Woolf, a 30-year-old software engineer, recently became his first father and is already considering moving his family out of the UK. “Now we have to choose between London and our second child,” he says, denounces triple-wammy with high rents, high childcare costs and high taxes.
European capitals such as Madrid, Paris and Berlin are not that expensive, and have salaries in the same high tech sector as London. He says that friends who own many non-properties in the capital are thinking or already doing the same thing.
“To rent a decent two-bed flat in London, you are looking at £3,000 a month plus £2,000 per child, assuming you are not eligible for the grant.
“I feel like the UK government wants this issue to go away. Well, they may just get a wish.”
FT Money has received dozens of emails from readers and is seriously considering leaving the UK in search of lower taxes and better opportunities. Our recent callouts have attracted a lot of responses from young experts. They also gathered entrepreneurs who are trying to minimize capital gains tax on corporate sales by moving overseas. Additionally, recent changes to the UK’s long-term residence rules create an opportunity for UK citizens to leave the country and avoid inheritance tax on non-uk assets.
Here we summarize how readers of all ages and their tax advisors stifle pressure on the pros and cons of leaving the country.
Rob, a 31-year-old London banker, says he and his friends are discussing the idea of working abroad frequently. “We are all good people who are trying to do normal things. It’s getting more and more difficult in the UK, just as we can afford a house big enough to raise a family,” he says.
A recent UK Council survey found that nearly three-quarters of the UK ages 18-30 consider living and working in other countries in the short or long term. Almost two-thirds said their standard of living is worse than their parents’ generation, citing more than half the lower wages as the biggest challenge faced by younger workers.
Rob ideally wants to work for a European bank, but like many British citizens, he fears that his language skills are not sufficient. Other readers who are attracted to the idea say they hit a wall studying visas and work permits (see box below), or found that popular destinations such as Australia have equally high housing costs. Many people are drawn to the idea of getting tax-free salaries in the Middle East for several years and returning to the UK with ready-made home deposits.
However, FT readers working in the Middle East highlight and caution the countless ways to spend money on the playgrounds of the rich. “People come to Dubai because they watched TV shows, but they don’t understand the maths of the Expat lifestyle,” says the person. “There’s no employment security here,” another warns. “If you lose your job for any reason, your visa will be cancelled and you will have to leave immediately.”
Robert Salter, director of tax advisor Brick Rosenberg, says he is likely to appoint a low-tax jurisdiction in the Middle East and Singapore, including tax laws and low-tax jurisdictions, such as the Middle East and Singapore. “People near the peak of their career revenues are finding that the negatives that may occur at such locations, such as high housing costs, private health insurance costs, and potentially international school costs, are still covered by low income tax fees,” he says.
Others see it as a way to set themselves up for a more comfortable retirement. A London reader in his mid-50s, John played a senior role in Abu Dhabi on a three-year contract after being approached by a headhunter. “This gives you a financial choice for retirement, which would take twice as long to achieve if you were in the UK,” he says.
He is planning many trips around Asia, despite renting a spacious apartment with access to the pool and gym, but can afford to save a significant portion of his tax-free salary.
Providing worker plans for non-tax residents appropriately, experts say there should be no taxes paid on the money that will ultimately be repaid to the UK. However, readers who have already moved abroad warn about the need to manage exchange rate risks.
Young professionals working abroad must notify student loan companies. Repayments will be automatically deducted from paid packets, but liability remains and it may be costly to accumulate late payments.
The high capital gains tax rate was brought in in the budget last October. This has given British entrepreneurs and business owners itchy feet.
British citizens selling £100 million shares in their businesses could face a £24 million capital gains tax (CGT) bill. Louise Jenkins, a tax partner at US consulting firm Alvarez & Marsal, says that the UK’s temporary non-residential rules allow you to leave the UK, sell it and then be a resident for more than five years, which means you can reduce this to zero. However, those who get fouled over complex details are at risk of being retroactively taxed.
Jenkins advises that he tends to be attracted to Dubai, combining tax benefits with a flashy lifestyle. However, gaining tax settlements in Italy is becoming increasingly popular with older clients who realize considerable wealth. If an Italian non-dome pays a “fixed tax” of 200,000 euros per year on foreign industrial income, there will be no CGT or inheritance tax to worry about for 15 years.
