What is split year treatment?
If you are planning on moving to the UK, the tax year in which you acquire UK residency can usually be split into two distinct parts.
This is known as split year treatment:
- Period 1: Non-UK residency
- Period 2: UK residency
What are the benefits of split year treatment?
An advantage of split year treatment is it clearly separates out income and investment gains that accrued before arrival to the UK. This generally means that they will not be subject to UK tax.
In certain circumstances it is not straightforward to ascertain whether you would qualify for split year treatment. If you do not, it could potentially bring overseas income and gains into the scope of UK tax and result in a large tax bill.
What shall I do now?
Therefore, to bring a level of certainty, if you are considering moving to the UK sometime between 6 April 2021 and 5 April 2022, you would benefit by taking advice before April 5 2021. With less than three months remaining before the new tax year, now is the time to act.
To get started, check the free Understanding UK Residency and the Statutory Residency Test guide by our trusted financial advisor Charlton House.
This article is for information only and does not constitute financial advice. Please do not act based on anything you might read in this article. All contents are based on our understanding of legislation which is subject to change. The information is correct as of 29 January 2021.