The ultimate guide to HNW relocation

High net worth (HNW) individuals that are relocating will have various issues that they will need to consider in relation to the move, especially in relation to their finances, such as limiting their tax liability and ensuring they qualify under immigration laws. Those relocating to the UK need to make sure they have taken expert advice in relation to their tax and financial planning arrangements, including estate and pension planning.  

Why the UK? 

There are many reasons why HNW individuals wish to relocate to the UK: 

• The country has a respected legal system and is formed around a stable government that is elected democratically  

• London is a leading global economy that is highly diverse and cosmopolitan and houses the headquarters of many multinational corporations 

• The UK’s education system is recognised as being one of the best in the world 

• Taxation for those not domiciled in the UK can be very attractive for HNW individuals and families 

How is tax liability determined in the UK? 

An individual will need to pay income tax, capital gains tax and inheritance tax in the UK depending on whether they are resident or domiciled in the UK. 

Domicile 

Domicile is the permanent home of a person. It is not necessarily where they are resident or based on their nationality. Everyone has a domicile and it is either determined: 

• At birth- this will be the father’s domicile unless the parents are not married then it is the mother’s 

• By dependency- a person’s domicile is changed where they are a dependent (unmarried under the age of 16 or mentally disordered) and the person they are dependent on changes their domicile  

• Choice- if a person starts residing in a new country and intends to remain their permanently or indefinitely then they will lose their other domicile and gain this as their domicile of choice 

It should be highlighted that the UK has introduced statutory rules that treat an individual as having UK domicile in relation to issues such as taxation (without changing their actual domicile). These were updated in 2017 and cover inheritance, income and capital gains tax. There are different rules depending on whether the person: 

• Was formerly domiciled in the UK- here deemed domicile can occur after just a one-year grace period of being resident in the UK 

• Is a non-UK domiciled individual- in which case they will be deemed for tax purposes as UK domiciled after 15 of the last twenty tax years ‘residence in the UK  

However, the use of planning can allow individuals to look at how they can mitigate the increased taxation as a result of these rules. 

Residency for tax purposes 

Since 2013, a person’s residence for tax purposes is determined using the statutory residence test (STR).   

An individual is regarded as being UK resident for a tax year where either: 

• The automatic residence test is met. This looks at residence in the UK over a set number of tax years as well as the time spent in the country. 

• The sufficient ties test is met. This looks at ties to the UK such as family, accommodation, work, time in the country and country ties. 

It is possible to use the split year treatment where the individual spends some time working and living in the UK but not the whole tax year. This means that the person will be taxed in the UK on the time spent as a UK resident only. 

Visa options 

Wealth individuals that are determining where they would like to relocate to will frequently consider the UK as the place to relocate to. If they keep their domicile overseas, then the UK offers very generous tax regimes. 

In order to enter the UK, it may be necessary to obtain a visa. Those that wish to reside permanently in the UK will need to ensure that they meet the residency requirements before they arrive. There are various visa options available: 

Investor visa 

This is applicable for those that want to invest at least £2 million in the UK and that meet the following eligibility requirements: 

• Over 18 years 

• Can evidence that the money belongs to themselves or their spouse/partner 

• The money is held in regulated financial institutions  

• The money is free to be spent in the UK 

This visa lasts for a maximum of three years and four months and can be extended up to two years. Under this visa, it is possible to work and study. It is possible to apply to settle in the UK after: 

• Two years with an investment of £10 million 

• Three years with an investment of £5 million 

• Five years with an investment of £2 million 

It is not permissible to work under this visa as a professional sportsperson or coach, get private funds or work as a doctor or dentist (unless certain conditions apply). 

It is possible to switch to this visa if you already have a Tier 1 (General) or (Entrepreneur) visa, any Tier 2 visa or a student visa including tier 4. This visa allows someone to stay in the UK for three years from when the visa is switched. 

Innovator visa 

Another possibility is an innovator visa, if the following requirements are met: 

• The applicant wishes to set up and run an innovative business in the UK that us different from anything else on the market 
• The business has been endorsed by an approved body 
• The applicant is 18 years old and meets the English language requirement 
• The applicant must prove that they have enough personal savings to support themselves in the UK 

It is necessary to show at least £50,000 in investment funds and the source of the funding has to be evidenced. A team can apply but each applicant for the investor visa has to have the relevant funding. 

Family visa 

It is possible to apply for a family visa in order to live with certain family members: 

• Spouse, civil partner, fiancé or partner 
• Child 
• Parent 
• Family member that you are providing long-term care for 

It is also possible to switch to this visa if you were staying in the UK under a different visa. There are certain requirements that may have to be met such as knowledge of English. 

Work visa 

It may be possible to apply for a work visa (Tier 2 General Visa), which is a skilled worker visa if the following requirements are met: 

• Offer of employment from an approved sponsor 
• Skill level 
• Salary 
• Proficiency in English 
• The person must work in an area that is on the “shortage occupation list” and remain in the job to keep the visa. 

Gaining British citizenship 

It is possible to apply for British citizenship or naturalisation in various situations. Those born in the UK are not necessarily British citizens and this will depend on birth date and the circumstances of the parents. 

There are various routes to acquire British citizenship including those that are married or the child of a British citizen. 

Tax implications of relocating to the UK 

There are various tax benefits for HNW individuals that have non-domicile status in the UK 

Remittance basis 

Those that are UK resident but are not domiciled in the UK (this includes those that are deemed domiciled) can claim a remittance for taxation paid on their foreign income and capital gains that are not brought into the UK. 

The charges for the remittance basis are as follows: 

• First seven years- free of charge 
• Once resident for seven of previous nine years- £30,000 charge 
• Those resident for 12 of the previous 14 years- £60,000 charge 
• Over 15 years the person is deemed domiciled in the UK and this remittance basis cannot be used 

A claim under this basis does not need to be made every year. 

Inheritance tax 

Inheritance tax is generally limited to assets situated in the UK, other than some non-UK assets that are connected with a UK residential property.  

Inheritance tax is payable at 40% once the tax-free band is exceeded, but there are certain reliefs and exemptions, for example in relation to spouses.  

Other tax benefits 

Certain UK resident employees can claim overseas workday relief. Those that are not resident nor domiciled in the UK are only liable to tax on their UK source income and also will only have to pay capital gains tax on a disposal of UK residential property.