potential “tail” exposure
• forgetting about CGT on UK assets
• forgetting about withholding tax abroad
• failing to use the right wrapper
• mis-timing sales
• bringing money back to the UK without understanding potential remittance and mixed-fund implications (where relevant)
• triggering unnecessary tax in more than one country
• misunderstanding how DTAs work

This article sets out common structures used by expats and the UK tax concepts to consider when building an internationally mobile investment plan.

Why British Expats Struggle With Investment Structure

Let’s start with a common reality many expats experience:

Many British expats invest without a full understanding of how residency, tax and structure interact once they leave the UK.

Your parents didn’t.
Your employer didn’t.
Your bank didn’t.
Your UK adviser didn’t.
Your overseas adviser probably didn’t either.

Most investments British expats buy are sold by:

• salespeople
• product-led advisers
• platforms that may not be designed around UK tax outcomes or UK return scenarios
• banks focused on AUM
• offshore “specialists” with no UK expertise
• local advisers who don’t understand SRT or UK tax

And British expats think:

“I’m investing offshore - so I’m protected.”

A structure is generally only effective if it aligns with your tax residency, future mobility and relevant UK rules. This is why having a clear framework can be helpful.

The First Rule: Investment Location ≠ Investor Taxation

One of the most important concepts in expat investing is this:

The tax outcome is driven primarily by your tax residence, but also by the type of income/gain, the asset, local law, and any relevant treaty. Investment “location” alone is not determinative.

You can live in Dubai and hold:

• UK ETFs
• UK unit trusts
• UK bonds
• UK dividends
• UK bank interest
• US ETFs
• offshore portfolio bonds
• Singapore funds
• European SICAVs
• Irish ETFs
• Dubai brokerage portfolios

The UK may still tax certain items even when you live abroad, depending on the facts and your residence status. Common examples include:

• UK rental income (non-residents are typically within UK income tax on UK property income)
• UK property gains (non-residents are generally within UK CGT/NR CGT on UK land/property, subject to the rules)
• some UK-source pensions (treatment can vary by type and treaty)
• certain gains/income on return, for example under split-year treatment and/or temporary non-residence rules (where applicable)

And when you return to the UK:

• you may become taxable on worldwide income and gains from the point UK residence applies (and in some cases, earlier in the tax year depending on split-year treatment and specific anti-avoidance rules)
• you may lose years of clean capital
• you may face mixed fund rules
• offshore accounts can become more complex to manage and evidence for UK tax purposes, particularly where mixed funds or remittance considerations arise
• offshore fund holdings can create additional UK reporting and tax complexity, particularly where reporting fund status is unclear
• for UK residents, gains on non-reporting offshore funds are typically taxed as offshore income gains, which are charged to income tax rather than CGT under the offshore funds rules
• in some scenarios, amounts realised while non-resident can become chargeable in the year of return (for example under temporary non-residence rules or where split-year treatment does not apply)

This interaction between residency and taxation is frequently underestimated.

The 2025/26 UK Tax Changes That Significantly Affect Expat Investors

The last two UK Budgets introduced changes that can materially affect expat investors, particularly those who may return to the UK:

1. Dividend tax rate changes from 6 April 2026

The ordinary and upper rates of dividend tax increase by 2 percentage points from 6 April 2026 (the additional dividend rate is unchanged). The impact depends on your UK residence status and whether you are taxable in the UK on dividends in the relevant year.

2. New residence-based IHT (10/20 rule)

Under the residence-based IHT framework from 6 April 2025, individuals who meet the long-term UK residence test may be within UK IHT on worldwide assets. There can also be “tail” exposure for a period after leaving the UK, depending on residence history. The practical effect depends on the detailed rules and individual circumstances.

3. Non-dom rules replaced from 6 April 2025

From 6 April 2025 the remittance basis was replaced by the 4-year Foreign Income and Gains (FIG) regime, with transitional rules for existing cases.

4. Stricter NI rules

National Insurance position can affect state pension entitlement and may be relevant for returning expats, particularly where voluntary contributions or gaps arise.

