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Many British expats only discover they have made a tax mistake long after the original decision was taken.
At the time, everything felt reasonable.
They were earning well.
They had lived abroad for years.
They had spoken to colleagues and friends.
They had read articles and watched videos.
They believed they understood the rules well enough.
Then something changed.
A return to the UK.
A property sale.
A pension withdrawal.
A residency review.
A request from HMRC.
And the realisation followed: “I didn’t know it worked like that.”
This article is designed to explain why those situations arise so frequently - not because expats are careless, but because UK tax outcomes for internationally mobile individuals are driven by technical rules, timing, and interactions that are rarely explained together or applied to real-world scenarios.
What follows is an educational overview of the most common UK expat tax pitfalls, why they occur, and the themes that typically sit behind them.
Important note:
This article is provided for general information only and does not constitute tax, legal or financial advice. UK tax outcomes depend on individual circumstances and can change. Professional advice should always be taken before acting on any of the points discussed.
Most British expats do not intend to take risks with tax.
In practice, issues arise because people:
A key feature of expat tax issues is delay.
The consequences often surface years after the original decision - when a property is sold, when income is drawn, when residency changes, or when HMRC receives overseas reporting data. That delay is one of the main reasons these issues can become costly.
Before looking at specific technical issues, it helps to understand the behavioural patterns behind them.
British expats are often:
Those traits are strengths - but they can sometimes create a sense of certainty that does not fully reflect how the rules operate in practice.
Common drivers include:
Informal advice filling formal gaps
Friends, colleagues and online communities often share experiences confidently, even when outcomes are fact-specific.
Overseas advice not aligned with UK rules
Local advisers may be excellent in their own system but unfamiliar with UK residence tests, return-year issues, or UK anti-avoidance rules.
Life changes faster than planning assumptions
Marriage, children, health, career changes and parental care all alter residence patterns more quickly than people expect.
UK tax outcomes for expats are primarily driven by residence status, rather than by where income arises or where tax is paid locally, subject to the interaction of domestic law and any applicable treaty provisions.
The UK Statutory Residence Test (SRT) assesses:
It does not consider intention or lifestyle preference.
Misunderstanding residence status can affect:
Residence is therefore best viewed as the foundation layer for all other analysis.
Keeping a UK property is one of the most common drivers of unexpected residence outcomes.
A property does not need to be owned.
Availability and use are what matter.
In some circumstances, limited use of an available UK home can contribute to the creation of an accommodation tie, which then interacts with other ties and day counts under the Statutory Residence Test.
What often catches people out is not one visit, but the combination of:
For UK tax purposes, work is assessed based on days and hours, not seniority or location of the employer.
In some cases:
can count towards UK workdays.
As workday thresholds are approached, the interaction with accommodation and other ties can become increasingly relevant to the residence analysis.
Property sales are particularly sensitive to timing.
Issues commonly arise when:
Different countries calculate gains differently, and foreign tax credit relief does not always align perfectly due to differences in timing, calculation methods and classification.
As a result, the same transaction can produce very different outcomes depending on which tax year it falls into.
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A UK pension commencement lump sum may be tax-free under UK rules, but that treatment does not automatically apply overseas.
Other jurisdictions may:
Timing is critical.
If UK residence applies for the tax year in which a lump sum is taken, the UK tax analysis may differ from expectations, depending on the facts and the rules in force at the time.
Double tax treaties are often misunderstood.
They generally:
They do not:
Treaties reduce double taxation; they do not prevent taxation.
Many expats hold investments that work well locally but interact poorly with UK rules if residence changes. Non-UK reporting funds are a common example.
If UK residence applies at the time of disposal, any gain may be treated as an income amount rather than a capital gain where the investment is classified as a non-UK reporting fund, depending on the rules in force at the time. This is often only discovered when people return.
Mixed funds arise when income, gains and capital are held together in the same account.
They are particularly common among expats due to:
If funds later need to be remitted to the UK (or otherwise used in a way that is treated as a remittance), ordering rules can make the tax analysis complex and, in some cases, unfavourable. Good records and account segregation significantly reduce this risk.
Inheritance tax planning for expats has received increased attention due to legislative changes and proposed reforms that focus more heavily on residence history rather than domicile.
Simplified summaries (often described as “10 out of 20”) are not substitutes for legislation.
Whether overseas assets fall within UK IHT scope depends on:
This is particularly relevant for long-term expats who may later return.
The year of return is often where multiple issues converge:
Return planning is therefore often just as important as departure planning.
