Leaving the UK part 1: Tax and National Insurance
Written by Carl Turner on February 20, 2015.
If you are leaving the UK or have already moved to pastures new – congratulations! This is no doubt the start of an exciting adventure which will bring new experiences, a different lifestyle and a diverse set of financial challenges. The first of these is to make sure that your financial affairs in the UK are all tidied up, and more importantly that you are not paying any more tax than you need to.
Here are three important things you need to do:
1. Let your bank know
Once you are no longer resident in the UK, you can apply for tax free interest from your bank or building society. This is automatically deducted at source at a rate of 20% unless you let your bank know. In order to do that you need to complete the online r105 form for each bank or building society then print and post.
The form is downloadable here.
2. Check if you are eligible for a tax refund
You may well be eligible for a refund in the tax year you left the UK.
The reason you could be due a refund is that, if you left the UK part-way through the tax year (before 5 April) you will only have received part of your tax free personal allowance under PAYE. But you may be entitled to a full year’s personal allowance, even though you will not be living in the UK for the full tax year.
HMRC have an online form (P85) to fill in to inform them that you have left, you can access the P85 here
Make sure you have your National Insurance number, income information and your new address to hand in order to be able to complete the document, which then needs to be printed and sent to HMRC with your P45 if you were employed, or your tax return if you were self-employed.
You should beware of various companies (often advertising online) which offer to claim back overpaid tax for taxpayers – many are not reputable and others may charge high fees for a service that you can easily do for yourself.
Once HMRC has received the form they will work out whether you are owed a refund for the tax year you left. Usually when you move abroad you will be classed as non-resident and will no longer pay tax in the UK on income earned abroad, although income earned in the UK may still be subject to UK tax. One example is the rental income from a UK property. Make sure you read the small print and remember that it is your responsibility to declare any UK income.
The UK has double taxation agreements with many countries to ensure that you don’t pay tax twice on the same income. You will find more information about that here.
3. Check your National Insurance situation
You can request a statement of your National Insurance (NI) account from HMRC. You can do this online here, specifying the years you would like your statement to cover. This statement will detail all the NI payments or credits on your account and tell you if there are gaps with regards to your ‘qualifying years’ towards a state pension. In certain cases it is possible to pay voluntary contributions to plug any gaps and the statement should provide this information.
In some cases it may be advisable to continue paying NI contributions while you are abroad, particularly if you think you will be returning to live in the UK in the future and if you are hoping to claim a UK state pension. Your NI statement should be able to help you make this decision. In order to qualify for a state pension you will need 30 years of contributions. Voluntary contributions for most people are just £2.70 per week so it is well worth considering your situation carefully.
If you are moving to a country that has a social security agreement with the UK, any contributions you have made in the UK could count towards benefits you are eligible for in your new country of residence.