UK Expat Tax Advice 2025-26: What You Need to Know

This is your complete guide to UK expat tax in 2025 to help you minimise your obligations while remaining compliant

By Alex Schulte | 4 April 2025

UK expats are sometimes 24 hours away from owing UK tax.

They often learn an ugly truth: Moving abroad doesn’t mean escaping the clutches of Her Majesty’s Revenue and Customs (HMRC)—far from it.

Make no mistake: HMRC is on your back and has made many expats lose sleep over unpaid tax returns.

The question is, what are your UK tax obligations if you move abroad?

This guide will walk you through them all.

Start with understanding…

Are You Still on HMRC’s Radar? Tax Rules for UK Citizens Living Abroad

It’s the million-pound question for every expat.

Are you still liable for UK taxes?

The answer hinges on your tax residency status.

Why does residence status matter?

Because:

UK residents pay tax on their worldwide income and capital gains.
Non-residents only pay tax on UK-sourced income (e.g., property rental, UK employment, and pensions).
Dividend & interest income may be taxed unless exempt under “disregarded income” rules.

Double Tax Treaties can help you avoid paying tax twice if you’re a resident in two countries. Where no treaty exists, unilateral relief may provide tax credits.

Now the question is how do you work out whether you’re a UK tax resident? Understanding your residency status is crucial for navigating the UK tax system and determining your tax obligations.

HMRC has a way. It’s called…

The Statutory Residence Test

HMRC uses the Statutory Residence Test (SRT) to determine if you’re still in their tax net. It’s not just about counting days—though that matters too:

Spend more than 183 days in the UK? You’re automatically a resident. No arguments.
Less than 183 days? Things get more complicated.

Then, the SRT considers other elements…
✅ Whether your family lives in the UK 👨‍👩‍👧
✅ If you have accessible accommodation 🏡
✅ Your UK work commitments 💼

Completing the SRT is the best way to get started.

It’s split into a few parts… First:

The sufficient ties test:

When you’re in tax limbo, HMRC looks at five key ties:

Family Tie – Got a spouse or child who’s a UK resident? That’s a tie. If your kid attends boarding school in Britain while you work in Dubai, HMRC is taking notes.
Accommodation Tie – Keep a flat in London for those quarterly visits? If it’s available to you for 91+ days and you crash there even once, congratulations—you’ve got another tie.
Work Tie – Popping back for meetings? Forty days of work (just 3 hours counts as a day) creates another connection to the UK.
90-Day Tie – Spent more than three months in the UK during either of the last two tax years? That’s another mark on your scorecard.
Country Tie – If you spend more nights in the UK than anywhere else, HMRC will raise an eyebrow.

The more ties you have, the fewer days you can spend in the UK before being caught in the tax net.

It’s complicated, right?

You can understand your obligations using automated software like AI-powered travel compliance assistants. These give you tailored advice for your situation in real time.

Split-year treatment

Leaving mid-year? You may qualify for split-year treatment, meaning you’re only taxed in the UK for part of the year.

Dual residency

If you’re a resident in two countries, double tax treaties help determine where you pay tax.

Now, let’s go over what you’ll be paying…

Income Tax for Expats: The Essentials

UK income tax rates for 2025-26

For those still caught in the UK tax web, here’s what you’re facing:

Tax Band	Rate	Income range
Personal Allowance	0%	£0 to £12,570
Basic Rate	20%	£12,571 to £50,270
Higher Rate	40%	£50,271 to £125,140
Additional Rate	45%	Above £125,140

Remember: Scotland plays by its own income tax rulebook—with different rates and thresholds than England and Wales.

Can expats claim the Personal Allowance?

Even if you live abroad, you might still qualify for the £12,570 tax-free Personal Allowance if:

You’re a UK national, or
Your country of residence has a Double Taxation Agreement (DTA) with the UK that includes personal allowance provisions

This means your first £12,570 of UK income might be tax-free. Not a bad start.

Tax reliefs you need to know

Don’t leave money on the table. Remember these potential tax-savers:

Gift Aid donations
Pension contributions
Business expenses while working overseas

Capital Gains Tax: The UK Expat Tax Guide

Property sales: HMRC’s global reach

If you thought that selling your UK property while abroad would shield you from Capital Gains Tax, think again.

Since April 2015, non-residents must pay CGT on capital gains made on UK property sales.

This expanded in 2019 to include commercial property and indirect property holdings.

Remember: You must report and pay any CGT within 60 days of completing the sale.

Miss this deadline, and penalties await.

Let’s take a closer look at…

CGT rates for 2025-26

Capital Gains Tax rates for 2025-26:

Basic rate taxpayers: 18% (was 10% before October 2024)
Higher rate taxpayers: 24% (was 20% before October 2024)

For property disposals, the rates remain at 18% for basic and 24% for higher-rate taxpayers.

The annual tax-free CGT allowance (Annual Exempt Amount) is just £3,000 for 2025-26—significantly lower than in previous years.