Living in a jurisdiction with limited local taxation does not remove UK considerations.
If UK residence applies, UK rules can bring:
back into scope, regardless of local tax treatment.
Zero-tax jurisdictions may reduce local friction, but they do not switch off UK tax analysis.
ISAs cannot be contributed to while non-resident.
While existing ISAs may retain UK tax advantages domestically, they may:
Cross-border treatment depends on both systems.
Overseas property is usually taxed locally, but UK residence status can reintroduce UK analysis.
Where sales occur close to a return, issues can arise around:
Pension income is highly sensitive to tax year alignment.
Large withdrawals taken abroad can fall into UK tax scope if residence applies for that tax year, depending on the facts and applicable rules.
This is particularly relevant for:
Some overseas investment products can be incompatible with UK tax rules if residence changes or may produce outcomes that differ materially from UK expectations.
Outcomes depend on:
Product selection should be considered alongside mobility plans.
Once someone becomes UK resident again, certain planning opportunities may no longer be available.
Pre-return preparation often focuses on:
An effective review often looks at:
This is not a checklist for action, but a way of understanding where risks commonly arise.
Inheritance outcomes for expats are often assumed to be straightforward where assets pass to a spouse or civil partner. In practice, cross-border outcomes depend on a combination of factors, including:
While the UK has historically provided generous spousal exemptions in many scenarios, those outcomes are not automatic in cross-border contexts. Differences in residence status between spouses, ownership structures, or the application of post-reform IHT rules can materially affect outcomes.
For internationally mobile families, spousal assumptions should therefore be reviewed rather than relied upon.
A recurring misconception among expats is that overseas income or assets are unlikely to be visible to UK authorities unless voluntarily disclosed.
In reality, the UK participates in extensive international information exchange frameworks. These include automatic reporting of financial account data by overseas institutions to UK authorities under global standards.
In addition, UK systems may draw on:
The practical point is not enforcement, but awareness: tax analysis should be based on how rules apply, not on assumptions about visibility.
A common belief is that any tax issues arising during an expat period can be addressed once someone returns to the UK.
In practice, certain outcomes are driven by facts and timing that cannot be changed retrospectively. These can include:
This is why pre-return review and forward planning are often more effective than attempting to re-engineer outcomes after UK residence applies.
Most British expats do not make tax mistakes because they are careless, reckless or trying to take shortcuts.
They make them because UK tax outcomes for internationally mobile individuals are driven by technical rules, timing and interactions that are rarely explained in a single, coherent way.
In many cases, decisions that seem reasonable at the time - keeping a UK home, working remotely during visits, taking pension income abroad, selling property, or returning for family reasons - only reveal their tax impact years later, when circumstances change or residence status shifts.
The common thread running through nearly all expat tax issues is not intent, but assumption:
A sustainable approach to expat life is rarely about finding a clever structure or exploiting a rule. It is usually about understanding how systems behave when life changes - and allowing sufficient time and clarity to reduce the risk of unexpected outcomes.
This article is intended to help British expats recognise where risks most often arise, so they can engage with their situation earlier, ask better questions, and avoid relying on explanations that only work in theory.
This article is provided for general informational purposes only. It does not constitute tax advice, legal advice, financial advice, or a recommendation to take (or refrain from taking) any action. Tax outcomes depend on individual circumstances, the precise facts, and the law, treaty interpretation and HMRC practice in force at the relevant time (including changes announced but not yet enacted). No reliance should be placed on this article as a substitute for obtaining personalised advice from a suitably qualified professional. No professional relationship is created by the publication or use of this content.
Shil Shah is Skybound Wealth’s Group Head of Tax Planning and a Private Wealth Adviser, based in London. He works with clients who live global lives, executives, entrepreneurs, families and professionals who want clear, confident guidance on their wealth, their tax position and the decisions that shape their future.
Most expat tax issues do not arise from one single mistake.
They arise from timing, assumptions and interactions between systems that are rarely explained together.
In a private introductory session with our tax team, you’ll:
Understanding the framework early can prevent expensive surprises later.
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The shift from domicile-based to residence-based taxation is the biggest change British expats have faced in decades.
Your residency history will now determine whether your global estate is exposed to UK inheritance tax.
If you’ve ever lived in the UK - or you may return one day - you need to understand exactly where you stand under the new 10/20 rule and tail period.
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Many British expats encounter tax problems not because they were careless, but because the rules are technical, timing-driven and often misunderstood.
A focused discussion can help you:
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