How to Split Your UK Tax When Living in Australia?

In the last decade, there has been an increase in the immigration rates of Britons to other countries in the quest for better lifestyles. Australia is the common destination for most British emigrants because it has many appealing advantages such as low pollution rates, good climate, and cultural similarities between the UK and Australia.

Despite these benefits, there is a critical aspect that you need to consider in your immigration plans. These two countries have similarities in cultures but different tax systems, so you need to understand your tax commitments in the UK and Australia. You don’t want to find yourself having an unexpected tax bill in addition to the ups and downs of settling in a new country. 

In this article, we’ll look at how the split year treatment applies to help you split your UK tax return as a non resident and to manage your finances effectively as a UK ex-pat in Australia.

What Is the Split-Year Treatment?

When you immigrate into or emigrate out of the UK, the tax year is split into two entities, the residential and the non-residential part. This means that you’re only liable for a UK tax on foreign income based on the time you were living there rather than the whole year. Therefore, a split-year system is important in preventing double taxation. 

While living abroad, your UK residence and non-residence status are determined by the Statutory Residence Test stated in the Finance Act 2013 Sch45. This information guides the decisions of the taxing authority of the UK. 

The split year treatment may apply if:

  1. You cease to have a home in the UK until the end of the tax year. This condition means that you are leaving the UK permanently to live and retire in Australia. You must have been a UK resident for the previous tax year and will be a non- UK resident for the next year. Under this condition, you must spend less than 16 days in the UK for the remaining tax year. This applies when you are a tax resident of Australia within six months and have your only home by the end of six months. Also, you need to be present at the end of each day in Australia for six months. 

  2. When working full time in Australia, you can apply for the split year treatment as a non-resident if you pass the working abroad test. If you’re successful, the rule starts applying for the tax year you leave the UK. For you to be classified as a non-resident, you’ve to spend sufficient hours outside the UK. Sufficient working hours are equal to: spending more than 35 hours per week working abroad and less than 30 days working full time in the US, and less than 91 days in the UK. In addition to this, you must have been a UK resident over the past tax year. Working abroad should last, at least until the end of the tax year you depart from the UK.

  3. If you accompany a partner who works in Australia full time. If your partner or someone you’re living with passes the aforementioned sufficient hours’ test, you can be eligible for the split-year rule. That is if you spend more time in your overseas home and less time in the UK. The rule also applies if you were a UK resident during the previous tax year. You also need to spend 90 days or less in the UK for the rest of the tax year you leave the UK.

  4. You are a non-UK resident in the following tax year. For example, if you leave the UK for Australia in the tax year 2020/2021, you must remain non-resident until 6th April 2022. 

If you’re a UK ex-pat living in Australia and meet the above criteria, the split-year treatment for your UK taxes is applied automatically. You don’t have to apply for it. If it does not apply, you need to make claims in writing at the revenue offices. 

Split Year Treatment on Capital Gain Tax (CGT)

If you’re living in Australia, the split treatment for your CGT may be a bit complex though it’s possible to have the split. The income you generate from real estate in the UK is subject to UK Tax. The CGT may not apply to gains made on capital outside the UK. If you are a non-resident of the UK for five years or less, then return to the UK again, the tax authority (HMRC) may collect taxes on any gains you made while you were abroad upon your return. These are government attempts to bar people from leaving the UK to avoid CGT.

In conclusion, these are the ways to split your UK tax when living in Australia. It’s advisable to seek advice on uk cgt on uk property disposal if you are a non resident, this should apply to your specific needs before making tax decisions. 


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