Split Year Treatment: How to Break UK Tax Residence Without Getting It Wrong

Split Year Treatment: How to Break UK Tax Residence Without Getting It Wrong

Most people who are planning to leave the UK focus on day counts. How many days can I spend in the UK? When do I need to be gone by? What ties do I have? What they often miss is that the statutory residence test can make you a full year UK tax resident from a single day in the country. Day counts do not always come into it. In Episode 22 of the Tax Compass Podcast, Simon Roue and Laura Sant take on split year treatment: what it is, why it exists, and why getting it wrong can expose you to UK tax on your worldwide income for an entire year. What they cover: Split year treatment exists because the UK tax year runs to its own calendar, out of step with most other countries. When someone arrives in or departs from the UK part way through a tax year, the year can be split so that UK tax residence applies only to the relevant portion. But the starting point is always the full year position. You have to have been UK tax resident before split year treatment becomes relevant at all. On the way out, there are three cases. Case one covers starting full-time work outside the UK. Case two covers being the partner of someone starting full-time work outside the UK. Case three covers ceasing to have a home in the UK, and is the only route available to retirees who are not working. The outbound cases are significantly more technical than the inbound ones, and case one comes with a requirement that is easy to overlook: you must also meet the full-time work overseas test in the following tax year. That requirement exists for a reason. HMRC will not allow someone to split their year on the basis of starting work overseas if they are back in the UK within a few months. For most people going on a genuine overseas assignment this will not be an issue. But for anyone whose circumstances change unexpectedly, for example losing a job abroad, it can create a serious problem. Case three, ceasing to have a home in the UK, carries its own complexity. From the point you cease to have a home, you are limited to a maximum of 15 midnights back in the UK. A home has its everyday meaning under the statutory residence test, so a property that has been emptied of belongings and rented out no longer qualifies as a home even if it has not been sold. But people who plan to spend a few extra days in the UK after moving out need to be careful: those days start counting immediately. On the way in, the rules are more numerous and the matrix of cases more involved. The practical reality is straightforward: if you arrive in the UK, take a job and get a home, you will be tax resident from the point those things happen. The technical complexity on the inbound side is mostly relevant to edge cases, such as someone who arrives late in the tax year and may still fall within the automatic non-residence tests. Simon and Laura also cover the planning opportunities that can arise in the gap between breaking UK tax residence and becoming tax resident somewhere else. A classic example is someone who leaves the UK in October to start work in Spain but does not become Spanish tax resident until the 1st of January. Employment income sourced to where the work is done can create genuine planning opportunities in that window. Pension income is a different matter, and Simon flags this directly: pension income is sourced to the UK and will remain taxable there unless a double tax treaty provides relief. The consistent message throughout is the same one LSR Partners gives to every client considering a move: have the conversation before you make the move. The rules around split year treatment are technical enough that the wrong sequence of events, even by a matter of days, can close off options that would otherwise have been available. lsrpartners.com [https://lsrpartners.com/] Subscribe for more tax guidance for expats and globally mobile individuals. Brought to you by LSR Partners – helping you pay the right tax in the right place at the right time. 📲 Book a call with us to talk about your situation: https://lsrpartners.com [https://lsrpartners.com/] 🎧 Catch up on all past episodes: https://lsrpartners.com/podcast-videos

Employment Income UK Tax: PAYE, Tax Codes, Pensions, Benefits and Why Payroll Often Gets It Wrong