The Most Dangerous Expat Investment Mistake: UK-Situs Assets Without Understanding Tax

One area that is frequently misunderstood by expats is the treatment of UK-situs assets (and this list is not exhaustive).

✔️ UK shares are UK-situs assets.

✔️ UK unit trusts and OEICs are UK-situs assets.

✔️ UK property funds are UK-situs assets.

✔️ You generally can’t contribute to an ISA while non-UK resident.

Existing ISAs can usually remain open, but the rules and provider terms matter.

For many British expats, this represents a commonly overlooked risk.

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Portfolio Bonds: A Common Expat Wrapper

No product divides opinions more than portfolio bonds. Why?
Because portfolio bonds have sometimes been sold inappropriately, with high charges or poor suitability, particularly in parts of the offshore market.

A more balanced view is this:

A modern portfolio bond can be a tax-efficient wrapper for some British expats, depending on charges, jurisdiction, underlying investments, expected time horizon, and whether a UK return is likely.

Let’s explain why - clearly and simply.

1. Tax deferral

In many jurisdictions, investment growth within a portfolio bond is not subject to annual local taxation, allowing tax deferral until a chargeable event occurs.

This can be valuable because:

• you retain compounding
• you may reduce ongoing reporting and the frequency of taxable events compared with certain direct holdings, depending on your residence status, the wrapper and local rules
• you may simplify the way underlying switches are treated for UK tax purposes compared with holding offshore funds directly (subject to the bond’s tax classification and your residence status)
• the structure may be simpler to manage for some UK return scenarios, depending on the bond terms, records and underlying holdings.

2. Clean segmentation of capital

You can keep:

• clean capital
• growth
• income
• contributions

…all separated.

This can help with segregation and record-keeping, which may reduce mixed-fund complexity where remittance rules are relevant - but it does not remove the need for proper documentation and a fact-specific review with an appropriately qualified professional.

3. Treaty-friendly

Treaty outcomes can vary significantly. Some jurisdictions treat life wrappers in a straightforward way, but others look through to the underlying income or apply local rules. It is important not to assume treaty treatment without checking the relevant treaty and local law.

4. Underlying switches within the bond will not usually trigger immediate UK CGT

Switching underlying investments within a life assurance bond (often referred to as a portfolio bond) will not usually trigger an immediate UK CGT charge in the way it might if you held assets directly, although the UK can tax gains on a later chargeable event.

5. Works BOTH abroad and when returning

Portfolio bonds can be helpful for people who expect to move jurisdictions, including potential UK returners, because the UK tax treatment is generally based on the chargeable event regime rather than offshore fund reporting status - but this depends on the bond and underlying holdings.

On return, a life assurance bond is generally assessed under the UK chargeable event regime rather than the offshore fund rules that can apply to direct holdings of certain offshore funds (subject to the bond and underlying holdings).

6. Excellent for multi-jurisdiction living

The wrapper stays constant even when residency changes.

7. Helps with IHT planning when structured correctly

Portfolio bonds may sometimes be used within broader estate planning (for example, ownership/beneficiary structuring), but IHT outcomes depend on the long-term residence rules, exemptions/reliefs, and the full estate plan.

Portfolio bonds are not “just an offshore product”.
For some expats, they can form part of a wider investment structure - but they are not the only approach and suitability depends on personal circumstances.

International Collective Investments (UCITS/Reporting Funds): A Common Option for Expats

UCITS and reporting funds are:

• globally recognised
• tax-transparent
• compliant
• liquid
• diversified
• accepted worldwide

BUT:

Non-reporting funds should be approached with caution, particularly by expats who may return to the UK in the future.

Why?

For UK residents, gains on non-reporting offshore funds are typically taxed as offshore income gains, which are charged to income tax rather than CGT under the offshore fund rules (which is often materially higher for higher-rate or additional-rate taxpayers).

Many British expats don’t know which funds are reporting or non-reporting.

ETFs and Passive Investments: The Risk Nobody Tells Expats

ETFs are brilliant investments. But UK tax rules create problems for expats because:

✔️ Many non-UK ETFs are non-reporting

For UK residents, disposals of non-reporting offshore funds are generally taxed as offshore income gains, which are charged to income tax rather than CGT under the offshore fund rules. This can result in materially higher UK tax charges for returners.

