Cross-Border Tax for UK Expats: Residence Testing, Treaty Relief and the 2025 Reforms

The Statutory Residence Test is the mechanism HMRC uses to determine whether an individual is UK tax resident for any given tax year. If an automatic overseas test is satisfied, the individual is non-resident for that year without further analysis. The most straightforward tests are: fewer than 16 days in the UK in a tax year (for those who were UK-resident in at least one of the 3 preceding years); or fewer than 46 days in a tax year (for those who were not UK-resident in any of the 3 preceding years); or full-time overseas work averaging at least 35 hours per week with fewer than 91 UK days and fewer than 31 days of UK work. Where no automatic overseas test applies, automatic UK tests may confirm UK residence: the most common is spending 183 or more days in the UK in the tax year. Where neither set of automatic tests is conclusive, the sufficient ties test applies: HMRC counts the number of UK ties an individual has (family, accommodation, work, whether they spent 90 or more days in the UK in either of the 2 preceding years, and whether the UK is the country where most time is spent) and compares that count against day-count thresholds to reach a conclusion. The result can be UK resident or non-resident depending on the combination. A regulated cross-border tax specialist can assess which test applies to an individual's specific pattern of travel and connection.

Tax residence and tax domicile are distinct concepts that many expats conflate. Residence is determined each year by the SRT and governs whether a person pays UK Income Tax on worldwide income (if resident, arising basis) or on UK-source income only (if non-resident). Domicile is a common law concept relating to an individual's permanent home country. Until 5 April 2025, domicile status determined whether UK-resident individuals could use the remittance basis and whether overseas assets fell within the scope of UK Inheritance Tax. From 6 April 2025, the government replaced domicile as the primary connecting factor with a residence-based framework. The remittance basis is abolished: all UK-resident individuals are now taxed on the arising basis on their worldwide income and gains. For IHT, the long-term UK residence test replaced the deemed domicile test.

The Foreign Income and Gains regime is the replacement for the remittance basis for new arrivals. To qualify, a person must become UK tax resident having been non-UK resident for at least 10 consecutive tax years. For up to 4 years of UK residence, they can claim 100% relief on foreign income and gains. However, claiming this relief in any year results in the loss of the personal income tax allowance and the CGT annual exempt amount for that year. Whether the FIG regime produces a net benefit compared to the arising basis with allowances intact depends on the volume and nature of the individual's foreign income: a regulated specialist can assess which approach applies to the individual's position in each year.

For former remittance basis users, a Temporary Repatriation Facility (TRF) is available during 2025-26 and 2026-27: pre-April 2025 foreign income and gains held offshore can be remitted at a 12% reduced rate. From 2027-28, such remittances are taxed at normal rates. A 50% transitional relief on foreign income (not gains) charged on the arising basis was available in 2025-26 for individuals who were remittance basis users and do not qualify for the FIG regime.

Where an individual is liable to tax in both the UK and their country of residence on the same income, the UK's double-taxation treaty with that country (where one exists) determines which country has the primary taxing right. Relief may take the form of full exemption, a reduced withholding rate, or a foreign tax credit. Claims are made using Form DT-Individual, which requires a residence certificate from the overseas tax authority. UK government pensions (civil service, armed forces, police, teachers) are generally taxable only in the UK regardless of where the recipient lives. Capital Gains Tax on disposals of UK residential property by non-residents is not covered by double-taxation treaties.