If you are employed and you assume that because your company runs payroll your employment income tax is being handled correctly, this episode is for you. In Episode 21 of the Tax Compass Podcast, Simon and Laura cover the full landscape of employment income and UK tax. This is an area where people most commonly discover either that they have been overpaying tax for years or that they have an unexpected liability they never saw coming. Both situations are avoidable with the right knowledge. Simon opens with the observation that even clients with complicated tax returns often have a comfort blanket of knowing LSR Partners will sort things out. The concern is the clients who think their employment income is simple and therefore does not need checking. It is often those clients who are sitting on the biggest surprises. The episode covers the following areas in detail: How PAYE and tax codes work. HMRC issues a tax code to your employer and your employer applies it mechanically. Payroll has no discretion. If the code is wrong, payroll applies the wrong code regardless. The error sits with HMRC and it falls to you to spot it and correct it. Laura explains how cumulative and emergency codes work differently, and why an emergency code can mean missing out on unused allowances and brackets that you are entitled to. Benefits in kind and the difference between those processed through payroll in real time and those reported via P11D at the year end. P11Ds are being abolished in April 2026 and everything will need to be payrolled, but until then the timing gap between receiving a benefit and having it reflected in your tax code creates a period where you have taxable income that has not been taxed. The episode explains how this works and what to watch for. Pension contributions, covering the distinction between salary sacrifice and relief at source, why the naming of these two schemes is confusing and arguably the wrong way round, and why higher and additional rate taxpayers using relief at source schemes need to claim their additional relief through a tax return rather than assuming the pension provider handles it. The annual allowance and tapering. The current annual allowance is £60,000, tapering down to £10,000 for those with adjusted income above £360,000. Over-contributions create a tax charge that people consistently fail to anticipate, and the episode explains why the first year of exceeding the allowance often catches people with no carry-forward relief available. The upcoming salary sacrifice cap. From a future date, salary sacrifice pension contributions will be capped at £2,000 per year. Simon and Laura are clear that this is a stealth tax rise. Employer National Insurance savings on salary sacrifice contributions above that level will disappear, which will almost certainly lead to employers reducing or removing the matching contributions that currently make salary sacrifice schemes so valuable. The message is straightforward: maximise employer contributions now while the current rules still apply. Equity awards and the £100,000 threshold. For clients whose salary sits just below £100,000, a bonus or equity vesting event can push their total income above the threshold, remove their personal allowance and create a tax liability that neither they nor their employer anticipated. The episode walks through exactly why this happens and why it is more common than people expect. Simple assessment and overpaid tax. HMRC is estimated to have caused around 600,000 people to overpay tax through incorrect PAYE processing. The simple assessment system is designed to catch these errors, but in practice LSR Partners see it failing regularly, including cases where overpayment relief claims are simply being ignored. The episode closes with a reminder that equity is covered in more detail in a separate episode, and with the consistent LSR Partners message: if you have questions about your employment income tax position, get in touch before a problem compounds rather than after. lsrpartners.com [https://lsrpartners.com/] Subscribe for more tax guidance for expats and globally mobile individuals. Brought to you by LSR Partners – helping you pay the right tax in the right place at the right time. 📲 Book a call with us to talk about your situation: https://lsrpartners.com [https://lsrpartners.com/] 🎧 Catch up on all past episodes: https://lsrpartners.com/podcast-videos

The Statutory Residence Test: A Plain English Guide to UK Tax Residency for Leavers and Arrivers

If you are leaving the UK, arriving in the UK, or already living overseas, your UK tax residency status is the single most important factor in determining what you owe HMRC and where. In this episode, Simon and Laura tackle the Statutory Residence Test head on. Not the 125-page HMRC manual version, but a clear, honest, high-level guide to how it works, why it matters, and what you need to be thinking about before you make any international move. The Statutory Residence Test was introduced in April 2013 to replace a system that was far less clear-cut. Its purpose is straightforward: to determine whether you are UK tax resident in any given tax year. If you are resident, you are taxable in the UK on your worldwide income and gains. If you are not, you are taxable only on UK sources of income. The difference between those two positions can be enormous. Simon and Laura cover the full picture in this episode, including: * Why HMRC makes it easier to arrive in the UK than to leave it, and how that imbalance shows up throughout the test. * The automatic overseas tests, including the day count thresholds (15 midnights for leavers, 45 for arrivers) and the full-time work overseas test, which applies to most people relocating for employment but contains more detail than most people expect. * The three automatic UK tests, covering the 183 day rule, the only home in the UK test, and the full-time work in the UK test. The last two are designed specifically to catch people who leave or arrive part way through a tax year and are far more commonly relevant than the 183 day rule most people default to. * The sufficient ties test, which determines residency for anyone who does not fall into one of the automatic categories. Five potential ties, including family, accommodation, work, the 90 day tie and the country tie, interact with your day count to produce a residency outcome that surprises many people. The commonly cited 182 day rule is only the starting point, not the whole picture. * Split year treatment, which allows the tax year to be split into a resident period and a non-resident period for people who leave or arrive part way through the year. There are more routes into split year treatment on arrival than on departure, which again reflects HMRC's general direction of travel on residency. * The interaction between the Statutory Residence Test and double tax treaty residence, and why being UK tax resident does not prevent you from being simultaneously tax resident in another country. * Why real-time records of your days, work activity and location are essential, and why having a documented piece of advice from LSR Partners in your files makes a material difference if HMRC ever opens an enquiry. The episode closes with the message that runs through everything LSR Partners does: if you are leaving the UK or arriving in the UK, have the conversation before you go. Not after. One client spent three days too many in the UK and faced a £20,000 tax bill that proper planning would have avoided entirely. Every situation is different. The Statutory Residence Test is detailed, fact-specific and unforgiving when applied incorrectly. Get in touch before you act. lsrpartners.com [https://lsrpartners.com/] Subscribe for more tax guidance for expats and globally mobile individuals. Brought to you by LSR Partners – helping you pay the right tax in the right place at the right time. 📲 Book a call with us to talk about your situation: https://lsrpartners.com [https://lsrpartners.com/] 🎧 Catch up on all past episodes: https://lsrpartners.com/podcast-videos