✔️ US ETFs can create US withholding tax problems

US-listed investments can create withholding tax on dividends and may also raise US situs/estate tax considerations for non-US persons. The impact varies by the investor’s tax residence, treaty position and the specific instrument.

✔️ UK returners could end up paying tax they didn’t expect

Because some platforms and managed solutions trade more frequently than investors expect, which can accelerate taxable events depending on residence status and the assets held. Passive investing can be a sensible approach, but the UK tax outcome can depend heavily on the vehicle, reporting status, and how the investment is held. UK returners may face unexpected tax outcomes if they have held offshore funds/ETFs that are non-reporting, or if disposals are poorly timed around a return year.

Case Studies

Case Study 1 – The Gulf Investor Who Built a Passive ETF Portfolio (and later returned to the UK)

Situation: A British expat spent several years in the Gulf, investing regularly into a low-cost ETF portfolio via an overseas platform. They assumed “offshore” meant “simple” and did not check reporting fund status.

What went wrong: On returning to the UK, parts of the portfolio were non-reporting offshore funds. For a UK resident, gains on non-reporting offshore funds are typically treated as offshore income gains and charged to income tax rather than CGT under the offshore fund rules.

Why it mattered: The tax outcome can be materially worse than CGT, and the platform statements often aren’t designed to evidence UK reporting status or calculate UK tax cleanly.

What would have helped: Identifying reporting fund status early, keeping a clear record of acquisitions, and considering whether a wrapper (or a different fund selection) was more appropriate for a future UK return.

Case Study 2 – The International Professional Holding UK-Situs Investments While Non-Resident (IHT exposure)

Situation: A British expat living abroad retained a large holding of UK-listed shares and UK-domiciled collective investments, assuming that UK tax was “switched off” once they left.

What went wrong: UK-situs assets can remain within UK inheritance tax scope, even for non-residents, and the eventual IHT cost depends on the wider estate, nil-rate bands, exemptions/reliefs and any treaty position.

Why it mattered: The family discovered that asset “location” (UK situs) can be relevant for IHT even where income tax/CGT exposure is limited while abroad.

What would have helped: Reviewing situs exposure, considering diversification away from UK situs where appropriate, and aligning ownership/beneficiary planning with long-term residence IHT rules and the family’s wider estate plan.

Case Study 3 – The Return Year Timing Error (split-year and temporary non-residence risk)

Situation: A British expat planned a mid-year return to the UK and sold investments shortly before or around the move, expecting the disposal to be taxed only overseas.

What went wrong: Depending on the facts, split-year treatment may not apply, and in some cases temporary non-residence rules can bring gains into charge in the year of return. In addition, overseas tax paid may not fully credit against the UK liability.

Why it mattered: The disposal timing (and the residency outcome for that UK tax year) drove the tax result more than the investment itself.

What would have helped: Modelling the return year under the Statutory Residence Test before selling, and stress-testing the plan for split-year eligibility and temporary non-residence exposure.

Case Study 4 – The Mixed Account Problem (record-keeping and remittance complexity on return)

Situation: Over several years abroad, a British expat used one offshore account for everything: salary, bonuses, dividends, interest, sale proceeds and transfers between countries.

What went wrong: On returning to the UK, where remittance rules apply, transfers from a mixed fund can be taxed unfavourably unless clear evidence supports a different classification. Even where remittance rules don’t apply, weak records can create avoidable uncertainty and compliance friction.

Why it mattered: The underlying issue wasn’t investment performance - it was the inability to evidence what each transfer represented.

What would have helped: Segregated accounts (or clear internal “pots”), consistent documentation, and a plan for how funds would be used if the UK became relevant again.

Capital Gains Tax (CGT): Where Expats Get Caught Without Realising

Most British expats forget one thing:

Even if you live abroad, the UK can still tax certain gains - most notably UK land/property.

And with UK rule changes from 2025–2026, the importance of timing and structure has increased for many returners.

✔️ UK Property
The UK generally taxes non-residents on gains on UK land/property, subject to the detailed rules and any reliefs.

