What Is Split Year Treatment When Leaving or Arriving in the UK?

UK tax residence is normally determined for a complete tax year.

The UK tax year runs from 6 April to 5 April, and the Statutory Residence Test determines whether you are UK resident or non-UK resident for that year.

But what happens if you leave the UK halfway through the year?

Or perhaps you have been living abroad and move permanently to the UK partway through a tax year?

In some circumstances, the tax year can be divided into a UK part and an overseas part.

This is known as split year treatment.

Why Does Split Year Treatment Matter?

Under the normal Statutory Residence Test, you are either UK resident or non-UK resident for the tax year as a whole.

That can sometimes produce a surprising result.

For example, you might leave the UK permanently in June but still be regarded as UK resident for that entire tax year under the Statutory Residence Test.

Similarly, somebody arriving in the UK partway through the year might become UK resident for the tax year as a whole.

Split year treatment recognises that somebody’s circumstances can change significantly during a tax year.

Where the relevant conditions are satisfied, the year is divided into:

a UK part, during which you are taxed as a UK resident

and

an overseas part, during which you are generally taxed as a non-UK resident for most purposes. GOV.UK

Split Year Treatment Is Part of the Statutory Residence Test

An important point is that split year treatment does not replace the Statutory Residence Test.

You first determine your residence position for the tax year.

To qualify for split year treatment, you must actually be UK resident for that tax year under the Statutory Residence Test. If you are already non-UK resident for the whole year, there is no need to split it. GOV.UK

If you are UK resident for the year and your circumstances involve leaving or arriving in the UK, you then consider whether one of the split year cases applies.

Is Split Year Treatment Optional?

No.

This is sometimes misunderstood.

Split year treatment is not simply something you elect for because it produces a better tax result.

If your circumstances meet all the conditions for one of the statutory split year cases, split year treatment applies.

HMRC states that an individual who is UK resident for the year must consider whether the split year rules apply. GOV.UK

What Happens If You Leave the UK?

There are three split year cases relating broadly to people leaving the UK.

These cover situations including:

• Starting full-time work overseas
• Accompanying a partner who starts full-time work overseas
• Ceasing to have a home in the UK

These are known as Cases 1 to 3. GOV.UK

Each case has its own detailed conditions.

Simply buying a plane ticket and moving overseas does not automatically mean that the tax year will be split from the date you leave.

You need to satisfy the relevant statutory test.

Leaving the UK to Work Full-Time Overseas

One of the most common situations is Case 1 – starting full-time work overseas.

This can apply where somebody leaves the UK to work full-time abroad.

There are detailed requirements concerning working hours, UK workdays, days spent in the UK and residence in the following tax year.

So the date on which somebody physically leaves the UK is not, by itself, enough to establish split year treatment.

The full circumstances need to be reviewed.

What Happens If You Come to the UK?

There are five split year cases relating broadly to people arriving in the UK.

These are Cases 4 to 8 and cover circumstances such as:

• Starting to have your only home in the UK
• Starting full-time work in the UK
• Ceasing full-time work overseas
• Accompanying a partner in certain circumstances
• Starting to have a home in the UK

Again, each case has specific conditions. GOV.UK

What Does the Split Actually Do?

Suppose you leave the UK during a tax year and qualify for split year treatment.

The tax year is divided into:

The UK part – before the relevant split date

and

The overseas part – after the split date.

During the UK part, you are taxed as a UK resident.

During the overseas part, you are generally treated as non-UK resident for most UK tax purposes. GOV.UK

For somebody arriving in the UK, the position is broadly reversed: the overseas part comes first and the UK part follows the relevant arrival date. GOV.UK

Does That Mean Overseas Income Is Automatically Tax Free?

Not quite.

This is where the rules need to be explained carefully.

Split year treatment can mean that foreign income arising during the overseas part is not brought into UK tax in the same way as it would be during the UK-resident part.

But it does not mean that everything received during the overseas part automatically escapes UK tax.

For example, UK-source income can still be taxable in the UK while you are non-resident.

The treatment can also depend on the type of income or gain involved.

So the correct question is not simply:

“Was I living abroad when I received the money?”

You need to establish:

1. whether split year treatment applies;
2. the precise split date; and
3. how the particular income or gain is treated during the overseas part.

The Split Date Is Important

The split date does not necessarily correspond simply to the day you board a flight or move into a UK property.

It depends on which split year case applies.

For example, where somebody arriving in the UK qualifies under Case 8 because they start to have a UK home, the UK part begins when they start to have that UK home. GOV.UK

Different cases can produce different dates.

And in some circumstances more than one split year case could potentially apply.

HMRC therefore has priority rules that determine which case takes precedence and which split date should be used. GOV.UK

Your Position in Other Tax Years Can Matter

Another reason these rules can become complicated is that your residence position in the previous or following tax year can be relevant.

For example, certain departure cases require you to have been UK resident in the previous year and non-UK resident in the following year.

Some arrival cases similarly look at whether you were non-UK resident before arriving and your residence position afterwards. GOV.UK

So you cannot always determine the answer by looking only at the year in which you move.

Keep Accurate Records of Your UK Days

If you leave or arrive in the UK, keep proper records.

That should include things such as:

• Dates of arrival and departure
• Days spent in the UK
• UK working days
• Overseas working days
• Employment contracts
• Details of homes available to you
• When overseas or UK employment commenced
• Travel records

The Statutory Residence Test and split year rules are heavily dependent on facts and dates.

Trying to reconstruct those records two or three years later can be extremely difficult.

Don’t Assume Moving Country Automatically Gives You Split Year Treatment

This is probably the most important practical point.

You may:

• leave the UK permanently,
• start working abroad,
• move your family overseas,

and still need to satisfy specific statutory conditions before split year treatment applies.

Equally, somebody moving to the UK does not automatically become taxable as a UK resident only from the exact day they arrive.

The Statutory Residence Test needs to be considered first, followed by the relevant split year cases.

The Bottom Line

If you leave or arrive in the UK partway through a tax year, do not automatically assume that your UK tax residence simply changes on the day you move.

Under the Statutory Residence Test, you may technically be UK resident for the tax year as a whole.

However, if you satisfy one of the statutory split year cases, the year can be divided into a UK part and an overseas part.

For the overseas part, you are generally treated as non-UK resident for most purposes; for the UK part, you are treated as UK resident. GOV.UK

There are eight different split year cases, each with its own conditions, and the correct split date depends on which case applies. GOV.UK

So if you are moving into or out of the UK, it is worth establishing your residence position before assuming how your overseas income will be taxed.

This article provides general information only. UK residence and split year treatment depend on individual facts, day counts, working patterns, homes and residence in surrounding tax years, so specific advice should be obtained where necessary.