Split Year Treatment

Gain an understanding into how the tax year can be split in half

Exploring Residence, Domicile, and the Benefits of Split Year Treatment

The amount of UK tax you pay is based on your UK residence and domicile status. If you move to the UK, the date you become UK tax resident is also significant as, from that date, you may be liable to UK taxation on your worldwide income and gains as they arise.

If you’re not a full-time resident of the UK, new legislation from 6 April 2013 lets you split a tax year in two parts, under five different circumstances. With split year treatment, if you arrive in or leave the UK partway through a tax year, you can be treated as a UK non-resident for just part of the tax year.

What Are the Rules?

  1. Non-UK residents (provided various conditions are met), will only be charged UK Income Tax and Capital Gains Tax on income you earn in the UK or gains made selling UK assets.

  2. UK residents and domiciles pay tax on worldwide income and gains.

  3. UK residents non-domiciled pay tax on UK income and gains as they arise. Your overseas income and gains can be excluded from UK tax provided various conditions are met.

Why Should I Apply for Split Year Treatment?

In general, UK residents must pay tax in the UK on any income or gains worldwide. Non-UK residents, however, pay tax only for income earned in the UK. While some specific circumstances can change, such as eligibility for the UK personal allowance, this rule is broadly the case.

With split year treatment, you are taxed as a UK resident only for the part of the tax year when you live in the UK. This means you’ll not have to pay UK tax on your income when you are a non-resident and earning money outside the UK.

What Are the Cases If You Leave the UK?

  1. Starting ‘full-time’ work overseas

  2. Accompanying a partner who has started work ‘full time’ overseas.

  3. Leaving the UK to live abroad and ceasing to have a UK home.

There are further rules to consider here, including being a UK resident in the previous year, your work overseas must be ‘full time’ and any visits made to the UK after departure have to be limited for split year treatment to apply.

What Are the Cases If You Arrive in the UK

The five circumstances for splitting, when arriving in the UK are:

  1. Starting to work ‘full time’ in the UK.

  2. Ceasing ‘full-time’ work overseas and coming to live in the UK.

  3. Live in the UK and establishing your only home there.

  4. Starting to have a home in the UK.

  5. Accompanying a partner who has returned to the UK following a period of full-time work overseas.

Living overseas but spending time in the UK doesn’t necessarily mean that you are non-UK resident, and you may find yourself with a UK resident status.

Not only does planning ahead help with investment strategy, but it can also save costly mistakes that can be unknowingly caused. Speak with one of our advisers if you are planning to leave or move back to the UK.

Discuss Split Year Treatment and Optimize Your Financial Strategy

Whether you're planning a move to or from the UK or fall under one of the specific circumstances allowing split year treatment, our team is here to provide personalized insights to your unique situation.