✔️ UK Shares
CGT exposure depends on your UK residence status for the tax year and any relevant split-year or temporary non-residence rules.

✔️ UK funds/ETFs
Tax treatment depends on whether they are reporting or non-reporting.

✔️ Offshore funds
For UK residents, gains on non-reporting offshore funds are typically taxed as offshore income gains and charged to income tax rather than CGT under the offshore fund rules. This is often most relevant for returners who become UK resident while still holding such funds.

✔️ Business sales
Business disposals can be highly sensitive to residence status, split-year treatment and temporary non-residence rules - particularly where timing straddles a UK return.

✔️ Crypto
For UK residents, UK tax applies to crypto disposals in the usual way. For non-residents, UK tax exposure is more fact-specific and can arise on return in certain situations (for example under temporary non-residence rules). The “location” of an exchange or wallet is not a reliable single test.

Timing disposals around residence status is a frequent issue.

The “Return Year”: When UK Residence Timing Changes the Tax Outcome

Depending on how UK residency is triggered under the Statutory Residence Test, gains realised earlier in the tax year may fall within the UK tax net.

Location is not the key driver - UK residence status for the tax year, and whether split-year treatment applies, can determine whether gains fall within the UK tax net. In addition, temporary non-residence rules can bring certain gains into charge in the year of return.

It is often sensible to consider timing disposals with reference to your likely SRT position, split-year treatment and any temporary non-residence risks - ideally before major moves.

Mixed Funds: A Common (and Often Costly) UK Return Issue

Mixed funds are an unspoken investment problem for British expats.

A mixed fund is an account containing:

• clean capital
• foreign income
• foreign gains
• offshore interest
• dividends
• proceeds from fund disposals
• salary
• bonuses
• remittances
• historic growth

When you return to the UK:

Where remittance rules apply, transfers from a mixed fund may be taxed unfavourably unless clear evidence supports a different classification.

This can:

• destroy clean capital
• create unexpected UK tax
• make cash repatriation expensive
• contaminate years of offshore savings

Portfolio bonds can help simplify segmentation and record-keeping, which may reduce mixed-fund complexity - but they do not eliminate the need for careful documentation and fact-specific analysis.

Clear segregation and documentation of funds can be extremely valuable.

Withholding Tax: The Cost Expats Don’t See Until It’s Too Late

Withholding tax quietly eats expat returns.

Examples:

✔️ US Dividends
US dividends can be subject to US withholding tax. The rate may be reduced under an applicable treaty and correct documentation (for example, via the appropriate US tax forms), but the outcome depends on the investor’s tax residence and the instrument held.

✔️ Irish ETFs
Withholding tax outcomes can vary by fund domicile, the underlying market, and the vehicle used (including whether the holding is direct or via a wrapper).

✔️ Singapore
Singapore generally does not levy withholding tax on most dividends, although overall tax outcomes depend on the investor’s residence rules and the nature of the income.

✔️ Australia
Australian dividends can carry withholding tax depending on whether they are franked or unfranked, and the investor’s treaty position.

✔️ EU/Asia
Vast range of withholding tax rules depending on fund structure.

Expats holding global portfolios through an inefficient structure can suffer meaningful withholding tax leakage that reduces net returns, especially where the tax cannot be reclaimed.

Some wrappers and fund selections can help manage withholding tax leakage, but outcomes are jurisdiction-specific and depend on the underlying holdings and how they are structured.

The Currency Trap: How FX Movements Can Undermine Returns (and Complicate UK Tax Calculations)

British expats often earn in:

• AED
• USD
• SGD
• EUR
• AUD

And invest in:

• GBP
• USD
• EUR
• HKD
• multi-currency ETFs

The risk?

• Currency movements can materially reduce returns, particularly over shorter time horizons or where exposures are unhedged.
• They can distort CGT calculations when you return. 
• They can mask poor portfolio decisions. 
• They make mixed fund analysis harder.

A globally mobile life = global currency exposure.

A globally mobile investment portfolio = currency risk multiplied.

The New UK Residence-Based IHT Rule (10/20): A Major Consideration for Long-Term Expat Investors

From April 2025:

If you were UK resident for 10 of the last 20 years, the UK may bring worldwide assets within scope for IHT where the long-term residence test is met, and there may be tail exposure after leaving. The effective IHT cost depends on the wider estate, exemptions and reliefs.

