From April 2026, the government is removing the ability of a non-resident to essentially claim a deeming tax credit on their UK dividend income, which could increase their tax.
“There seemed to be a bit of confusion around this with some suggesting that the government was changing how expats were taxed,” says Chris Ball (pictured), CEO of Hoxton Wealth.
“They aren't really, but there is a method called disregarded income, which basically allows non-residents to look at their UK tax in two ways. You can either tax everything and get your personal allowance, or in exchange for losing your personal allowance, you can cut out certain things, such as dividend income.
"That's not changing, but with the removal of the deeming tax credit for a UK dividend, it will likely increase tax in the UK for those with a UK property income and UK dividend income and who therefore never wanted that disregarded income method.
"Ultimately, though, if people don’t fall foul of temporary non-resident rules, which might bring Capital Gains Tax back into play for them, they may to want to look at getting out of UK-based companies," he explained.
Changes were also made impacting the temporary non-resident rules.
Ball explained: “These are the rules that would catch an individual who become an expat, goes back and becomes UK resident again within five years. It brings certain things back into play."
“One thing that is not new is if somebody has a company in the UK or a company abroad, it brings back into charge dividends that were from something called pre-departure profits. Essentially, it was stopping individuals with loads of money in their UK company leaving the UK, becoming non-resident, getting a big dividend and it being tax free.
"That's what this was stopping. But post-departure profits were never caught, so it did allow somebody to go away, become non-resident, their company trades, builds up profits real time and pays them out as dividends.
"This being brought back in again from April 2026, which means expats need to become much more aware of the temporary non-resident rules and the impact that that's going to have, because post-departure trade profits are going to come into charge.
"Or they might need to consider things like bonuses payments and salary payments instead of relying on dividends but, for this, they're going to have to be mindful of where they are living and if it is a taxing jurisdiction.”
He also highlighted that the mansion tax will hit property owners with properties worth £2m or more. They will face a new “high value council tax surcharge” from April 2028., with properties worth £2m to 2.5m incurring a surcharge of £2,500 and the charge rising to £7,500 for those worth £5m or more.
Property income tax will also rise by two percentage points from April 2027, to 22pc, 42pc and 47pc for the basic higher and additional rates.
“Expats need to remember that this is a tax on owners not occupiers so non-UK residents letting out their £2 million plus home need to factor in the additional tax accordingly,” adds Ball.
