UK Tax for British Expats : Residency Rules, FIG Regime & What You Actually Owe

How the UK Taxes British Expats

When you move abroad, the most expensive mistake is getting your UK tax status wrong. The difference between being classified as UK-resident and non-resident can cost thousands in unnecessary tax.

The UK tax system has one golden rule: your residency status determines everything. If HMRC considers you UK tax-resident, you owe tax on your worldwide income and capital gains. If you're non-resident, you typically only pay UK tax on income from UK sources.

This is why getting your residency classification right is not optional-it's the foundation of your entire expat tax strategy.

The Statutory Residence Test: Your Roadmap

Since April 2013, the UK has used the Statutory Residence Test (SRT) to determine whether you're resident or non-resident for each tax year. Rather than vague concepts like 'ordinary residence', the SRT provides precise day counts and clear tests.

The SRT works in three tiers:

Automatic overseas test: If you satisfy this, you're automatically non-resident. This happens if you spend fewer than 16 days in the UK in the current tax year AND were UK-resident in none of the preceding three years, OR you work full-time overseas and spend fewer than 91 days in the UK.

Automatic UK test: If you spend 183+ days in the UK in the tax year, you're automatically resident (with limited exceptions for visitors).

Sufficient ties test: If neither automatic test applies, the SRT looks at your connections to the UK: family ties, accommodation, work, the 90-day tie, and country tie. The strength of these ties, combined with your day count, determines your status.

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Understanding the Five Ties

The ties test is where most expats need help. HMRC examines five categories:

Family tie: You have this if your spouse, civil partner, cohabiting partner, or minor child is UK-resident. Children who are only in the UK for full-time education do not count.

Accommodation tie: Available accommodation for 91+ consecutive days (with at least one night spent there), or a close relative's home where you spend 16+ nights per year.

Work tie: You work in the UK for 3+ hours per day on at least 40 days in the year.

90-day tie: You spent more than 90 days in the UK in either of the two previous tax years.

Country tie: You spent more days in the UK than any other single country (only applies if you were UK-resident in any of the three prior years).

The more ties you have combined with the days you spend in the UK, the more likely HMRC will treat you as resident.

The FIG Regime: The New Non-Dom System (From April 2025)

From 6 April 2025, the remittance basis of taxation was abolished and replaced by the Foreign Income and Gains (FIG) regime. This is a critical change for newly-arrived UK residents and long-term non-doms.

Under the new FIG regime, individuals who arrive in the UK after April 2025 have a four-year transition period where they are not subject to UK tax on foreign income and gains (even if remitted to the UK). After those four years, they become fully taxable on worldwide income like everyone else.

Importantly, if you elect into the FIG regime, you lose your personal allowance and CGT annual exempt amount regardless of whether you claim relief on only foreign income or all sources.

UK Tax on Your Overseas Income

If you're UK tax-resident, you pay tax on worldwide income. This includes:

• Employment income: Salary from a UK employer or, sometimes, from an overseas employer for work performed in the UK.
• Interest and dividends: From any source, unless specific exemptions apply.
• Overseas investment income: Pensions, annuities, and other payments from abroad.
• UK rental income: If you rent out a UK property, this is always taxable regardless of residency.

If you're non-resident, you typically only pay UK tax on:

• UK rental income (via NRLS): The Non-Resident Landlords Scheme (NRLS) requires tax to be deducted at the basic rate (20%) on rental income less expenses. The first £1,000 of annual rental income is tax-free. Most non-residents must file a Self-Assessment return by 31 January, even if tax has been withheld.
• UK employment income: Only if you work in the UK.
• UK pension income: If you receive a UK pension while abroad, it's usually only taxable in the country where you're resident (subject to double taxation treaties).

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Capital Gains Tax: What You Owe on UK Property

If you own UK property, the tax treatment changes depending on your residency:

• As a UK resident: You get principal private residence relief on your main home (if it qualifies), and you pay CGT at 18% or 24% on any gains after deducting the annual exempt amount (£3,000).
• As a non-resident: You lose PPR relief on gains accrued while you are non-resident. Non-residents pay UK CGT at 18%/24% on UK property disposals, and you still get the £3,000 annual exempt amount. However, you must report and pay any tax due within 60 calendar days of completion.

For UK residential property, the non-resident CGT rules are strict: there is no escape. Whether you've left the UK or not, selling a UK property triggers CGT liability.

Double Taxation Relief

To prevent being taxed twice on the same income (once in the UK and once abroad), the UK has double taxation treaties with most countries. These treaties typically allocate taxing rights and provide relief in your country of residence.

As an expat, always check whether your destination country has a treaty with the UK. If it does, you may be able to claim relief for UK tax paid on income also taxed abroad, or avoid UK tax altogether on certain types of income (like pensions) depending on the treaty.

ISA and Investment Bonds

ISAs and investment bonds are not automatically sheltered once you leave the UK. As a non-resident, you may lose tax-free treatment on future ISA growth, though the rules are complex and depend on your destination country.

If you hold an ISA before departure, plan whether to cash it in (triggering no gain or loss) or retain it knowing that future growth may be taxable.

Your Next Steps

Getting your UK tax status right requires professional advice tailored to your circumstances. The SRT is precise, but it can be misapplied-and HMRC scrutinises expat claims carefully.

Before you move abroad or as you settle in your new country, contact an expat tax specialist who understands the SRT and the new FIG regime. A structured tax plan could save you thousands annually and protect you from HMRC enquiries.