Wondering how your investments are taxed while living abroad? Learn how residency rules, tax treaties, and smart strategies can help you keep more of what you earn.
Table of Contents
- Common Investment Types for UK Expats
- Other Common Expat Investments
- How Different Investment Incomes Are Taxed
- UK Tax Residency Rules for Expats
- Double Taxation Treaties and Cross-Border Planning
Common Expat Investment Types
If you’re a UK citizen living abroad, it’s quite common to have money tied up in different types of investments. These might be things that give you regular income, like rent or dividends, or assets that grow in value over time, like property or shares. While these investments can work well for building wealth while you’re away from home, it’s really important to understand how the UK sees them for tax purposes.
Let’s have a look at the most common investments for expats and where they are liable to tax.
Property
If you own a rental property in the UK while living abroad, the income from that property is still taxable in the UK. This applies whether the rent is paid to a UK bank account or sent overseas. Unless you have been approved by HMRC under the Non-Resident Landlord (NRL) scheme, your tenants or letting agents are required to deduct tax before paying you. If you are approved under the NRL scheme you may receive your rents gross and you’ll need to declare the income on a UK tax return each year and keep receipts for expenses you’ve paid like repairs or letting fees, which can often be deducted.
Offshore Investment Funds
These are funds based outside the UK – for example, in Ireland, Luxembourg, or the Channel Islands. They can include mutual funds, unit trusts, and other collective investments. They’re common with expats and internationally mobile investors because they often come with flexibility, access to global markets, or local tax benefits. But the UK has specific tax rules about how they’re treated.
If you’re a non-UK resident and you hold UK investment funds (like UK-domiciled OEICs or unit trusts), you may still be liable for UK tax on any UK income those funds generate – like dividends or interest – especially if those funds don’t qualify for exemption under a double taxation treaty. But capital gains from selling your units or shares are generally not taxed by the UK if you’re non-resident, unless the fund holds UK property.
If you’re a UK resident investing in offshore investment funds, it’s vital to know whether the fund is classed as a reporting fund or non-reporting fund under HMRC rules. If it’s a reporting fund, you’ll usually pay Capital Gains Tax (CGT) when you sell it – with access to the CGT annual exemption. But if it’s a non-reporting fund, any gains are taxed as income – which can mean paying tax at a much higher rate, with no exemption.
If you’re a non-UK resident investing in offshore funds, UK tax may not apply at all, unless the fund holds UK land or property (in which case, you may still be subject to UK tax on gains under the non-resident CGT rules).
These rules are complicated, and the classification of funds can have a big impact on your tax bill. You can check whether your fund is classed as a reporting fund by searching HMRC’s official list of recognised reporting funds.
If in doubt, it’s worth speaking to a tax adviser before investing or selling offshore fund holdings.
Pensions
Pensions like SIPPs (Self-Invested Personal Pensions) are still available to UK residents abroad in some cases. If you become non-resident, you may no longer be able to contribute or get tax relief unless you meet specific rules (for example, under the migrant member relief rules in FA 2004).
QROPS (Qualifying Recognised Overseas Pension Schemes) are overseas pension schemes that follow HMRC’s rules. If they don’t, transfers to them can result in a 25% or higher tax charge. Even if the scheme qualifies, pension withdrawals might still be taxed in the UK depending on where you live.
Expat Mortgages
If you’ve taken out a mortgage on a UK property while living abroad, you might face higher interest rates or stricter lending criteria. Any income you make from renting out the property will likely still be taxed in the UK. Even if you don’t live in the UK anymore, the income from UK property remains taxable under UK law.
Other Investments Expats Often Hold
Employer share schemes: These can still be taxed in the UK, especially if the shares relate to work you did while in the UK.
Cryptocurrency: If you buy and sell crypto (like Bitcoin), HMRC sees this as an investment. Any gains are usually subject to Capital Gains Tax.
ISAs: You can keep ISAs (Individual Savings Accounts) you already have, but once you become non-resident, you can’t pay any new money in. The tax-free status remains on what’s already in the ISA.
Finally, don’t forget about local laws. Some countries charge exit taxes when you move out or may require you to report all your worldwide income, not just what’s earned locally. Always consider both UK and local tax rules when deciding how to manage your investments while living abroad.
How Different Investments Are Taxed
Understanding how different investments for expats are taxed can seem complicated, but it doesn’t need to be overwhelming. If you live abroad but are still classed as a UK tax resident, the UK government will generally expect you to pay tax on most of your worldwide income and gains. That includes money you make from renting out property, earning interest from savings, receiving dividends, selling shares or crypto, or drawing a pension.
Let’s go through the main types of income you might receive from your investments, and how they’re taxed, using plain English and real-world examples:
Rental Income (from UK Property)
If you rent out a property in the UK, that rental income is taxable in the UK, even if you live abroad. You’ll need to report this income to HMRC using the Self Assessment system. You can deduct some costs, like letting agent fees, insurance, and maintenance, before working out how much tax you owe.