Employment Related Equity — RSUs, Options and What Happens When You Move Countries

If your employer pays you in shares as well as salary, this episode is for you. Simon and Laura tackle one of the most consistently misunderstood areas of UK tax: employment related equity. Whether you have RSUs, share options, or some other form of equity award, the UK tax treatment is not always obvious, and the consequences of getting it wrong can be significant. They start with the basics: what RSUs are, why HMRC treats them as employment income rather than capital gains at the point of vesting, and what your base cost looks like once you have received the shares. From there they move on to share options, explaining why the tax point works differently, you are taxed when you exercise, not when the options vest, and what that means in practice for people sitting on unvested or unexercised awards. The episode then gets into the area where LSR do a substantial amount of client work: what happens to your equity awards when you move countries during the vesting period. If you are relocating to the UK with existing RSU grants, or leaving the UK with unvested shares, time apportionment is the key concept. HMRC will look across the entire vesting period and tax the UK-resident portion accordingly. The problem, as Simon and Laura explain, is that company payrolls frequently get this wrong, sometimes in your favour, sometimes not. There is also a memorable story about a former Lehman Brothers employee who never sold a share, kept his entire retirement fund in company stock, and was completely wiped out in 2008. Not financial advice, but a useful reminder about concentration risk. Topics covered in this episode: 1. How RSUs are taxed as employment income in the UK and what that means for your payslip 2. The difference between RSUs and share options, and why the tax point is different for each 3. What your base cost is once shares vest and how capital gains tax applies when you sell 4. Time apportionment: how HMRC calculates the UK-taxable portion of awards that span periods of residence and non-residence 5. Why company payroll often apportions incorrectly and how to spot if you are overpaying or underpaying 6. Concentration risk and why diversifying equity awards is worth thinking about If you have questions about your equity awards and how they interact with your UK tax position, book a call with us. lsrpartners.com [https://lsrpartners.com/] Subscribe for more tax guidance for expats and globally mobile individuals. Brought to you by LSR Partners – helping you pay the right tax in the right place at the right time. 📲 Book a call with us to talk about your situation: https://lsrpartners.com [https://lsrpartners.com/] 🎧 Catch up on all past episodes: https://lsrpartners.com/podcast-videos

UK Pensions Explained: Annual Allowance, Tapering & Salary Sacrifice Changes

Pensions are powerful, but they are increasingly complex. In this episode of the Tax Compass Podcast, Simon Roue and Laura Sant break down: 1. The £60,000 annual allowance 2. What counts towards it 3. The tapered annual allowance for high earners 4. Annual allowance charges 5. Carry forward 6. Salary sacrifice vs relief at source 7. The National Insurance angle 8. Proposed changes that could affect employer contributions If you earn over £100,000, and especially over £200,000, this episode is essential listening. We explain how to avoid common pension mistakes and why employer contributions may change in the near future. lsrpartners.com [https://lsrpartners.com/] Subscribe for more tax guidance for expats and globally mobile individuals. Brought to you by LSR Partners – helping you pay the right tax in the right place at the right time. 📲 Book a call with us to talk about your situation: https://lsrpartners.com [https://lsrpartners.com/] 🎧 Catch up on all past episodes: https://lsrpartners.com/podcast-videos