Emigrating mid tax year, need some info

mrposhman

I will be emigrating to Australia in July next year and I've no idea what the tax implications of this are.

I currently earn £36715 per year and should gain a bonus next year in June which will mean that I will be charged as a higher rate tax payer for a substantial part of this.

The tax year in Australia runs from 1st July - 30th June.

If I work from April - July will I be able to claim the additional tax back as at that point in time I will have paid my tax correctly or is this my overall tax exposure for next year in the UK?

To throw an extra spanner in the works, from this year I need to self assess my tax as I bought a house in Florida in April and will have to declare the income.

Can anyone let me know exactly what my tax exposure will be for next year?

Thanks in advance

Cook_County

You'll file a US return annually.

You'll file a UK return for the year of departure.

You'll file an Aussie return for 2009/10 as well.

mrposhman

OK seems like its going to be busy for me next year.

So, for next year, if i pay tax on my income and my bonus etc in the first 3 months of next year (going into the higher rate massively) can I claim any of this back? Could I self assess that year and use aussie employment records to prove that I didn't earn as much as I have been taxed on and therefore get a rebate for the first 3 months of the UK tax year??

Cook_County

You would self-assess in the UK.

You dso not have to, but you may choose to claim the non-statutory split-year concession if you qualify.

mrposhman

Thanks, whats the non-statutory split year concession??

Cook_County

The best place to read about HMRC's view is in IR20. It is not statutory so may not be accepted by the Courts but gives a good indication of HMRC's practice:

The booklet is available here.

jimmo

How are you getting on with the IR 20? I tried reading it and it didn’t take very long for my eyes to glaze over. However, it’s your money that is at stake, not mine.
How about this as a simplified version?
If you leave the UK to live permanently in Australia in July 2009 then HMRC will draw a “line” on your date of leaving the UK.
You will be assessable to UK Income Tax for 2009/10 on your total earnings in the UK from April 2009 to July 2009 plus any profits from the American property for the same period.
The way the Tax Tables work does mean that when your bonus is paid in June 2009 you will be charged Higher Rate tax but you should look upon that as a mechanical process and nothing more. When you leave the UK your tax liability for the year 2009/10 will be based on your total world income for 3 or 4 months. You will get back the Higher Rate Tax deducted from your bonus and some more.
I really haven’t got a clue about Australian Tax but rather feel that, in a mirror image of the British system they will accept you as a new resident and only charge you to tax on your income from the day you arrive.
Hopefully, that is relatively straightforward and when you emigrate you will get a clean break from UK Income Tax.
However, if it all goes pear shaped in Australia, and you return to the UK you will face a tax nightmare both here and in Australia.
There used to be a mantra “Fail to plan = plan to fail” and there is a lot of sense in that. However, I rather feel that if you plan to fail you just might “succeed”. in failing.
If you are going concentrate on the positives. If it all goes wrong you will come back with your tail between your legs and tax will be one of your problems, but not the only one. But it’s not going to go wrong is it?

mrposhman

LOL.

Yeah the IR20 isn't the easiest document. I scanned a few of the areas but will read it in more depth when I have a bit more time to look over it. I've got a while to sort it out. I have to sort out this years self assessment firstly (first timer with self assessment:eek: :eek: )

The point with the bonus I'm not sure I understand. If the UK draws a line after the first 3 months then I will be due 1/4 of my personal allowance and 1/4 of each of the tax bands. How do I claim the tax back as currently at that point I will have paid tax correctly and nomally it sorts itself through the cumulative nature of PAYE. Thats what I'm most concerned about.

I'm pretty sure it'll be a clean break as the Aussie tax year begins in July (when i'm leaving) so it should be quite straightforward.

What sort of tax nightmare could I face if I come back?

I'm likely to be there for at least a couple of years.

I've got to start looking at what happens to pensions at some point too but thats another day!!

than4

I'm not sure about the tax laws for the UK, but when I emigrated here it was not until I had left Australia for 90 days that I was no longer considered a resident for tax purposes.
There may be something similar for leaving the UK and also a grace period for entering Australia.
You will have to self-assess every year in Australia, but as you say, since you are arriving at the start of the tax year you have a whole year to sort that out.
If you do arrive in July or August I recommend you pick up a "Tax Pack" from a newsagents (free, but you may have to ask) and familiarise yourself with the Australian self-assesment system. There are lots of things you can claim deductions for, so you will know what receipts you need to keep for your self-assesment in the following year.

jimmo

Basically what I tried to show was the simple, straightforward case where you emigrate for good. Its relatively straightforward and a nice clean break. Continuing on that, if you finish work at the end of June then the PAYE tax deducted by your employer will based on the assumption that your pay to the end of June, including the bonus, is a quarter of your annual income and you will have paid a fair old lump out of your bonus. When you leave for good the Taxman treats that same 3 months income as your total for the year. He gives you the full personal allowance for the year and you should get a fair old repayment.
If you come back too early then you are in great danger of being regarded as dually resident in the UK and Australia for your period of absence. Then you may well be chargeable to tax in both countries on your total world income. Then you will have Double Taxation Relief to deal with as well.
I am afraid that the best I can do is say it’s relatively straightforward if you are going for good but if you are coming back then its really down to concentrated work on the IR20 and good luck..

mrposhman

Thanks for clearing that up jimmo.

How long do you have to be out of the country to be treated as "leaving for good".

I will be likely to be leaving for a minimum of 2 years as I shall be applying for a de facto partners visa which grants 2 years of temporary residency with the view that if you are in the same relationship to be provided permanent residency at the end of the visa period.

It will be great to get my full personal allowance (and I assume a full tax year of 20%!!) as I will get loads of my tax back, a nice lump sum to move out on would be awesome.