Practical Advice on UK Taxation for Immigrants

Understanding UK taxation can be complex, especially for immigrants navigating the system. At Foundry Accounting, we frequently address tax challenges faced by our clients. Below, we outline three real-world examples to illustrate common issues and solutions, offering practical guidance for managing UK tax obligations.

Example 1: Avoiding UK Tax Residency

Scenario: A Russian family plans to relocate to the UK on an Innovator Founder visa, with the wife as the main applicant. The visa was granted in August 2025, and the family, including the husband and two children attending a UK private school, will arrive in September. The husband wishes to avoid UK tax residency for the current tax year.

Solution:The UK tax year runs from 6 April to 5 April. As the family arrives after the tax year begins, they can split their tax year for residency purposes. UK tax residency is determined by the Statutory Residence Test (SRT), which evaluates days spent in the UK and ties such as family, work, or accommodation.

·        Wife’s Status: As the main visa applicant, the wife will likely become a UK tax resident if she spends 183 or more days in the UK during the tax year, triggering the automatic residency test.

·        Husband’s Status: The husband has UK ties, including a UK-resident spouse and available accommodation for 91+ days. To avoid tax residency, he must limit his UK presence to 120 days or fewer (based on SRT rules for three ties). If he works in the UK, this adds another tie, reducing the threshold to 90 days.

In Practice:We devised a plan to track the husband’s UK days, ensuring he stays below the 120-day limit. The Innovator Founder visa, introduced post-2018, does not impose a 180-day absence rule for dependants in the initial term, offering flexibility for tax planning. Upon visa renewal (typically after three years), stricter rules may apply, potentially limiting future tax residency options. We advised regular monitoring to maintain compliance with both tax and immigration rules.

Example 2: Managing Tax Liabilities Across Countries

Scenario: A Russian citizen moves to the UK in August on a work visa and begins employment with a UK company, receiving a salary with the UK personal allowance (£12,570 for 2025/26, tax-free). She also earns rental income from properties in Russia.

Problem: Determine her tax obligations in the UK and Russia and assess whether the remittance basis is beneficial.

Solution:As a new UK resident, she can split her tax year, becoming a UK tax resident from her arrival date. The UK taxes worldwide income for residents, but she may choose the remittance basis to limit UK tax to income earned or brought into the UK.

• Remittance Basis: If elected, only her UK salary and any Russian income remitted to the UK are taxable. Non-remitted Russian income avoids UK tax but requires careful tracking to avoid accidental remittances (e.g., transferring rental income to a UK bank). Her UK salary benefits from the personal allowance, but Russian taxes paid (13% as a Russian resident) are not credited against UK tax unless remitted.

• Arising Basis: Without the remittance basis, she declares all worldwide income (UK salary + Russian rentals) in the UK, with a tax credit for Russian taxes paid (13% for residents, 30% for non-residents) under the UK-Russia Double Taxation Agreement. This avoids double taxation but may increase her UK tax liability if her income is high.

In Practice:For the year of her move, she was a Russian tax resident (taxed at 13%). Calculations showed the remittance basis was beneficial due to her high income, minimising UK tax on Russian rentals. In the next tax year, as a Russian non-resident (taxed at 30%), the arising basis became more advantageous. She declared all income in the UK, claiming a tax credit for Russian taxes paid, reducing her UK liability to the difference between UK and Russian rates.

Example 3: Transferring Property to Family

Scenario: A Russian citizen owns a UK flat, purchased in 2014 for £3 million, through a British Virgin Islands (BVI) company. The flat, used as a personal residence for one year, is not rented out. The client pays Annual Tax on Enveloped Dwellings (ATED) (£23,550 in 2017). He wishes to transfer the flat to his son and granddaughter.

Solution:The client opted for a straightforward transfer, dissolving the BVI company and distributing the flat to his son and granddaughter. As the granddaughter is under 18, the son acts as trustee for her 50% share via a bare trust.

• Capital Gains Tax (CGT): The flat’s value increased by £40,000. After deducting purchase and transfer costs, the taxable gain is minimal, resulting in approximately £5,000 in CGT (based on non-resident CGT rules for UK property).

• Stamp Duty Land Tax (SDLT): As the transfer occurs during company liquidation with no third-party debts, SDLT is not applicable.

• Inheritance Tax (IHT): Transferring the flat is a Potentially Exempt Transfer (PET). If the client survives seven years post-transfer, no IHT applies. If he passes within seven years, IHT (40% on amounts above £325,000) may apply, with taper relief from year three.

In Practice:We advised the client of the IHT risk and recommended life insurance to cover potential IHT liability, with premiums adjusted annually to reflect tapering relief. The transfer was executed, and the client was informed of the need to monitor his health and estate planning over the seven-year period.

Conclusion

These examples highlight common tax challenges for immigrants in the UK. At Foundry Accounting, our specialists tailor solutions to your unique circumstances, considering immigration status, tax rules, and personal goals. Contact us at foundryaccounting.co.uk for expert guidance on navigating UK taxation.