Capital gains tax and LISAs when resident in both the UK and Netherlands

SashaC

Hi all,

First off, this is probably quite an involved question, and I'm happy to pay for this advice, if anyone can direct me towards someone with good reputation who'd have experience with this sort of scenario.

I have two questions, but they're both related to my somewhat vague residency status. Some context: I moved to the Netherlands late last year and am a registered resident of Leiden, but have kept residency at my family home in the UK for convenience. I'd been physically in the Netherlands from the beginning of October 2020 until mid-August. I'm now staying at my family home for a while (though still technically resident at my Leiden address). I've been unemployed (mostly intentionally, for self-study) since early 2020, just before Covid, but made some extremely lucky investments. My plan is to try and get a job soon, preferably but not definitely in the Netherlands, and then if need be unregister somehow at my UK address (though if possible I'd prefer not to, since it will remain convenient) - but in the meantime I'm feeling financially overexposed.

So I have two questions:

1) I would like to sell of some of the investments, but I'm concerned about how capital gains tax would work in this situation. Could I end up having to pay it in both countries? (some of the investments are in an ISA, but not all. The most successful are crypto, which are on exchanges still) If so is there a sensible way to avoid this? I believe that in the UK I can sell enough to profit up to £12,000 without getting taxed, but a) I don't know if there's a similar rule for the Netherlands, and b) I don't know whether the profit is calculated from my average cost basis or something else.

2) I would like to put some of the money in a LISA, but without accidentally defrauding the UK government, who presumably (hopefully) don't follow my movements closely enough to know that I'm semi-emigrated. What are the rules here?

Thanks all.

Jeremy535897

You are in the unfortunate situation where the complexity of the matter will mean any fees for sound advice is likely to exceed the tax at stake.

You need to tackle the problem in stages. First, you need to understand the residence rules in the UK and Netherlands. A good place to start regarding the UK is https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability/guidance-note-for-residence-domicile-and-the-remittance-basis-rdr1

That has links to other relevant information. It is very complicated. I know nothing of Netherlands residence rules. Here is a summary:
https://taxsummaries.pwc.com/netherlands/individual/residence

You decide whether you are resident in either the UK, or Netherlands, or both. If both, the UK-Netherlands double tax agreement will decide the matter. See:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/732461/netherlands-dtc-2008-2013.pdf

The next question is how each of the countries taxes investment gains. The usual rule is that countries don't tax non-residents on such gains. Even if they do, the capital gains tax article (Article 13) in the UK Netherlands double tax agreement gives the taxing rights on most gains on investments to the country where you are resident, although you will need to check Netherlands tax rules in case they treat crypto gains as income. That can be the case in the UK. See https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual

For shares see https://www.gov.uk/government/publications/shares-and-capital-gains-tax-hs284-self-assessment-helpsheet/hs284-shares-and-capital-gains-tax-2021

The current annual capital gains tax exemption in the UK is £12,300.

Regarding a LISA, see https://www.thisismoney.co.uk/money/experts/article-1690538/Im-not-a-Brit-can-I-open-an-Isa.html

SashaC

Thanks for the in-depth reply Jeremy!