In Jenkins’ experience, entrepreneurial clients who earn huge sums rarely leave. “They still want to work, invest their money and set up new businesses,” Jenkins says. “If they are based overseas, countries outside the UK are more likely to enjoy the economic benefits of their talent.”
Other business-owned readers argue that the decision to move is not just due to the UK tax rates, but also to the business dynamism of other countries. They say that foreign governments show a greater desire to attract start-ups and have a more consistent tax policy.
Readers also emphasize the need to receive tax advice before selling your business, both in the UK and in the planned relocation country.
Retirement abroad is always popular, but tax advisors say the looming changes in the inheritance tax treatment of pensions have fueled a wave of renewed interest from clients in the ’60s and ’70s.
Salter adds that the new long-term residential rules introduced in April have increased their effectiveness by creating potential IHT savings for British citizens leaving the UK.
“In fact, the dominant UK individuals who remain non-residents for over a decade now have been able to avoid IHT’s liability for non-uk assets in ways that are essentially impossible in previous systems,” says Salter.
Advisors say they are exploring the possibility that many older clients will leave abroad to take advantage of the new regulations, but few have yet to decide to leave. For those who have decided to stay in the UK, routes to ease IHT are available, such as using trusts or establishing family investment companies. However, readers are worried that the rules could change again. “Who knows what this government or the next government can do in the future?”
Tax advisors say European destinations such as Italy and Spain are the most popular with retirees, but some readers say that Cyprus and Malta have certain IHT benefits.
Haysmac partner Katharine Arthur says he advises wealthy clients on transfers, but the double recording treaty says that income taken from pensions is usually taxed only in the country of residence. “There may also be IHT or gift taxes paid in the country they live in, but these are generally less than here,” she says.
However, anyone considering this route should be confident that they can meet the rules for the entire stretch for 10 years. The number of nights an individual can spend in the UK without affecting his tax status depends on the legal residence test. “This could be 90 days, but depending on your individual situation, it could be just 46 days,” says Arthur.
Jonathan Black: Four career questions when thinking about overseas moves
1) What level of international mobility could be different employers in your sector? Can I apply directly to the International Office or can I move inside?
2) What are the requirements and costs for a visa? If you are eligible, sponsoring an employer is the easiest route, but relocation packages vary. You need to be aware of these broad living expenses.
3) How about your language skills? As competition for overseas roles increases, high flow is required.
4) Assuming that I will eventually return to the UK, will the experience I gain overseas be related to employers in the UK market? It is beneficial to maintain your network and connectivity to the UK while you are apart.
Jonathan Black is the Director of Career Services at Oxford University.
She encourages clients to carefully assess their healthcare impact on themselves and other families. It is a common concern that there is enough range to return to the UK to care for older parents, but other readers say that the cost of care is another important factor to consider.
Martin, a retired engineer in the 60s, is set to leave England later this month to settle forever in South Africa. “My wife has Alzheimer’s disease and the quality of care is a third of the ridiculous price in the UK,” he says. “The cost of living there is 40% cheaper. My overseas pension is tax-free and I pay 20% inheritance tax when I die.”
Martin emphasizes that he is not a “wealthy non-dom.”
“I’m just a big deal with English that I worked so hard,” he says.
All advisors emphasize that thorough recordkeeping is a must. Pete Fairchild, national head of Crowe’s private clients, a tax advisor, says it is important for individuals who have moved to maintain a “rich” record of time spent in the UK in order to avoid unintentionally reopening their resident status in the UK.
“The administrative burden may not be well received, especially as many tax commentators expect future HMRC inquiries in this area,” Fairchild says.
On the other hand, many older readers say that the biggest barrier to leaving the UK is emotional rather than practical. Some say they were detained because their spouses were reluctant to leave their friends and family, especially their grandchildren.
One 62-year-old reader, considering moving to Italy, Portugal and Dubai after selling his business, says that if he had only pleased, he would have already moved across the country.
But he adds: “Finding a solution that will keep my wife happy is the challenge.”
The couple has three children in their 20s and he has encouraged them to look out of the UK for their future, he says.
“They’ll have to make up their minds about what they’re doing, but maybe they’ll want to follow us.”
Thank you to all FT leaders who shared their experiences. I’ve changed a few names to protect anonymity.