The temporary non-residence trap

Planning to leave the UK, sell assets, then return?

HMRC is one step ahead of you.

Example: Let’s say you leave the UK, become non-resident, but then return within five tax years… Any gains made during your absence on assets owned before departure might still face UK CGT when you return.

This ‘temporary non-residence’ rule is designed to prevent short-term tax avoidance.

If you want to reduce your tax bill, you can give…

A one-time gift

In other words, non-Dom rebasing.

Foreign assets acquired before April 2017 may be rebased to their market value as of that date. This could significantly reduce your tax bill when you sell.

So, that’s income tax—but what about National Insurance contributions?

Let’s have a look at…

National Insurance Contributions for British Expats

NI contributions are a tricky story.

Social security. You stop paying Class 1 NICs when you leave the UK.
Pensions. Pensions are typically taxable in the UK, even for non-residents.

Expats can (and do) pay voluntary Class ⅔ NICs if they want to maintain their state pension eligibility.

Class 2: £3.45/week (2025 rate) for self-employed expats.
Class 3: £17.45/week to fill gaps in contributions.

But this is where things get interesting.

Many DTAs assign taxing rights to your country of residence. If that’s the case, you can apply for an “NT” (no tax) code from HMRC to receive your pension without UK tax deductions.

Any NIC paid in the UK count towards your state pension in EU/EEA nations.

Inheritance Tax: Major Changes Coming in 2025

From domicile to residency

UK Inheritance Tax has been transformed.

As of April 2025, the UK inheritance tax is shifting to a residency-based system.

If you’ve been a UK tax resident for at least 10 of the last 20 tax years, your worldwide assets could be subject to UK IHT at 40% above the £325,000 threshold.

Even after leaving the UK, a “tail provision” might keep you in the IHT net for up to 10 years. Time your exit carefully.

What can you do?

Consider:

🎁 Making lifetime gifts (tax-free if you survive seven years)

🔐 Using trusts to manage assets

❤️‍🩹 Taking out life insurance written in trust to cover potential IHT bills.

A note on trust changes: timing matters

Trusts established before April 2025 may benefit from grandfathered rules while newer ones face stricter scrutiny. The current Nil-Rate Band sits at £325,000, with an additional £175,000 Residence Nil-Rate Band for primary homes passed to direct descendants.

Property Taxes: Owning UK Real Estate from Abroad

The non-resident landlord scheme

Any rental income is still subject to UK income tax.

Under the Non-Resident Landlord Scheme (NRLS), letting agents typically deduct basic rate tax before passing rental income to you.

However, you can apply for gross (untaxed) rental income and settle with HMRC through Self Assessment.

Stamp duty and the non-resident surcharge

Buying UK property from abroad? Since April 2021, non-resident buyers face an additional 2% Stamp Duty Land Tax surcharge on residential properties in England and Northern Ireland.

But there are ways around this. For example, through:

Council tax breaks

Your empty UK property might qualify for discounts if it’s:

Unoccupied due to your overseas work commitments
Used by students or disabled individuals.

The End of the Non-Dom Regime: 2025’s Game-Changer

Farewell to the remittance basis

The biggest tax shake-up for international individuals is the abolition of the non-domicile tax regime from April 2025.

The “remittance basis,” which allowed non-UK domiciled residents to avoid UK tax on foreign income and gains kept outside the UK, is being scrapped entirely.

From 2025-26, UK residents will generally be taxed on worldwide income and gains as they arise, regardless of domicile status.

Who will this affect?

Non-doms & New Arrivals: If you have foreign income, assets, or gains and hold (or are applying for) non-domicile status in the UK, this is for you!
Employers & PAYE: Managing UK-based employees with overseas earnings? Learn how to apply for a PAYE direction to tax only the UK portion of their income.
Trustees & Residency Changes: If you’re overseeing a trust with assets from a former non-dom or someone changing their UK residency status, here’s what you need to know.

Not all is lost, however. Consider the…

The new 4-Year FIG regime

The new Foreign Income and Gains (FIG) regime offers a four-year tax break for newcomers to the UK, including returning Brits who’ve been non-residents for at least 10 consecutive years.

During these four years, qualifying individuals won’t pay UK tax on foreign income and gains, even if brought into the UK.

The catch? You’ll lose your Personal Allowance exemption and CGT annual exemption during the FIG years.

Temporary Repatriation Facility: a limited-time opportunity

For those with untaxed foreign funds under the old rules, the Temporary Repatriation Facility (TRF) offers a chance to bring money into the UK at reduced rates:

If you previously used the remittance basis, you can remit old foreign income and gains at a reduced tax rate:
- 12% for the first 2 years (2025-2027).
- 15% in the final year (2027-2028).
Applies for 3 tax years and includes income held in trust structures.

After this window closes, standard tax rates will apply.

