Tax Planning to Do Before Leaving the UK

For the internationally mobile professional or investor, the period before leaving the UK is one of the most important planning windows in your financial life. Several tax reliefs and allowances are tied to UK residence or UK-source income. Once you become non-resident, some of these opportunities are gone permanently.

This guide is written for individuals who have decided to leave the UK — whether for a specific opportunity, retirement abroad, or long-term relocation — and want to make the most of their final UK tax year.

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Establishing When You Become Non-Resident

Before planning anything, you must understand precisely when you become non-resident for UK tax purposes. This is determined by the Statutory Residence Test (SRT), introduced in 2013.

The SRT is a rules-based test. You will be non-resident for a full UK tax year if you meet one of the "automatic non-residence tests" (broadly: spending fewer than 16 days in the UK in the year, or fewer than 46 days in the year after previously being non-resident). Alternatively, you may be non-resident if you do not meet the "automatic UK residence tests" and you meet the "sufficient ties" tests — taking into account accommodation, family, work, and previous residence in the UK.

The "split year" rules allow the tax year to be divided into a UK-resident period and a non-resident period in the year of departure. UK tax applies to income and gains arising in the UK-resident portion; the non-resident rules apply to the remainder.

Critical: understand your split year departure date before making any significant planning moves. The relief on capital gains and income described below applies only to the UK-resident portion of the tax year — timing matters.

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Pension Contributions: Use the Window Before You Go

UK pension tax relief is available to individuals who have UK-taxable earnings or who otherwise qualify for contribution relief. Once you become fully non-resident with no UK employment income, you lose the ability to make pension contributions that attract full UK tax relief. (You can still contribute up to £3,600 gross per year to a SIPP even with no earnings — but this is a relatively small amount.)

The pre-departure priority: in the tax year(s) before departure — and particularly in the final UK tax year — maximise pension contributions. The annual allowance is £60,000 for 2026-27. With carry-forward from the previous three years (provided you were a member of a registered pension scheme in those years), you may be able to contribute up to £240,000 in a single year if you have not fully used previous years' allowances. Note that your tax relief is in any case limited to 100% of your relevant UK earnings in the contribution year.

Tax relief calculation: a 45% (additional-rate) taxpayer making a £60,000 net contribution to a pension in the final UK year:

• The pension provider adds basic rate tax relief of £15,000 (making the gross contribution £75,000 in the pension).
• The individual reclaims a further 25% of the gross contribution — £18,750 — through self-assessment (the difference between the 45% additional rate and the 20% already relieved at source).
• Net cost of the £75,000 gross pension contribution: £41,250 (£60,000 paid in, less £18,750 reclaimed). The full £75,000 sits within the tax-sheltered pension wrapper from day one.

For someone leaving the UK on a high income, making the maximum pension contribution in the final UK year is one of the highest-return financial decisions available.

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ISA: Top Up Before You Lose Access

You cannot open a new ISA or contribute to an existing ISA once you become non-resident for UK tax purposes. However, existing ISAs retain their tax-free wrapper indefinitely — you simply cannot add to them while non-resident. When you eventually return to UK residence, you can resume contributions.

The action: ensure your ISA is fully funded (up to the annual allowance of £20,000 in 2026-27, though this may change) in the tax year before departure and in the portion of your split year when you are still UK-resident.

Do NOT close your ISAs before departure. They continue to grow tax-free even while you are non-resident, and closing them means you lose the tax-free wrapper permanently. The ISA is one of the most valuable long-term investment shelters available to UK residents; protecting it costs nothing.

Innovative Finance ISAs, Lifetime ISAs: if you hold these, review the terms on non-residence carefully. The Lifetime ISA in particular has specific restrictions; government bonuses may be clawed back in certain circumstances.

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Crystallising Capital Gains Before Departure

Non-UK residents are generally not subject to UK capital gains tax on the disposal of non-UK assets (they are subject to UK CGT on UK residential property since April 2015, and UK commercial property since April 2019, regardless of residence).

This creates a planning opportunity in the year of departure: for non-UK assets (overseas shares, overseas property, non-UK investment funds), consider whether to dispose of these before becoming non-resident.

If you crystallise gains before departure: the gains are subject to UK CGT at UK rates. For 2026-27 the rates are 18% for gains falling within the basic-rate band and 24% above it, for both residential property and other chargeable assets (the non-residential higher rate rose from 20% to 24% on 30 October 2024). You use your UK CGT annual exempt amount (£3,000 in 2026-27). If you have brought-forward losses, these can reduce the liability.