When you first buy a UK property, Stamp Duty Land Tax (SDLT) will normally apply. If you’re living abroad, an extra 2% surcharge on top of the normal SDLT rates is usually added where the property is residential, i.e. bought to be lived in as a home. There are different rules for commercial properties such as offices, shops or restaurants. This is something to keep in mind, as the SDLT rules also change if you’re buying an additional property or investing through a company.
It’s also important to know that working out what you can deduct from rental income, to produce your profit liable to tax – isn’t always simple. HMRC divides costs into revenue expenses (such as repairs, letting fees, and insurance – usually deductible immediately) and capital expenses (like extensions or new kitchens – which can’t be deducted right away but might reduce your tax bill when you sell the property). Some expenses qualify for specific reliefs, like replacement of domestic items relief, and mortgage interest relief is now given as a basic rate tax credit, rather than a full deduction against rents.
If you rent out a property in the UK, that rental income is taxable in the UK, even if you live abroad. You’ll need to report this income to HMRC using the Self Assessment system. You can deduct some costs, like letting agent fees, insurance, and maintenance, before working out how much tax you owe.
If you live abroad and want to receive the rent in full (without tax being taken off first), you’ll need to apply under the Non-Resident Landlord scheme.
Dividends
Dividends are payments made to shareholders when companies make profits. If you hold shares (UK or overseas), and you receive dividends, you’ll pay tax on anything over your dividend allowance, which is £500 in 2024/25. The rate of tax you pay will depend on the level of your other income, which defines what rate taxpayer you are.
You must report foreign dividends using the SA106 form.
Interest from Savings
You may earn interest from a bank account, savings account, or bond. If you’re a UK tax resident, and a basic rate taxpayer, the first £1,000 is tax-free. A basic rate taxpayer in the UK is a taxpayer whose total income is no higher than £50,270 per year. Higher earners like higher rate or additional rate taxpayers get a smaller or no allowance.
Capital Gains (When You Sell Something for a Profit)
If you sell shares, a second home, or even cryptocurrency, and you make a profit, this may be taxed under Capital Gains Tax (CGT) rules. Each person gets a CGT allowance – £3,000 in 2024/25. Only gains over that amount are taxed.
If you sell UK residential property, a higher CGT rate applies (18% or 28%) if the sale does not qualify for Principal Private Residence Relief. Principal Private Residence Relief means that if you are selling a property which has been your main home – caveats excluded – you don’t have to pay tax on the proceeds.
If you have been temporarily non-resident, gains on overseas assets sold while abroad may still be taxed if you return to the UK within five years. This is known as the temporary non-residence rule. So if you become UK resident after spending some time away, you should be aware that you could be taxed on any gains you made whilst you were non-resident on the year of your arrival back in the UK. Broadly, you need to have been away for more than five full tax years for any gains made whilst non-resident to stay outside the UK tax net.
Pensions (Including Offshore Pensions)
UK pensions are usually taxable in the UK when you draw an income. If you’re receiving payments from an overseas pension or a QROPS, it may still be taxed in the UK depending on your residence and tax treaty agreements.
Pension tax depends on a lot of factors, so it’s worth seeking advice if you’re drawing income from overseas.
Cryptocurrency
If you buy and sell cryptocurrency (like Bitcoin), and make a profit, you’ll likely pay CGT on that gain. HMRC considers crypto a capital asset, not cash.
It’s important to keep records of dates, values, and conversions to pounds sterling for accurate reporting.
Employer Share Schemes
If you’ve been given shares by your employer, either in the UK or while you were working for a UK company abroad, these might be taxable in the UK. The timing and scheme type matter.
Reliefs: Approved schemes such as SAYE (Save As You Earn) or SIPs (Share Incentive Plans) may offer some tax advantages.
ISAs (Individual Savings Accounts)
ISAs are a tax-free savings wrapper. If you already have an ISA when you leave the UK, you can keep it, and it stays tax-free. But you can’t add new money to it unless you become UK resident again.
As you can see, each type of income has its own rules, allowances, and forms. HMRC expects all UK residents – even those abroad – to report worldwide income correctly. If you’re unsure what to report, or how much tax you might owe, it’s best to speak with someone who understands both UK and international tax.
Getting it right means fewer surprises, less stress, and the confidence that you’re doing the right thing.
Where income is earned in a currency other than GBP, HMRC requires conversion into sterling using official exchange rates for the date of receipt. This adds another layer of recordkeeping and accuracy required.
Tax Residency Rules
If you’re a UK citizen living abroad, your tax treatment mostly depends on whether HMRC still sees you as a UK resident for tax purposes. This is where the Statutory Residence Test (SRT) comes in. It’s a set of clear rules that help decide whether you count as a UK tax resident in a given tax year.
There are three parts to the test:
- Automatic overseas tests – if any of these three tests are passed, you will be conclusively non-UK resident
- Automatic UK tests – if any of these three tests are passed, you will be conclusively UK resident
- Sufficient ties test – where neither of the above two tests are passed, this test considers things like whether your family lives in the UK, if you have a home here, or if you worked in the UK. The more ties you have, the fewer days you need to spend in the UK to still be classed as resident.