Overseas workday relief: A hidden gem

If you’re non-domiciled but a UK resident, you might exclude income earned on overseas workdays from UK tax. This relief has become even more valuable following recent changes to remittance rules.

Tax For US Citizens Living in the UK

American expats in the UK face unique challenges because, unlike most countries, the US taxes its citizens on worldwide income regardless of where they live. Look at the US-UK tax treaty first—this plays a crucial role in preventing double taxation for American expats living in the UK.

Paying US tax while living in the UK: the basics

If you’re a UK-based American citizen or green card holder, you’ll need to:

File UK tax returns under PAYE and pay National Insurance Contributions
Continue filing US federal tax returns annually
Report foreign bank accounts with the Report of Foreign Banks and Financial Accounts (FBAR) if total balances exceed $10,000

Avoiding double taxation

Mechanisms exist to prevent paying tax twice on the same income:

Foreign Earned Income Exclusion (FEIE): Excludes up to $130,000 (2025 tax year) of foreign earnings from US tax
Foreign Tax Credit (FTC): Credits UK taxes paid against US tax liability

I recommend you consult a specialist advisor familiar with both tax systems to optimise your position.

What about state taxes?

Some states still want a slice of your income, while others let you off the hook.

Here’s what you need to know:

✅ Residency-Based States (e.g., California, Virginia) – These states don’t let go easily. Unless you officially sever ties (sell property, change your domicile, cut financial connections), you may still need to file a state tax return.

❌ No-Income-Tax States (e.g., Florida, Texas) – If you’re lucky enough to have established residency in one of these states before moving abroad, you’re off the hook—no state tax filings required.

How to Protect Yourself

📌 If you moved mid-year, file a Part-Year Resident Return to avoid unnecessary taxation.

📌 If your old state claims you still owe taxes, provide proof of UK residency (lease, utility bills, foreign tax filings) to contest it.

📌 Some states, like California, are aggressive in taxing expats, so be proactive in documenting your exit.

FBAR & FATCA: What US Expats Need to Know

When you bank abroad, Uncle Sam still wants to know about it.

Here’s how to stay compliant:

FBAR (FinCEN 114)

📌 Required if your total foreign account balances exceed $10,000 at any time during the year.
📌 Must be filed electronically by April 15 (automatic extension to October available).
📌 Penalties for non-compliance? Up to $10,000 per violation (and much worse for willful neglect).

FATCA (Form 8938)

💰 If your foreign assets exceed certain limits, you must report them:

Filing Status	Must File If Assets Exceed
Single	$200,000+
Married	$400,000+

⚠️ Penalties: Up to $10,000 for failing to file.

Bottom Line? Don’t ignore these filings. The IRS and Treasury have global reach, and the penalties aren’t worth the risk. If in doubt, get professional tax advice!

Expat Returning to the UK: What Are The Tax Implications?

Timing is everything

Planning to return to the UK? Start tax planning 12-18 months in advance.

Your residency status upon return will determine your tax treatment. Consider:

Whether you qualify for split-year treatment if returning mid-tax year
If you meet the criteria for the new 4-Year FIG regime
The impact of the new IHT residency rules on your worldwide assets.

Instant UK Expat Tax Advice and Compliance

You’ve probably worked it out already: tax compliance is a headache, and it’s made 10x worse for expats.

That’s why we’ve built a beautifully simple automated solution to handle it for you.

Our AI-enabled Travel Compliance Assistant offers tailored immigration and tax advice for your situation, no matter how niche. Just enter in any travel details for a personalised recommendation.

Contact our tax experts today to find out more.

Frequently Asked Questions (FAQs)

Do I have to pay UK tax if I live abroad?

It depends on your residency status. Non-residents typically only pay UK tax on UK-sourced income.

How do I know if I’m a UK tax resident?

The Statutory Residence Test examines days spent in the UK and connections to the country to determine your status within the UK tax system.

Can I be a tax resident in two countries?

Yes, and Double Taxation Agreements help determine where you pay tax.

Do I need to file a UK tax return if I live abroad?

File a tax return if you have UK taxable income, such as rental earnings or pensions, as these are considered taxable income.

What are the tax implications if I return to the UK?

You will be taxed on worldwide income once you become a UK resident again, though the new FIG regime might provide temporary relief.

How do I claim tax relief under a DTA?

If you’ve paid tax abroad, you may be able to claim relief to avoid double taxation. Here’s how:

✅ Declare foreign income in the Foreign section (SA106) of your Self Assessment tax return (SA100).
✅ Complete the relevant HMRC form—DT-Individual for individuals, DT-Company for businesses.
✅ Get a UK tax residency certificate from HMRC (if required).
✅ Submit the form to the tax authority in the foreign country to apply for a reduced tax rate.

Every country has different rules, so check the specific treaty terms or consult a tax professional if unsure!

What happens if I fail to file an FBAR?

Failing to file can result in penalties of up to $100,000, criminal charges, and loss of tax amnesty status. This can poentially trigger a broader IRS review of your finances.