Moving from the UK to play club rugby abroad is an exciting prospect. You will be playing top-class rugby as well as sampling a different culture and potentially enjoying a better quality of life.
However, there are challenges.
While language barriers can be overcome with study and perhaps some help from Google Translate, an entirely new tax system can be difficult to navigate. These difficulties can be accentuated if you still have taxable earnings and assets in the UK.
Read on to discover some of the issues you may face, and why tax planning is so important.
1. You will need to establish your residency status
You will usually be taxed on your income based on the country in which you are resident.
From a UK perspective, this is governed by the Statutory Residence Test, which considers factors such as the amount of time you spend in the UK, ties you have here, and your previous pattern of residency.
For example, if you spend more than 183 days in the UK, you will be considered a UK resident and your income will be taxed accordingly.
However, other countries have their own criteria. For example, in France, your residency is based on your main home, where you work, and other assets you have there.
2. It is important to plan your exit from the UK carefully
If you are leaving the UK to become a resident in a different country, you need to plan your departure carefully from a taxation perspective.
Doing this will ensure that you comply with the regulations of both the UK and the destination country, as well as helping you make the most of any opportunities that arise from your relocation.
For example, you may qualify for “split-year” treatment in the year you leave the UK, meaning you are taxed as a UK resident for part of the year, and as a non-resident for the other part. This can help simplify your exit tax position.
The taxation implications of certain UK assets will often depend on how long you remain a non-UK resident. You may be subject to certain tax charges if you return to the UK within a specified period. Because of this, it is worth seeking advice about how best to manage your assets, especially if you do not know how long you will live abroad.
3. You should be aware of double-taxation agreements in force
Certain countries will consider all your worldwide income from tax purposes. Meanwhile, your UK tax obligations may persist if you maintain ties or receive income from the UK. This means you may pay tax in two countries.
This risk of being taxed twice on the same income could be mitigated by a double taxation agreement between the UK and the country in which you are resident.
Such an agreement sets out which country will tax different sources of income, such as your regular salary, rent from any property you own, and capital gains from your investments. It will also outline how to reclaim overpaid tax.
However, understanding and applying these rules can be complex and errors may lead to you paying more tax than necessary.
4. Adjusting to a different tax system
Having grown accustomed to the UK tax system, it can be challenging to come to terms with a completely different system.
While the UK uses a progressive Income Tax system with personal allowances, other countries may tax your income in a different way. For example, France has a household-based Income Tax system rather than taxing individuals separately.
The same applies to social security contributions, which could affect your ability to access healthcare and other benefits when you are resident in another country.
There may also be other taxes that you are not used to in the UK, or taxes may be similar but have a different name.
These differences highlight the importance of seeking expert tax advice, as there are pitfalls to avoid or opportunities to exploit.
5. There may be tax implications for your existing savings and investments
As well as any UK income, you also need to be aware of the tax implications around other assets you may have accrued, such as investments and a pension fund.
For example, when you move to France, your ISA remains open, but you cannot make new contributions.
While you will continue to benefit from UK tax-free status within the UK wrapper, any gains and interest are likely to be subject to French tax once you become resident there.
It is advisable to consult a financial or tax adviser to determine if your ISA and other investments and savings should be held in a more tax-efficient way in your new country.
Expert advice can help you navigate your way through tax challenges
One of the big attractions of playing abroad is the potential to earn a higher salary. However, you need to take steps to ensure that this advantage is not lost through poor financial planning.
That is why we suggest you seek expert advice, both before you relocate and while you are living and playing overseas.
We can help you review all your existing assets to see how they will be affected by your move to play abroad, so that you can make a smooth transition and avoid any costly, potentially irreversible mistakes.
We can also give you guidance on how you manage your new income and help you utilise any relevant double taxation agreement to minimise the risk of paying tax twice on the same earnings.
If you would like to talk to us about your own plans, please get in touch.
Email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change. This article does not constitute overseas tax advice.
The Financial Conduct Authority does not regulate tax planning.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.