Repatriating to the UK in 2025: Your instant guide (Part 1)

Are you an expat returning to the UK from Dubai...

And feeling overwhelmed?

This one needs a blog of its own. 

If you're considering moving back to the UK (soon or not so soon), there can be a lot to consider. 

Not only is there the physical move to plan for but the more mundane tasks of taxes and financial planning too.

Especially considering that UK planners are unlikely to understand the nuances of offshore products and investments...

(It’s best to start with having an international financial planner).

You can easily feel overwhelmed.

What if you forget an important task?

What if you run out of time?

What if there's something you haven't even considered at all?

This blog aims to put your anxiety to rest if you are an expat returning to the UK.

It will give you a better idea of what you need to start preparing for now...

So you can avoid any nasty and expensive surprises in the future.

Returning to the UK: Should you sell assets?

If you have time on your side...

Start looking at your financial affairs 12 to 18 months before you return to the UK. 

If you have assets to sell and profit to release, it may make sense to review disposals before you return – especially given higher Capital Gains Tax rates for most assets from 30 October 2024 and 6 April 2025 (carried interest).

From April 2025, moving home requires more careful planning. Transitional reliefs such as the Temporary Repatriation Facility and 50% foreign income reduction are available, but only under specific conditions and during defined periods.

However, even the best laid plans seldom come to fruition.

Having the luxury of choosing your exact date of return is unlikely.

If you have assets such as a property and you can’t or don’t want to sell before you move, then you’ll need to plan carefully. From April 2025, all foreign income and gains are reportable, with no £2,000 de minimis. Early advice will help avoid unexpected liabilities. 

As always, everyone's circumstances are different.

Repatriating may not necessarily be all that complex for you...

As long as you take sage financial and tax advice from a professional.

Retiring back to Britain

If you’re an expat returning to the UK to retire and have a Qualifying Recognised Overseas Pensions Scheme (QROPS), you’re required to inform the QROPS provider when you’ve returned to the UK.

If you then transfer your funds or take benefits from your QROPS, the scheme itself has to report payments to HMRC, regardless of how long you were a non-UK resident previously.

If you’ve started drawing an income from a pension scheme while abroad, you will be liable to tax in the UK on your income once you return to Britain...

(Regardless of whether yours is a UK registered pension scheme such as a SIPP, or whether it's a QROPS).

And from 6 April 2027, pensions themselves will also fall within the scope of UK Inheritance Tax — a major change that could affect estate planning for many returnees. 

It's important to seek specialist, cross-border tax and financial planning advice before you return to ensure that the level of income drawn from your pension together with other assets is done in the most tax efficient way possible.

For example, effective strategies may include:

• Drawing down a portion of the pension commencement lump sum tax-free, potentially before UK residency resumes.
• Using tax-deferred 5% withdrawals from an offshore bond.
• Making use of the CGT annual exempt amount by realising gains in a split tax year or before becoming UK resident.
• Transferring assets between spouses if one is a higher or additional rate taxpayer, to optimise allowances.
• Reviewing the treatment of international pensions (such as QROPS) and how these compare with UK pensions under the new regime.
• Restructuring dividend, rental, and interest income flows in advance to make full use of allowances and rate bands. 

Timing is also critical. Once you are UK resident, many of the most effective planning opportunities fall away – particularly in light of the new residence-based inheritance tax rules and the inclusion of pensions from 2027. 

You have choices and options – but you must seek advice in advance of your return to Britain while still non-resident. 

If you delay, you will limit your flexibility and may face a significantly higher overall tax burden. 

Repatriating: How are funds taxed in the UK?

From 6 April 2025, the remittance basis is abolished. A new 4-year Foreign Income & Gains (FIG) regime allows relief only for individuals who have not been UK tax resident in any of the previous 10 tax years. For other returnees, all foreign income and gains will generally be taxable as they arise. 

But, if you’ve been an expat for less than 5 years, beware of the temporary non-residence rules...

These could see gains, realised during your absence, taxed on your return.

If you think you may be resident in the UK, UK-domiciled, but not ordinarily resident you will need to seek professional tax advice as your tax position is complex.

Non-dom status will no longer shelter income. Planning now revolves around FIG eligibility, transitional reliefs, and careful timing of repatriation. 

Seek professional tax advice so you can plan effectively.

How to make and receive an international transfer

You'll need to have a bank account in the UK if you want to receive funds from abroad.

