If you are returning to UK after being resident overseas, or expect to do so in the future, early and extensive planning will help make your move as seamless and tax efficient as possible. In particular, the UK domicile reform has opened up opportunities for inheritance tax planning for returning British expatriates.
We usually encourage relocating to Southern Europe, as we know first-hand the benefits of living there. But we understand there are many reasons why you may be considering a return to the UK. It could be part of your retirement plan, or you could find that circumstances, such as family requirements, ill health or the death of one spouse, unexpectedly draw you back home.
Whatever the reasons, once you realise you need to move back, it is important to give yourself enough time to review and reorganise your financial affairs. This is not only for your peace of mind, but to ensure the financial implications of your return work in your favour. Even if you have no plans to return at present, it’s worth bearing the possibility in mind when setting up financial arrangements, to try and keep them as flexible as possible.
Estate planning and UK inheritance tax (IHT)
Make sure you review your estate planning before you relocate, taking inheritance taxes, succession law, probate, your will and any trust arrangements into account to ensure your legacy remains track to go to your chosen heirs.
Under the UK domicile rules, returning UK nationals would become subject to UK inheritance tax on worldwide assets even if you had acquired a new domicile of choice abroad.
From 6 April this year, the domicile regime is replaced by one based on long-term residence. In summary, if you have lived abroad for 10 years or more when you return to the UK, your UK inheritance tax liability could be limited to UK-based assets for up to 10 years – assets owned outside the UK would be exempt for this period. With extensive strategic planning, the UK can now be an IHT-free zone for 10 years.
Returning to UK: Timing your move
First of all, before you buy your UK home and move back, allow enough time to review and adjust all your wealth management and set up new arrangements if necessary. The more time you have for advance planning, the better.
Secondly, it is better to plan your return date around your tax planning rather than the other way around.
Your finances should be designed to suit your personal circumstances and country of tax residence. Assets and structures taxed beneficially for you now as an expatriate may not work as favourably for you in the UK. Conversely, you could find more tax-efficient opportunities in the UK once you regain British residency.
Your residence status will affect the tax implications for any income, such as your pension, as well as selling or moving any of your financial interests. Remember: as soon as you are seen to be a UK resident, HM Revenue and Customs (HMRC) acquire taxing rights over your income and gains.
While generally you cannot decide where you are resident for tax purposes, you could plan to transition at a time that will minimise your tax liabilities in both countries.
When will you be seen as a UK resident?
You could potentially be considered a UK resident before you even leave Europe.
Even if you have been overseas for many years, you may still have links to the UK that can trigger residency and bring you into UK liability much sooner than you think.
For example, if you still own a UK property or buy one before moving back, you could become resident before you arrive in Britain. Once you cease to use your foreign property as your main home, you could be seen as a UK resident straight away, even if you keep your property in your country of residence.
If you are likely to spend time in the UK preparing for your permanent return, be careful not to accidentally bring forward the date of your UK tax residence status. Residency can be triggered after only 16 days if you have been a non-UK resident for under three years. Otherwise, you generally become resident after 46 days of a tax year, or 30 days if staying in a UK property that is considered your main home.
Buying and selling assets
Before buying a new UK home, understand how the local and UK tax rules might restrict or eliminate the availability of main home reliefs. When it comes to capital gains tax, it may be much more tax efficient to sell or buy when resident of one country over the other. You might find it beneficial to either bring forward or delay selling or transferring any assets according to where you are a tax resident.
Don’t forget that moving from an EU country to a non-EU one may mean you no longer qualify for preferential tax treatment. For example, Portugal and Spain exempt the main home from capital gains tax if you use the proceeds to buy your new main home. The new home does not need to be in Portugal/Spain, but it does need to be in the EU or EEA (European Economic Area).
It is also worth noting that the UK increased stamp duty on second homes and investment properties from 3% to 5% from 31 October 2025. If you buy the UK property you intend to live in once you return while still owning a main home abroad, the UK purchase will be classed as second home.
Pensions
If you transferred your UK pension into a Qualifying Recognised Overseas Pension Scheme (QROPS), while living abroad, take specialist advice on the best way forward. And if you made pension decisions based on tax-compliant opportunities abroad, establish what you should do once you are liable to UK taxation.
Returning to UK: Early planning
Ideally, take time to review your tax and financial arrangements before you even set your departure date. You will benefit from speaking to an adviser with in-depth knowledge of both tax regimes to ensure you get the best out of your finances for your new life ahead.
Blevins Franks specialises in cross-border tax and wealth management. Our integrated advice covers taxation, estate planning, pensions and investments and takes both countries’ tax regimes into account. With offices and highly qualified advisers across the UK, Spain, France, Portugal, Cyprus and Malta, we are perfectly positioned to help you plan your return to the UK. We’ll advise you on how to make your move as tax efficient as possible, guiding you through every step of the process for as long as you and/or your heirs need us.
Contact Blevins Franks today.
