Coming home to retire? Tax implications for returning expats

If your retirement plans involve sunshine and sandals, moving back to the UK is unlikely to be at the top of your bucket list. But for many, the UK does offer significant advantages. These include the National Health Service, which may be especially valuable to older expats.

Meanwhile, UK savers and investors also benefit from strong consumer protection laws and transparent financial regulation.

And indeed, many people have already been persuaded. In the 2025/26 tax year, 143,000 UK British nationals returned to the UK. Of this group, 12,000 were over-65s, according to the Office for National Statistics¹.

If you are considering moving back to the UK, considering a number of different aspects and how they compare in different countries could help clarify your decision. These include:

Quality of the healthcare system

• Political stability of both countries
• Cost of living and housing affordability
• Your lifestyle preferences (for instance, weather, hobbies, community)
• Any changes in UK allowances after living abroad
• The tax regimes.

Think about timing

The FIG regime applies if you become a UK tax resident after 10 consecutive years of non-residence. For your first four years back in the UK, you are exempt from UK tax on certain foreign income and gains.

If you return after fewer than 10 years abroad, you do not qualify for FIG relief and are taxed on all income and gains as soon as you become a UK resident.

Returning to the UK within five years may also trigger a tax bill on certain foreign income or gains, depending on your circumstances and the detailed rules set by HMRC.

The FIG regime replaced the remittance basis, under which non-domiciled UK tax residents paid tax on foreign income and gains only when brought to the UK.

Home is where the tax is (paid)

On returning to the UK, it will be your residence status that determines when you start paying UK tax – and crucially, when the four-year FIG exemption starts if applicable.

The Statutory Residence Test (SRT) sets out the rules for determining your residency each tax year. It considers how many days you spend in the UK, your ties to the UK and your connections elsewhere.

As a general rule, you will be considered a UK resident if you have spent 183 days or more in the UK during a tax year. But the SRT in its entirety will determine your residence status. The tax year in the UK runs from 6 April to 5 April each year.

Pensions, assets and IHT

Consider how your pensions and investments, as well as other assets, will be affected by UK tax rules on your return.

When it comes to foreign pensions, any income, unauthorised payments such as early withdrawals and some lump sums become subject to UK tax. The same applies to investments, dividends, interest and rental income from overseas property.

If you expect to retire in the UK, it is also worth considering the implications of inheritance tax (IHT). Becoming a UK long-term resident typically brings all your assets – UK and overseas – into your UK estate.

As noted above, if you qualify for the new FIG regime – meaning you lived abroad for more than 10 full tax years – you are exempt from UK tax on many foreign income sources in the first four years after your return.

This includes most types of pension income, rental income from non-UK property and many investment-related gains. It does not apply, however, to qualifying recognised overseas pension schemes (QROPS).

Using the four-year tax relief window as an opportunity for effective tax planning and restructuring should be a priority.

Claiming FIG as a UK resident could result in the loss of some of your allowances. Seeking professional advice could help ensure you make use of all available allowances.

Taking the plunge

It is only natural that the emotional element of returning home plays a role when weighing up your decision about where to retire. Being closer to family, spending more time where you grew up or having easier access to healthcare can be compelling reasons to move.

However, it is important to consider how life in the UK will differ from living abroad and ensure this will meet your lifestyle expectations.

Seek as much clarity as possible on your housing arrangements and other potentially large expenses associated with a move back to the UK. This includes managing your tax liabilities, as well as knowing the allowances and benefits available to returning residents.

The tax landscape has changed significantly for UK expat returnees. Different rules apply depending on how long you have lived abroad.

Professional financial and tax advice can ensure you make the most of your allowances and avoid unexpected tax bills once you are back in the UK.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Source
¹Office for National Statistics – November 2025