Simply supply the bank you’re transferring from with the following details about the account you're transferring to:

• Your personal details
• Your bank’s SWIFT code
• IBAN (international bank account number) number
• BIC (business identifier code)*

*Not always requested.

You may wish to use an international currency exchange firm for the transfer because many such companies charge low or zero fees for large transactions, and often offer better exchange rates than your bank.

Ensure you entrust a reputable, regulated company.

Don’t forget currency exchange issues

Unless you hold sterling offshore, you’re likely to encounter a rate of exchange when you move your funds back to Britain and into pounds sterling.

You can forward fix a rate of exchange if you use a foreign exchange specialist company.

This can be a wise move if you don’t want the risk of the currency crashing on the day you move it.

Explore your options with a regulated foreign exchange (also called FX) firm.

Income tax

Liability for tax in the UK is determined by your residence and domicile residency status under the Statutory Residence Test (SRT).

If you’re a tax resident in the UK you’re liable to UK tax on your worldwide income. 

As a non-resident expat you’re subject to tax on UK-source income only, such as rental income from UK properties or UK pension income.

Where you are subject to UK income tax, the amount you pay will depend on the level of your income, which falls into each of the tax bands.

At present, everyone has a personal allowance of £12,570 which you do not have to pay tax on. However, this allowance is tapered away for those with adjusted net income above £100,000, and certain non-residents may not be entitled to it depending on treaty position and domicile status.

When returning to the UK, you should notify HMRC of your change in residence status promptly. HMRC notes::

“You may need to register for Self Assessment, e.g. if you start working for yourself or have other income or gains from the UK or abroad. You don’t need to register if you’re an employee and don’t have other untaxed income to report.” 

You can find out more about self-assessment and who needs to send in a tax return on HMRC’s own website.

If you’re returning to the UK and taking up a job offer, you'll usually be required to complete a Starter Checklist form from HMRC.

This is for employees without a P45, (which is the form you’re given at the end of a period of employment in the UK, which provides details of your tax code, gross pay, and the tax paid for that year).

This Starter Checklist replaced the old P46, and it gets you back on HMRC's system.

Until your tax situation is clarified you may also be placed on an emergency tax code.

These forms and processes are managed directly via HMRC’s website.

For the purposes of income tax, you are generally treated as being resident for the whole of the tax year.

Therefore all income received in the tax year in which you become UK resident will be subject to UK income tax. 

There is however an extra statutory concession for the purposes of income tax which allows a ‘split year treatment’ to be applied.

That means income arising in the tax year of return (but before the actual date of return) will not be subject to UK income tax. 

The rules for this are quite different from those applying to the treatment of capital gains.

Importantly, split year treatment applies in several defined cases (e.g. where you or your spouse/partner take up full-time work in the UK, where you cease full-time work abroad, or where you acquire a home in the UK). It is not automatic and must be claimed.

You'll find more information on this here in HMRC’s guidance (RDRM12000 onwards).

National Insurance

National Insurance contributions (NICs) are payable in order for you to qualify for certain benefits including the state pension, contributory unemployment benefits, and certain sickness benefits. 

You can make voluntary contributions while you’re abroad.

However, if you haven’t done so and you’d like to catch up once you repatriate, you can check your NI record online.

You'll also be able to find out how any gaps you have may affect your future entitlement to benefits.

The class of NICs you pay depends on your employment status, level of earnings, and whether you have reached State Pension age.

If you’re employed you stop paying Class 1 National Insurance when you reach the State Pension age.

If you’re self-employed you stop paying Class 2 when you reach state pension age.

And, you stop paying Class 4 from the start of the tax year after you reach state pension age.

It’s important to note that:

• You normally need at least 10 qualifying years of contributions to receive any UK State Pension, and 35 qualifying years to receive the full amount.
• If you have gaps, you may be able to make voluntary Class 2 or Class 3 contributions to improve your record. Recent transitional arrangements (extended to April 2025) allow individuals to top up contributions as far back as April 2006.
• Checking your record before you return to Britain allows you to plan whether voluntary top-ups are beneficial. 

Capital Gains Tax (CGT)

Capital gains is a tax payable on any gain made on the disposals of the majority of assets, whether the disposal occurs due to a sale of the asset or gifting. 

It's assessed in the tax year in which the gain is made, and the rate at which it's paid relates to your total income.

From 30 October 2024, gains that fall within the basic-rate band are charged at 18%, and gains above the basic-rate band are charged at 24% (trusts and personal representatives: 24% for disposals on/after 30 October 2024).

You have an annual exemption per tax year, below which gains realised will not be subject to CGT.