The SRT also allows for split year tax treatment in certain cases, like when you leave the UK to start a full-time job overseas. This means the tax year is split into a resident part and a non-resident part – so you’re only taxed on foreign income during the time you’re UK resident.
This article is written mainly for UK nationals who are not UK tax resident, so the general rules that apply to you will be different from someone living in the UK full time. If you’re not tax resident in the UK, then HMRC usually won’t tax your overseas income – but it will still expect you to pay tax on your UK income, like rent from a UK property, or dividends from UK companies.
On the other hand, if you’re a foreign national living in the UK, and you meet the conditions of UK tax residency under the SRT, then the UK will generally tax your worldwide income – unless you qualify to use the remittance basis, which applies to some non-domiciled individuals.
Just because you live abroad doesn’t automatically mean you’re non-resident for tax. For example, if you travel back often, have close family in the UK, or keep a home here, HMRC might still consider you UK tax resident. That’s why it’s essential to review your ties and day counts carefully.
And finally, even if you are non-resident now, if you return to the UK within five years, special rules known as the temporary non-residence rules may mean you still owe UK tax on things like pension withdrawals or capital gains made while you were away.
HMRC expects you to apply the SRT properly and keep evidence to back up your position – like flight records or overseas work contracts. There’s an online tool on GOV.UK that gives a general idea, but if things are unclear, it’s best to get advice.
Getting your residency status right is the foundation for working out what tax you owe – and just as importantly, what you don’t.
Double Taxation Treaties and Other Efficient Tax Strategies
The UK has over 130 double taxation treaties in force. These agreements prevent double taxing by assigning taxing rights between countries and often allow a credit for foreign tax paid.
Under TIOPA 2010, UK residents can claim foreign tax credits for overseas tax paid on the same income. Relief is limited to the lower of the UK or foreign tax due.
For example, if you pay 15% withholding tax on foreign dividends and the UK tax due is 8.75%, you receive credit for the 8.75% only.
Double taxation relief UK must be claimed via the SA106 form. Specific treaty provisions should be referenced, and evidence of foreign tax paid must be retained. HMRC may request translated statements and local tax certificates.
Tax-efficient structures for expats may include:
- Offshore bonds (can defer tax until encashment)
- International savings plans
- QROPS (Qualified Recognised Overseas Pension Schemes)
- Non-resident trusts (where available)
Each of these comes with risks. Offshore bonds may trigger a chargeable event gain if encashed while UK resident. Non-resident trusts may still have UK tax exposure if the settlor retains an interest or if UK beneficiaries receive distributions.
International tax planning involves assessing residence, domicile (where historical returns are in point since the UK abolished domicile in the 2025/26 tax year), investment types, treaty access, and future relocation plans. Decisions about drawing pensions, selling properties, or changing residence should be coordinated carefully.
Working with an adviser can help structure investments in a way that minimises tax across jurisdictions. For example, using a tax-deferred investment bond while non-resident may avoid unnecessary income tax now and allow time to plan for drawdown when in a lower-tax jurisdiction.
Treaty relief should be examined in detail. Some treaties override domestic law in specific cases. For example, many treaties assign pension taxation rights solely to the country of residence, not the source.
Where tax is withheld overseas and not reclaimable, it is critical to ensure the treaty is correctly applied from the start to avoid double taxation. Mistakes can lead to overpayment and lengthy recovery processes.
Given the complexity of cross-border tax rules, working with a specialist in expat tax planning is highly recommended.
Understanding the tax rules around your investments is more than knowing rates – it’s about the interaction of tax laws between countries, the rules on reporting, and your obligations under UK law.
A qualified adviser will:
- Help determine your residency status
- Support correct reporting of worldwide income
- Identify how double taxation treaties affect your situation
- Ensure your investments are structured in the most tax efficient way
Book a tax consultation with Expat Taxes today to ensure your investments are structured, declared, and managed in the most compliant and tax-efficient way possible. A consultation will also give you insight into future-proofing your finances and avoiding costly mistakes. Many expats uncover tax-saving opportunities or unreported issues during these sessions that can prevent long-term financial or legal trouble.
DISCLAIMER: The material in this article is for general information purposes only and does not constitute legal or taxation advice. Legal, financial, investment and taxation advice should be sought before acting or refraining from acting. All information and taxation rules are subject to change without notice. Expattaxes.co.uk Limited (hereafter ‘the parties’) accept no liability for any action taken based on the information in this article or any of the articles on this website.
Written by Venita Machnicki, CTA (UK), ATT
Venita is a Chartered Tax Adviser with over 15 years of experience specialising in UK and international tax. She is a trusted expert in cross-border tax matters for globally mobile individuals, expats, and business owners. Venita combines deep technical knowledge with a practical, client-focused approach to help people navigate the complexities of UK tax while living and working overseas.