If you hold until after departure: the gains on non-UK assets are generally not subject to UK CGT. However, many destination countries tax capital gains on worldwide assets from the date you become resident. The gain crystallised between original purchase and departure may escape tax in both jurisdictions if planned correctly — particularly where the destination country provides a rebasing at the date of arrival.

The DTA rebasing provision: some double tax agreements (DTAs) allow a rebasing of assets to market value on the date of departure from the UK (or arrival in the new country). This means the gain from original cost to the departure/arrival date is effectively untaxed — neither country claims it. The United Arab Emirates (no capital gains tax, no DTA with UK) and certain other zero-CGT jurisdictions provide the cleanest outcome. Always confirm the specific DTA provisions with a specialist cross-border tax adviser.

The temporary non-residence rules: be aware that if you leave the UK for fewer than five complete UK tax years and then return, gains made on personally held assets while non-resident may be "brought back" and taxed in the year of return. The temporary non-residence rules are complex; if you are considering a short-term departure, they must be reviewed carefully.

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Accelerating or Deferring Income

In the year of departure, consider whether to accelerate income into the UK tax year or defer it to after departure.

Accelerate income if: the destination country has a higher income tax rate than the UK; or if the income will be taxed in the UK regardless of residence (e.g. UK rental income, UK employment income); or if you want to use UK loss relief or allowances that would otherwise be wasted.

Defer income if: the destination country has a lower income tax rate; the income relates to non-UK sources that will escape UK taxation once you are non-resident; or the income will qualify for the FIG regime exemption in the first four years of UK residence (for individuals returning to the UK after a period abroad).

Discretionary income: dividends from a personal company are a classic example of discretionary income. If you control when the company declares a dividend, you have flexibility to time the dividend against your residence position. Bonuses, if within your control, can similarly be timed.

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Using Losses

UK capital losses must be reported to HMRC. If you have unrealised losses in your portfolio, consider crystalising them before departure (if you also have gains to offset) or after departure (to use against any future UK asset disposals). Losses carried forward from UK resident years are available to offset future UK-source gains even while non-resident.

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Employment and Earnings: The Final Pay Period

If you are employed in the UK until a specific date, ensure your employer's payroll reflects the correct split-year treatment. PAYE in the UK tax year of departure will calculate tax on UK employment income in the normal way; once you are non-resident, income earned in the new country is not subject to UK PAYE.

If your employer pays a termination payment (redundancy or settlement agreement payment), the tax treatment depends on the nature of the payment and your residence position at the time of receipt. "Post-employment notice pay" (PENP) is taxable regardless of residence. Other termination payments above £30,000 may be taxable in the UK if they relate to UK employment. Take advice on the timing and nature of any termination payment.

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Review and Update Your Will Before Departure

As discussed in our companion guide on wills and intestacy for expats, the tax year of departure is also the right time to review and update your will. Marriage and family law, succession law, and forced heirship rules all change when you move countries. Your UK will should be reviewed, and in many cases, a locally drafted will in the destination country should be prepared before or shortly after arrival.

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Notification to HMRC

You must notify HMRC of your departure. This is done by:

1. Completing form P85 (available on gov.uk) if you were employed in the UK, or through your self-assessment return if you were self-employed or had investment income.
2. Completing a self-assessment tax return for the split year, reporting income and gains to the date of departure.
3. If you have a SIPP: the pension provider does not need to be notified of your departure, but you should update your address and keep the provider informed of your residency status (particularly relevant for QROPS planning or future pension income withdrawals).

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The Double Tax Agreement Position at Destination

Before departure, confirm the DTA position between the UK and your destination country. Key provisions to check:

• Pension income: does the DTA allow UK pension income to be taxed only in the country of residence (beneficial if the destination has no income tax, as in the UAE)?
• UK rental income: most DTAs allow the UK to tax UK rental income regardless of the recipient's residence; you may receive a credit in the destination country.
• Capital gains: does the DTA provide a rebasing at departure or arrival?
• State Pension: can the State Pension be paid gross to a non-resident? (Some countries have specific provisions.)

This guide provides general information and does not constitute tax advice. UK tax law is complex, and the impact of departure on your financial affairs depends heavily on your personal circumstances, the nature of your assets, and the destination country's tax regime. Always take specialist advice from a UK tax adviser and a tax adviser in the destination country before finalising your departure plans.

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How Global Investments can help

Global Investments advises clients on the financial planning aspects of leaving the UK, including pre-departure pension contribution maximisation, ISA management, investment portfolio review, and the coordination of UK and destination-country tax planning. We work with specialist cross-border tax advisers in the UK and across key relocation destinations to ensure your financial affairs are optimally structured before, during, and after the move.