The annual exempt amount for individuals is £3,000 (trusts: £1,500) for both 2024/25 and 2025/26. 

Depending on your current residency status, you may not be liable to UK CGT on investment assets that were purchased while you were non-resident, and disposed of while non-resident.

However, once you repatriate, your entire gain from such a disposal could be liable to CGT.

It may be wise to realise any gains on investment assets before repatriation.

You don't need to go about this alone.

A qualified financial planner can help.

HMRC has a useful section on its website with help sheets to assist you in determining whether you have anything to pay.

Also worth keeping in mind is the fact that there is no relief or reduction in liability available to take into account gains that were accrued while abroad. 

For this reason, returning to the UK with unrealised gains on assets is not a good idea.

Where gains are realised during a tax year in which you are non-UK resident, it is important to be aware that you may still be subject to UK CGT. 

Temporary non-residence rules can still bring gains realised while abroad back into charge if you return within the specified period (typically five years) - see HMRC’s updated HS278 helpsheet for details.

It is also worth noting that, while capital gains are assessed in the tax year in which they are made, an extra statutory concession applies where you have not been resident in the UK at any time during the previous five tax years.

Disposals made after the date that you become UK resident are assessable for CGT.  

The result of this is that if, for example, you become UK resident half way through a tax year, you will not be subject to UK CGT on disposals made in the first half of the tax year.

However, if you’ve lived abroad for fewer than five years and made a taxable gain in that time, you may be subject to UK CGT.

Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) will be taxed at 14% for qualifying disposals from 6 April 2025, rising to 18% from 6 April 2026 (disposals on or before 5 April 2025 remain at 10% where eligible).

Carried interest will be subject to a unified CGT rate of 32% from 6 April 2025, with a further change to an income-tax-style regime planned from April 2026. 

Inheritance tax (IHT)

IHT may be levied on the estate of a deceased person who was domiciled in the UK, or who was not domiciled in the UK but who owned assets there.

It can also apply to the assets of deceased expats.

Domicile is distinct from residency, meaning that IHT is applicable to a UK-domiciled individual regardless of where they are resident.

The IHT threshold (or Nil Rate Band - NRB) is the amount up to which an estate will have no IHT to pay.

As of 2025, the NRB remains at £325,000 per individual and is frozen until at least April 2028. Additionally, the Residence Nil Rate Band (RNRB), which applies when a main residence is passed to direct descendants, is also frozen at £175,000 per individual until April 2028. The taper threshold above which the RNRB is reduced remains at £2 million.

Assuming you’re a British expat, you’re likely to be a UK-domiciled individual whose estate could be liable to IHT.

So you may want to consider taking advantage of certain IHT exemptions.

It’s worth exploring strategies such as Potentially Exempt Transfers (PETs), gifts into trusts, spousal exemptions, and use of reliefs like Business Property Relief (BPR) and Agricultural Property Relief (APR), which remain available in 2025. Professional advice is strongly recommended to navigate these options effectively. 

Potentially Exempt Transfers (PETs) 

PETs are gifts that potentially qualify for an exemption and are made, in general, to either an individual or an absolute trust. 

A potentially exempt transfer will only become chargeable to IHT if the donor fails to survive for seven years, and the scope of the estate may now depend on UK residence over the previous 10/20 years rather than solely on domicile.

In this instance, it is regarded as a failed PET.

On death within seven years of the gift, the value of the failed PET is added to the donor's estate, along with any other gifts made by the donor in the seven years before death. 

Only where the value of the failed PET, when added to any earlier gifts within seven years, exceeds the prevailing NRB (per individual £325,000 in 2025, frozen until 2028) will IHT become payable on the failed PET. 

If there is an IHT liability on the PET, then this may be reduced by taper relief, where the donor has survived at least three years from the date of the gift.

The relief is calculated as a percentage reduction of up to the full IHT rate depending on the length of time between the gift and date of death, as illustrated in the table below:

Note: The NRB and RNRB remain frozen at current levels until at least April 2028. Professional advice is recommended to plan PETs effectively and ensure they are structured to maximise exemptions and reliefs available in 2025. 

That's it for the first part of this blog.

Hopefully it gives you a feeling of clarity, confidence and control over your ideal future.

It's important for investors, like yourself, to have all the information they need to make better, more informed decisions.

Look out for the second part of this blog, covering everything from lifestyle to pet relocation, in the next few days.

And, as always, if there's any financial questions keeping you awake at night...

Get in touch so you can have the unbiased answers you're looking for.