By Eamon Shahir
Many Britons abroad believe they have cut their tax ties with home. Most have not, and changes to tax laws have made that costlier.
Selling your assets in the UK and moving to Madrid, Lisbon or Cape Town doesn’t mean a bon voyage from the taxman.
In fact, cutting ties with HMRC has become more difficult, thanks to 2025s tax amendments. Ignorance of these rule changes can mean a massive – and expensive – mistake.
Around 246,000 British nationals left the country in the year to December 2025, and only about 110,000 returned, show the Office for National Statistics’ latest estimates. They join a diaspora decades in the making: the UN counts at least 4.8 million British-born people living abroad, with Spain hosting the largest community in Europe at an estimated 295,000, about 40% of them over 65.
Many of these people are retirees chasing the sun, but a growing share are working-age professionals and company founders who move for opportunity or for a tax position that allows their capital to work harder.
When fighting broke out in the Gulf on 28 February 2026, roughly 30,000 Britons, about one in eight of the UAE’s 240,000-strong British community, left the Emirates, reports CNBC. Most have not come home: many are riding out the conflict elsewhere in Europe rather than walk back into the UK tax net.
How HMRC decides you have left
Your tax residence is determined by how many days you physically spend in the UK. HMRC’s statutory residence test says anyone who spends 183 days or more in the UK is resident for that year. But spending fewer than 183 days in the UK doesn’t guarantee you’ve left. Anyone who was a UK resident in any of the previous three tax years must spend fewer than 16 days in the country to qualify automatically as non-resident. That allows for one extended Christmas and a couple of weddings before your non-UK tax resident status is nullified.
Anyone who fails the automatic tests then faces the sufficient ties test, which weighs UK family, available accommodation, working days and time spent in the country. The more ties you have, the fewer days you can afford to spend here. A home you could sleep in counts against you, as does a spouse who stayed behind.
Much of this hinges on the evidence: Boarding passes, a foreign tenancy and overseas utility bills all help to build the record HMRC will require. If an inspector asks you to prove where you slept on a particular night two years earlier, a hazy memory of Spain will not suffice.
The expensive of coming home
Leaving creates one set of problems. Returning may create more.
The default is now that if you live in the UK, you pay UK tax on your worldwide income and gains. There is one exception. The four-year foreign income and gains regime allows anyone returning after at least 10 consecutive years abroad to claim full relief on foreign income and gains for their first four years back. The relief is worth real money, though it applies only to a small group of people.
For those who have been away for less than a decade, this does not apply. Their offshore investments, foreign rental income and overseas business profits all become taxable in the UK from the day they resume residence. Even those who qualify pay for the privilege. Claiming the four-year regime costs you your personal allowance and your capital gains annual exempt amount for that year.
Why founders are recalculating
The new rules hit business owners hardest. If you sell a company, Business Asset Disposal Relief now taxes the first million pounds of qualifying gains at 18%, up from 10% just over a year ago. HMRC takes 24% of everything above the £1 million lifetime limit.
On a £5 million exit, a UK tax-resident founder owes HMRC £180,000 on the first million and £960,000 on the remaining four, which totals to £1.14 million. But the same founder, selling the same company after establishing non-UK residence, owes the UK nothing on those shares, though the destination country will want its own look. That can mean the difference between buying another company or making another recruitment drive.
Timing is critical. If you’re selling a business, it should be in a tax year when the founder is non-resident. Anyone who returns within five years loses the benefit: HMRC taxes the gains in the year they come home. Don’t think that you can sign the sale agreement in March and fly out in April. Start planning your exit years in advance to ensure you do not pay tax unnecessarily.