This includes:

• foreign funds
• offshore accounts
• ETFs
• Singapore funds
• Dubai-held portfolios
• Swiss banks
• US brokerage accounts

These changes increase the importance of reviewing how investments are structured and held.

The 12 Most Expensive Investment Mistakes British Expats Make

1. Holding non-reporting funds

For UK residents, disposals can be taxed as offshore income gains (income tax rather than CGT) under the offshore funds rules.

2. Buying UK ETFs abroad

Unaware of UK-situs IHT exposure.

3. Not considering whether a suitable wrapper is needed

Direct holdings can create more frequent reportable events and record-keeping complexity for internationally mobile individuals

4. Selling investments mid-return

Can create unexpected UK tax exposure in a return year, depending on split-year treatment and temporary non-residence rules.

5. Mixing clean capital with income

Creates a lifelong tax headache.

6. Investing through the wrong platform

Some offshore brokers don’t provide UK-compliant reporting.

7. Using US brokers as a non-US person

Causes WHT and estate tax exposure.

8. Owning UK property funds abroad

Creates UK tax exposure unknowingly.

9. Confusing investment income with residence/workday concepts

Employment income can be affected by workday/residence analysis; investment income is taxed under different rules. Mixing the two often leads to incorrect assumptions.

10. Not aligning portfolios to residency

Residency is a primary driver - but asset type, source rules, local law and treaties also matter.

11. Relying on “advice” from friends

Emotionally easy, financially disastrous.

12. Returning to the UK without restructuring

One of the most common and costly mistakes.

The Expat Investment Structure That Actually Works (Practical Plan)

The following is a general framework often used when thinking about expat investment structuring.

Step 1 - Build your portfolio around tax residency

It is important to understand:

• where you are resident
• where you might become resident
• where you definitely will NOT become resident
• when you may return to the UK

Step 2 - Consider whether a portfolio bond (or another wrapper) is appropriate for a core portion of wealth

This can help with:

• tax deferral in some jurisdictions,
• simplified switching treatment,
• segmentation/records,
• and planning for mobility - subject to charges, suitability and your circumstances.

Step 3 - Prefer UK reporting funds where a future UK return is likely and treat non-reporting funds with caution.

Non-reporting funds should be approached with caution, particularly by expats who may return to the UK in the future.

Step 4 - Avoid UK-situs investments unless strategically essential

This can reduce:

• UK IHT exposure (where UK-situs assets would otherwise be in point)
• UK reporting complexity
• and certain UK tax complications that can arise on return (for example, UK-situs exposure and offshore fund reporting issues)

Step 5 - Keep your “clean capital” clean

Document every transfer.
Avoid mixing income and gains.

Step 6 - Map your future return to the UK

Review:

• investment sales
• pension strategy
• cashing out
• fund disposals
• location of assets

Step 7 - Reduce withholding tax leakage

Consider whether wrapper choice, fund domicile and documentation can reduce unrecoverable withholding tax, recognising results vary by jurisdiction.

Step 8 - Build a currency strategy

A multi-currency life needs a multi-currency plan.

Step 9 - Link everything to your long-term financial plan

Investing is not about products.
It’s about clarity, structure, future options, and tax control.

Conclusion

Investing as a British expat is not about picking the right fund, the right ETF, the right platform or the right manager.

It’s about understanding:

• your residency
• your future
• your risks
• your reporting
• the 2025/26 rules
• the 10/20 IHT system
• how the UK sees your wealth
• how your host country sees your wealth
• how your portfolio will be treated when you return, relocate or retire

Most expats invest without a map. Without structure.
Without understanding the tax consequences.
And without realising how expensive the wrong choices become.

But with the right strategy - especially with the right structures - investing as an expat becomes:

• tax-efficient
• globally portable
• flexible
• more robust
• compounding-friendly
• and aligned with your long-term life plan

The aim of effective expat investment structuring is not only growth, but ensuring that returns are not unnecessarily eroded by avoidable tax inefficiencies.‍