Moving Back To The UK Could Trigger A Brutal Tax Shock

Is moving back to the UK about to become the most expensive decision of your life?

In today’s episode, Simon Misiewicz of Optimise Accountants looks at a question many British expats, Dubai residents, Spain residents, internationally mobile families and overseas business owners are quietly asking, is it now too expensive to return to the United Kingdom?

This episode explores why the emotional pull of home can hide a serious tax problem. You may want to move back for family, business, safety, schools or familiarity, but the UK tax system may have very different plans for your income, investments, property portfolio and worldwide estate.

Simon discusses recent conversations with people living in Dubai, where low personal tax can make wealth building easier, and compares this with Spain, where the cost of living may be lower but tax depends heavily on how and where you live. He also explains why Andalusia may not be the same as Barcelona, Valencia or other parts of Spain from an inheritance tax perspective.

The real shock comes when inheritance tax enters the conversation. If you have assets worth £2 million to £10 million, moving back to the UK could expose your worldwide wealth to a 40 percent inheritance tax problem. For some families, that could mean handing HMRC hundreds of thousands, or even millions, instead of passing wealth to children.

This episode also covers UK income tax, investment income, dividend tax, cost of living, Dubai tax advantages, Spain tax planning, UK inheritance tax, worldwide assets, property investment and why moving loved ones to you may sometimes be cheaper than returning to the UK.

Before you move back to Britain, ask one brutal question, are you going home, or walking into a tax trap?

Simon Misiewicz of Optimise Accountants

US UK Cross Border Tax Options

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A quick mention of our proud sponsor Calm Buddies, helping children, parents and families bring a little more comfort, calm and reassurance into everyday life. You can find out more about their products here: https://calmbuddiesofficial.myshopify.com/

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Transcript

SPEAKER_00 0:00

Is it too expensive for you to move back to the United Kingdom? So I've been having a series of tax consultations as well as doing some self-reflection myself. I've had clients that are in Dubai, which is a great tax haven. Now, of course, there are issues with the Middle East right now, which I only pray that gets resolved quickly with a minimum amount of casualties. In fact, no casualties would be perfect, so let's be fair about it. Now, politics aside and all that horrible stuff that's going on, it does bring to question whether people from Dubai are going to be staying there or moving back to the United Kingdom. And it brought home a home truce for myself. I too was thinking about moving back to the United Kingdom so I could do more business development stuff. And the problem is with that, is the cost of living. Now in Dubai, you can't compare that. I live in Spain and Alicia, Spain, in particular, and the cost of living is much cheaper than the United Kingdom. But people living in Dubai probably are going to be looking at the United Kingdom as being quite a cheap place to live until they take away the whole tax notion. Because in Dubai, if you're earning money over there, then you don't have to pay any income tax, which is great. The corporation tax is minimal. So really you could have a good living and pay the minimum amount of tax. Now personally, I didn't move to Dubai because the cost of living was so much higher than actually the tax benefits were eroded by the move to Dubai from Spain. So Spain is probably the lowest cost of living compared to the UK in Dubai, and the tax position is probably slightly higher in Spain if you do things wrong. There are ways to get your tax bill to be lower than it is in the United Kingdom. Yes, that's true. But not, of course, cheaper than Dubai. So there is this whole notion of cost of living, and then we have to look at income tax. Now the UK income tax rate is 45%, 47% if you've got interest and investments. In Spain, very similar actually, depending on where you're living in Spain. For me, for Andalusia, I'm taking dividends out of my UK limits company. So realistically, it is cheaper from a tax perspective for me to live in Spain. This episode is proudly sponsored by Calm Buddies, created by Louise and me to help care for anxious dogs inspired by our very own dog, Dolce. Please visit our Shopify store using the links provided below to see products designed to support dogs with anxiousness around separation, fireworks, and loud noises. Calm Buddies, better days together. The big thing that got me thinking about this whole moving back to the UK and people, funny enough, that are building up wealth in Dubai thinking about moving to the UK is inheritance tax. Now, you know, if you've got an asset base of a million pounds, then maybe inheritance tax is not going to be an issue, especially if you're a couple. You know, you've got this £325,000 per person, times up by two for the couple, £650,000 tax-free, and then you've got the £175,000, which is the residential nail rate band. Adding that together of £500,000 per person could get you nicely to a million. So most people under a million shouldn't be too worried about inheritance tax and then staying out of the country. Moving back to the UK is maybe not too much of an issue. But actually, if like myself and Louise and many other clients out there that have got assets going to the two to ten million pounds range, well, actually moving back to the UK is a disaster. And this is something that we had to look at to say, well, I want to go back to the UK to think about business development stuff and doing some more stuff in London. Turns out that wasn't a good idea. What is the point of saying to my son, hey, you're going, we're going to go back to the UK, which he wanted to do by the way. But why go back to the UK and then give HMRC 2 million? It just does not make sense. Now in Andalusia, Spain, you know, inheritance tax is 1% over a million euros. Because in Andalusia, the inheritance tax rate is different. Now don't think just because I'm saying this, oh, let's all move to Spain, I'm going to go to Barcelona or Valencia. Well, actually, those places are going to be very expensive from an inheritance tax perspective compared to Madrid and Andalusia, where I'm living. So please don't just rush to Spain without getting any tax advice. So what does that really mean? Well, I think you have to really question even if there are wars going on, whether your circumstances change, whether you have family that need you, is it better to have a different configuration rather than naturally assuming that returning back to the UK is the best thing? Again, let's recap here. We're talking about a higher cost of living potentially of moving back to the UK. Of course, if you live in Dubai, maybe not. Now, if you've got the income tax perspective as well, being higher in the UK, higher cost of living, you don't really have that much change left from the money you earn. And then you have this whole notion of going back to the UK and your worldwide assets now being triggered again for IHT, which is 40%. That is an expensive gamble to pay. It might be actually cheaper to bring your loved ones over to the country you're in, whether that's the US, Spain, Portugal, wherever it might be. If you think about a business, maybe setting up a business in a different country other than the UK. Buying property. You could buy property in most countries, as long as you know what you're doing, you could make a good return on investment. So before you make any life-changing decisions, you should start to think about well, what is my asset base for me and my family, and where should I move that? Back to the UK or a different country? You may have the issue of saying, well, actually, maybe Dubai is not great for me for right now. Hopefully it will get resolved. But for some people it may be a bit too much of a risk. And I understand that. For lots of people that are happy to take the risk or know that the risk to them isn't that great compared to what the media might be saying, by the way, and I'm very aware of that as well. But for some people with young families, it's not just them that they're thinking about. But is the move back to the UK right? I'm seeing a lot more people move from Dubai where it's got great culture, great sunshine, great place to go, and they're deciding to move to places like Italy, Spain, and Portugal. Why? Because the sunshine is still there compared to the UK. The tax regimes, well, they can be worked upon. So, where will I be going next? Personally, I'm staying right here in Spain. I'm not going back to the UK because it is far too tax heavy for me from an income tax perspective on my earnings and from an inheritance tax perspective when I want to give on my assets to my son Hugo. Where does that leave you? I hope it gives you some thoughts of what you need to consider for the long term for you and boy your family. Get thinking your way, get scribbling down some ideas, and put those actions into play.