With the United Kingdom preparing to abolish the non-domiciled (“non-dom”) tax status from April 6, 2025, many Australians are considering the tax impact of returning home. See our article Australians Living In The UK: How The New “Non-Dom Tax” Changes May Affect You.
Whether you make the decision to return home before the tax changes take place, or you remain in the UK until after the new laws impact you, when you return home it is important to manage your UK tax exit obligations.
Simple Checklist For Australians Returning From The UK
1. Confirm UK tax residency status and apply for split-year treatment (if eligible).
2. File a final UK tax return and settle any outstanding liabilities.
3. Plan capital gains tax-efficiently (consider selling non-UK assets after leaving to avoid UK CGT).
4. Transfer UK savings and close unnecessary UK bank accounts.
5. If keeping UK property, register with HMRC’s Non-Resident Landlord Scheme and ensure that you continue to file UK tax returns as a non-resident.
6. Seek advice on Australian taxes and ensure your Australian tax return is prepared in accordance with Australian tax residence rules, including declaring worldwide income.
7. Review foreign asset disclosures and pension tax treatment with the ATO.
8. Be mindful of the 10-year UK IHT rule for former UK residents9- Use the UK-Australia Double Tax Agreement to mitigate double taxation.
The Key Differences For Australians Returning To Australia Before vs After The UK’s New Non-Dom Rules (April 6, 2025)
The timing of departure from the UK will significantly impact an Australian’s tax obligations in both the UK and Australia. The key differences arise in capital gains tax (CGT), inheritance tax (IHT), and foreign income treatment.
1. UK Capital Gains Tax (CGT) Implications On Worldwide Assets
The Key Difference for CGT purposes is that leaving before April 2025 allows Australians to sell non-UK assets CGT-free under the remittance basis. Individuals leaving after April 2025 may still owe UK CGT on global assets if they were UK residents for more than 4 years.
2. UK Inheritance Tax (IHT) Exposure
The key difference for IHT exposure is that before April 2025 a non-domiciled resident does not have their worldwide assets caught in UK IHT rules when they leave the UK. Leaving after April 2025 can expose them to UK IHT for up to 10 years if they were a UK tax resident for a decade or more.
3. UK Tax On Foreign Income And Remittances
Non-domiciled individuals who leave before April 2025 avoid retrospective taxation on foreign income and remittances. Leaving after April 2025 could mean more UK tax on past foreign income, depending on transition arrangements.
4. Remittance Of Foreign Income Into The UK
Prior to 2025 a non-domiciled resident would avoid UK taxes on foreign income if they did not bring this income into the UK.
Under the new UK tax rules all foreign income is taxable in the UK after the first four years, regardless of whether the income is brought into the UK or not. It is important to ensure that your Australian income isn’t brought into the UK prior to 6 April 2025 if you want to avoid UK taxes on that income.
After 6 April 2025 you may be exempt from paying UK taxes under the four-year exemption rule. If you are not exempt under this rule you may be able to bring previously untaxed foreign income into the UK under a reduced tax rate if a decision to designate this income for remittance into the UK is made before the end of the 2028 financial year. Foreign income earned from 6 April 2025 (other than income earned under the 4 year exemption rule) will be taxable, regardless of whether it is remitted into the UK or not.
5. UK Property And Rental Income
The rules remain similar in that UK rental income will continue to be taxable in the UK as the country of source, as well as being taxable in Australia as the country of residence. However, the CGT rules may be stricter for UK purposes for former UK residents, meaning that the key difference is that an individual returning to Australia may see better CGT outcomes if they sell their UK property before they leave. As this will depend on specific factors, it is important to obtain correct tax advice for your specific situation prior to making your move back to Australia.
6. Australian Tax Treatment Upon Returning
Regardless of when an individual returns, Australians:
a) Will immediately become Australian tax residents and be taxed on their worldwide income for Australian tax purposes.
b) Must declare UK rental income, pension withdrawals, and foreign bank accounts.
c) May claim foreign tax credits for UK tax paid on income still sourced in the UK.
Leaving before April 2025 gives returning Australians more flexibility to clear UK tax obligations before Australian tax residency resumes.
Overview Of Tax Impact Of Australian Leaving Before Or After April 2025
| Factor | Before April 6, 2025 (Old Rules) | After April 6, 2025 (New Rules) |
| UK CGT On Worldwide Assets | No CGT on non-UK assets | Worldwide assets taxable if UK resident 4+ years |
| UK Inheritance Tax (IHT) | Only applies to UK assets | Worldwide estate taxed if UK resident 10+ years |
| UK Tax On Foreign Income | Foreign income not taxed if remitted after leaving | Worldwide income taxable if UK resident 4+ years |
| Bringing Foreign Income Money Into The UK | UK tax only applies when remitted to the UK | UK tax applies on worldwide income (after the first four years) and possible UK tax on past foreign income if repatriated |
| Australian Tax Impact On Moving Back To Australia | Becomes tax resident immediately, but avoids UK transition issues | Still becomes tax resident of Australia, but may owe UK taxes on past foreign income |
Summary
Australians who leave the UK before April 6, 2025 will avoid new UK tax burdens on foreign assets, income, and IHT. Anyone staying past April 2025 or moving to the UK after this date, may face unexpected UK tax liabilities which may continue even after leaving.
These changes mark a significant departure from the UK’s previous tax regime. Understanding these changes is important when assessing a decision around how long you plan to live in the UK, and how this may impact your current tax obligations, as well as the tax impact on your estate.
Whether you are still making your decision on living in the UK, or need to understand the tax consequences of your decision, it is important to engage an international tax specialist who can provide up to date and accurate information tailored to your specific situation.
